Have you noticed that, lately, all the events we’ve faced have created a “new normal”? It’s like a catch-all term for any change that seems structural to us and forces us to rethink our paradigms. From the rise of nationalism, trade protectionism, the influence of social media, technological disruption, social unrest, and the pandemic, we’ve had about 10 “new normals” in less than four years. It’s like those car brands that release a “new” model, which is really just a revamp of the past, and they call it “all new.” What is an “all new” version of the past “the new,” and so on. 

With the national vaccination campaign well underway (though not so much globally, especially in the developing world), the term has resurfaced to refer to new habits and practices that are likely here to stay: online shopping, remote work, a greater appreciation for outdoor activities, and so on. However, one aspect that has not received as much attention in this “new normal” is the restructuring of economic sectors, a result of all the aforementioned changes. This is affecting—and will continue to affect—the labor market permanently, with a drastic shift in demand that will take quite some time for all stakeholders to fully internalize. It is clear that, for now, we cannot know exactly how this entire restructuring will play out (especially in the service sector once social interaction can resume), but there are some figures and data that can offer us certain clues. 

The OECD published a study on the changes that have been observed and are projected to persist in the labor markets of its member countries, though the findings are likely applicable to the vast majority of countries. One of the most significant trends is an increase in long-term unemployment, given that, among the unemployed, the number of people who have been out of work for six months or more has risen by 60%. There are sector-specific impacts; for example, in agriculture, various mobility restrictions prevent seasonal workers from traveling between regions—a common practice during harvest seasons. However, there is also an intrasectoral effect resulting from the changes mentioned earlier: in retail, demand for in-store salespeople is likely to decline, while demand for after-sales service or warehouse management is expected to increase.

I emphasize this last point because, when looking at other indicators, we realize that the situation might be somewhat more complex. We constructed a kind of labor efficiency index that takes into account changes in output as well as in the labor force, which we were able to break down by certain sectors. This index shows that, as of May 2021, for every worker, the economy produces 12.8% more than the average between 2013 and 2020. However, in the retail sector, the increase is 41.6%. This is significant, as this is the sector that, on its own, employs the most people in Chile. It is true that the pandemic is not yet over and that these figures do not yet account for the recent easing of mobility restrictions, but we knew long before that certain jobs would be automated and others would change—the pandemic simply accelerated this process. 

Given its unique characteristics, this market will not adjust quickly, and government support will be necessary not only to sustain families affected by this structural unemployment but also to facilitate and enable the retraining of workers—a process that will likely require well-established national training programs. However, this could also be achieved through the private sector by facilitating the hiring of people whose previous jobs no longer exist and by creating training opportunities within the companies themselves. Alternatively, for companies that have not yet undergone this transformation but will do so in the future, they could allow their workers to acquire the skills needed for the future while continuing to perform their current duties. 

We need to be creative this time around. The costs of long-term unemployment are too high for entire generations, but we can’t expect to apply solutions from the past that have failed. There must also be a “new normal” in the way we address these problems. Otherwise, we’re doomed to face another Lota after the end of coal mining. And nobody wants that.

Nathan Pincheira 

Chief Economist at FYNSA