Implications of the Pandemic on Cities

Rapid development in urban areas has been halted in cities where they have seen comparably poor growth throughout the pandemic

Cities are hives of productivity and innovation: densely populated areas of intelligent and hardworking citizens help drive the economy forwards. They have also seen a significant growth compared to more rural areas. For example, growth in Sydney’s inner districts was 40% more than elsewhere in its metropolitan area in the period 2000–09. However, the pandemic has ravaged through economies, hitting urban areas particularly hard due to their deep concentration, which has led to only a fifth of San Franciscan office workers being in the building. While the pandemic has reduced economic activity in cities, it may lead to an improved quality of life for the workers. It also impacts employment, productivity, and house prices.

One positive impact of the pandemic on a city’s economy is an improved quality of life. Plans to pedestrianize Oxford Circus and policies to make it easier to set up outdoor dining in San Francisco come because of new priorities following the coronavirus era. Hence, this can attract new workers and motivate current workers to stay in the city and contribute to its economic activity, leading to productivity and output gains. However, once we eradicate the virus, these renewed values may fade, and traditional values may return. As lockdowns ease, more vehicles on the road may reverse these changes, lowering the quality of life and discouraging workers into the city.

One negative impact of the pandemic on a city’s economy is a loss of economic activity relative to the rest of the nation. Social distancing and isolation guidelines have meant that restaurant reservations in cities are lower than elsewhere, and Starbuck transactions seemed to have emigrated from city centres. The loss of demand has stunted growth in urban areas. However, this is likely to be a short-term problem as virus tensions ease following the defeat of the virus. Relaxed social distancing rules and higher vaccination rates should comfort people looking to go out for a restaurant meal, and the hospitality industry will recover.

The pandemic will have an impact on productivity as it has forced people to work from home. During the lockdown, over half of the people working in London worked from home, according to the ONS. Research by Humu, a software firm, reveals that one or two work-from-home days a week may make people more productive on both their at-home days and in-office days. Hence, this could be a positive shift in workplace trends. However, working from home seems to favour those occupations requiring higher qualifications. Those on lower incomes may not afford the devices or broadband required to work from home, while others in on-site jobs, such as construction, may not be able to work at all. Hence, the working from home shift may cause inequalities to widen. To combat this, the government must ensure national access to technology that allows people to work from home while providing generous support to those who may not be able to.

The pandemic will also impact employment. Emptier offices and fewer tourists in cities could mean less employment for low-wage workers such as baristas and taxi drivers. Incomes of these people would suffer, increasing relative poverty levels. On the other hand, economies have seemed to reallocate jobs from city centres to places with more demand, raising overall employment. While cities may suffer, suburbs and surrounding areas may see an influx of workers. The net effect on low-wage employment will depend on the mobility of the labour force and the ability of those who have suffered to identify opportunities to find additional work.

The pandemic will also have an impact on house prices in the city. Changes in the way people shop have reduced the number of high street stores, while more people working from home has reduced the demand for office space. Hence, owners of commercial property will lose equity and income from rents. A result would be a loss of demand as the wealth of landlords falls. However, government intervention in real estate markets and ultra-low interest rates have raised house prices to a record high in June 2021 in the UK. While London has seen the smallest growth, it nevertheless shows how fiscal extravagance has maintained property values in cities.

To conclude, there is no doubt that the pandemic has brought structural reform to the nature of economic activities in cities. Renewed priorities have led to improved living standards while working from home has provided flexibility in work schedules. However, low earners have suffered from a lack of demand and unfavourable conditions. Hence, the pandemic has benefitted wealthy city members, while poorer households have suffered dramatically from job losses.

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Ted Jeffery

A student passionate about economics and how the world works. New blog post every Monday.