Bill Kerr: Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. This episode is one of a series of special dispatches on the sweeping effect that Covid-19 is having on society, the economy, and the future of work. In addition to our regular podcast episodes, we’ll be bringing you shorter and more frequent interviews with business leaders, policy makers, and leading scholars on the coronavirus. My guest today is Harvard economist Ed Glaeser. Ed is one of the world’s leading scholars on the functioning of cities and urban economics. His bestselling book, Triumph of the City, describes the rise of cities, especially after they’ve mastered public health and disease control, and how cities serve economic centers and innovation hubs. Ed has also recently surveyed, along with several of my HBS colleagues, small businesses on the impact of Covid-19. Welcome, Ed.

Ed Glaeser: Thank you for having me on, Bill.

Kerr: Ed, you grew up in New York City, and you’ve long studied it. New York is clearly on the front lines of the Covid crisis. Can you tell us what you see in the response in New York to Covid and what other cities should learn from its example?

Glaeser: I think it’s very hard to figure out what exactly is the right thing to do now. Certainly, it’s not appropriate as an outsider really to second-guess what’s going on in New York. I mean, maybe they should have shut down a bit sooner, but it’s very hard to tell. There were trade-offs in terms of shutting down the schools, throwing it onto parents. New York, of course, has great extremes of wealth and poverty, and for people who are on the margins of existence, shutting down causes real pain. The one thing that is obvious from a policy response is that we all—all of us, none of us are innocent—screwed up the pre-period, right? We screwed up the 10 to 15 years where we had warnings of this, whether it was SARS or H1N1. We failed to invest in having enough personal protective equipment for physicians. We failed to have enough N95 masks. We failed to have enough ventilators. We failed to have an early monitoring system that would actually take seriously the things before it happened. That, in some sense, is not surprising. We often are not good at acting in time to take care of risks before they materialize. But in some sense, this is a tragedy that’s not totally unexpected. The real mistake was that we haven’t been planning for the next 10 years. And if we react to this going forward with the same sort of relatively lackadaisical attitude, I fear for our ability of our urban world to function.

Kerr: And would you typically think of that as a responsibility of a mayor—and let’s stick to maybe the top 20 cities in terms of size, so significant cities—is that a responsibility of the mayor? Is that more of a federal government type or state government type role?

Glaeser: I hate to say it, but I think the federal government has an outsized role in this. Whereas, as we know, once you get down to the response, it’s the governors who really have been on the front line. But in terms of the Centers for Disease Control, the NIH [National Institutes of Health], monitoring and controlling international travel, ideally there would be a national bank of ventilators, which could be moved around as an insurance device for local needs—that has to be done at a federal level. That being said, I think every state and every large city should have a pandemic plan in place so they thought about these issues ahead of time. So cities aren’t getting off the hook. But whereas many of the 19th-century urban problems—the waterborne pandemics, like cholera—really required a very local response—although sometimes it involved getting water from outside the city limits, like the Croton Aqueduct. But in this case, when you’re thinking about pandemics that are brought by air from different parts of the world, you really do need some degree of federal oversight.

Kerr: Okay. We think about moving beyond just New York City to Detroit, which is currently being hit pretty hard. Then it sounds like DC and Philly are going to be next as we go through April. Are there certain cities or traits of cities that lead you to concern for the quality of responses possible? Or maybe a different way of framing that is, how much can a local mayor do in this type of situation?

Glaeser: Well, different cities have different levels of capacity. And the good news is that, while New York had density levels—which would naturally make you afraid, right? I mean this density enables a virus to move from person to person, just as it enables an idea to move from person to person—but it also has a great deal of capacity. It has a large and very capable police force. It has a large and capable fire department. It has amazing hospitals. The more that you move toward cities—whether or not they are New Orleans or Detroit—that are considerably poorer, you’re looking at cities that have much less local capacity to deal with this onslaught, both in terms of the medical community and in terms of the management community. And where I’m focused—at least some significant part of what I’m doing—is thinking about advice that we’re trying to give to cities in the developing world and to countries in the developing world. And there, of course, the ability to respond is even more extreme. And I think there’s every reason to believe that there will be heartbreaking episodes in weeks to come. But the containment strategies, the strategies of lockdown, as much as they may have terrible consequences for service-sector workers in New York or Detroit today, they’re going to be even more horrific in terms of the economic consequences in Uganda and Kenya.

Kerr: Tell us a little bit about the advice role or the policy role that you’ve been playing in developing countries.

Glaeser: This is a set of economists who are involved with the International Growth Centre in London. I co-lead with Gharad Bryan and Nick Tsivanidis their Cities Programme, and we’re just trying to figure out what in the world we should be saying. Someone asked me early on, “Are you ready to talk to policy makers?” I said, “I’m really to talk to policy makers about bus rapid transit. I’m ready to talk to policy makers about congestion pricing. There are things that I’ve been thinking about and that we’ve had decades of research on that I’m completely ready to talk to policy makers about.” But telling them what the right level of containment is, what the right level of lockdown, that’s really hard. And there are some things that seem obviously, right. Like mass gatherings are a no-no, right? You want to make sure that you’re not allowing a lot of inter-person transit from high-risk populations to low-risk populations, or high-prevalence populations to low-prevalence populations, and you want to particularly care for the elderly in terms of lockdowns. Those all seem like sort of no-brainers. And there seems like some things where you’ve got to make sure that the movement still happens, right? Food supply chains are critical. More people died of starvation in the Plague of Athens than died from the disease, right? You cannot let this thing turn into a famine in developing world cities. But then, between those obvious no-no’s, right—no dense football matches, let the food go through—there’s a tremendous amount of gray area. And you can get away with more interactions if you have people wearing masks, if you have water or other forms of sanitary devices around. Figuring out what the right advice is around the gray areas seems hard, and the right answer is almost surely not to just follow what America has been doing. Not that America’s gotten it completely wrong at all, but just the conditions will be wildly different in Africa or India than they are in the US.

Kerr: Yeah. If you come across … anything that is the most common mistake, you think—either in the United States or in developing countries—that cities are making around the spread of Covid and the containment strategies?

Glaeser: Well, there are some places that went to extreme lockdown immediately—meaning that the food couldn’t get through—and so they had to step back on that. That was sort of an early, easy mistake. There’s, in general, an attempt to use blunderbuss strategies, when you need something that’s a little bit more modern. Now, some of that reflects the limited capacity in these cities. So they can clear the whole roads, but they can’t necessarily let through some cars and not other cars, and so that makes it very difficult to do things. Another thing that I’m really not sure about is, when is it the right advice to clear the schools? That’s a thing that we’re trying to figure out. What do we say is the rule for when you decide you want to actually send the kids home? Because keep in mind, as we were talking about beforehand, right, when you’re looking at a disadvantaged population, losing three months of schooling is a real loss. And you may lose those kids for school forever. So I think it’s appropriate to worry a lot about that decision.

Kerr: Yeah. One of our previous conversations about Covid, a podcast, one of the Amazon workforce development leaders was describing how they’re anticipating challenges to their future talent supply chain as coming off of this schooling disruption, as they look out 5 years, 10 years to the future. You also brought about this kind of inequality and the big challenges for certain racial groups and other very hard-hit groups by this. Is there anything that mayors, governors—and business leaders, for that matter—should be doing to help those groups in particular, or anything special you’ve seen that at least you can point to that city over there and say, “They’ve got this strategy that seems pretty interesting to help out?”

Glaeser: I was a big fan of the federal government paying people checks in the short run, and I think the fact that we have our unemployment insurance done in a way that you need to show up in person during Covid is an absolute disgrace. The fact that we cannot figure out some way to do electronic delivery of this stuff or something that doesn’t involve huge queues, that’s sort of appalling. The things that look most like unconditional cash transfers to the needy feel like the best thing to do. The things that feel like the worst things to do are requiring people to show up in person. In general, the Paycheck Protection Program [PPP]—again, I’m emphasizing the federal program because it’s been by far the largest—the Paycheck Protection Program is an unbelievably large thing for the federal government to try and do. It will involve assuredly a vast amount of waste. But on the other hand, it’s also a vast program. I mean, it’s hard to imagine anything—$349 billion in loans, some of which may be forgiven with not totally clear rules about the forgiveness—I mean, it’s just a sort of unbelievable thing. The quicker we get toward clarity about that, the better it’s going to be for small businesses and the banks that are lending to them. I mean, in some sense, when you think about this sort of inequality, it’s sort of like, for the past 150 years we’ve been moving in a direction so that less-privileged Americans have sort of been steered directly into the onslaught of a pandemic, right? I mean, if you think about this sort of 150 years, less-skilled Americans are working on farms, and they move to cities. They urbanize, but they move. They work in factories. The factories de-urbanize. They become capital intensive. People move the factories and they leave. They move to urban services, right? The one thing that a machine can’t reproduce is the joy of interacting with someone who smiles at you and tells you to have a great day while they serve you your coffee. And that seemed like it’s the future for Americans who aren’t great at computer programming and aren’t going to get MBAs. But yet, those occupations, those urban service occupations, the 20 percent of American workforce that’s in leisure and hospitality and retail trade—which is such dominant things for less-skilled Americans—that is the most vulnerable set of occupations to this. And in the short run, we’ve got to be focused on just giving them short-term resources to survive. And in the long run, we’ve got to be figuring out how to do a better job so that either those jobs come back in a way that’s safer or they have better educational vocational opportunities.

Kerr: Yeah. One of the things I’d also like to pick up on is, in addition to sending the paychecks out to everyone, one of the things that people are circling as an area of concern about the responses is the finances of state and local governments, which are often on balanced-budget requirements or other types of limitations as to how much they can support. And, of course, they’re going to be facing tax shortfalls and other pieces. Any perspectives around that particular aspect and the degree we need to extend support to states or find other cash windfalls or ways to help them?

Glaeser: In the current system, the natural way to deal with the cash shortfalls will have to be money coming from the federal government, right? That’s the only place we can do it. However, there is a sense in which, it is a little crazy that states don’t have more ability to borrow during temporary shocks, right? Even to pay for current expenses. And I understand why we like that discipline on states. But in a sense, you would like to be able to have a system where states can smooth their own revenues over time without actually having to go to the federal government. But for those states—and it’s true for most of them, I think, that have some form of balanced budget requirement for their ongoing expenses—either we’re going to be facing draconian and very painful cuts in very valuable services that state and local governments provide, or the federal government’s going to have to open the lending window or open the grant window.

Kerr: And let’s fast-forward 18 months from now, and hopefully Covid has receded substantially from our lives, although everyone, of course, suspects it’ll be long with us in some form. So many of the virtues of cities, the dense populations as you described it, the idea’s hopping from person to person, can also become liabilities when you’re thinking about a highly communicable pandemic, and it’s now the virus is hopping from person to person. Do anticipate a shift outwards, either toward movement back toward suburbs of big cities or toward smaller Metro areas?

Glaeser: I don’t know. I mean, I think there’s no question, if pandemics become an every-five-year-thing, that high-density living and public transport is not going to be looking like a very attractive thing for those Americans who can get out of it. I think there’s no question that pandemics have always been the greatest demon of density, right? They’re the Plague of Athens, which ended the Golden Age of Pericles and Pericles’ own life; the Plague of Justinian, which ended the Eastern Roman Empire’s attempt to rebuild the Roman world in the 6th-century. I mean, these have enormous capacity to do harm, and there’s no question that, as all of us have experienced, in some sense de-urbanized our own lives, right? The natural response is to put space between you and other human beings. That’s what social distancing means. In some sense, if cities are the absence of physical space between people in firms, social distance is the rejection of cities. It’s exactly what it is. And if that becomes the response going forward, then we will be looking at a much less-urban world. Now, I don’t know how that world will work for sub-Saharan Africa, for India, even for much of Latin America, right? I mean it’s easy to imagine that America will become even more suburban, and we’ll move to places. We’ve got an awful lot of land in this country. It’s not particularly hard to build at even lower and lower densities. But in the developing parts of the world, it’s just very hard for me to imagine how that works and how there’s a path out of poverty into prosperity that doesn’t involve densification. And I think that really means that the right answer to this, hopefully, is that we will figure out how to do better rapid responses to future pandemics, so we don’t go through this again. So we have a capacity to develop vaccines more quickly, so we have better monitoring that stops international travel more quickly, that we have ventilators in place. And the more that we feel that we have these things that are secure, the more likely the world will go on as it is before. But that’s on us, Bill. We’ve got to make sure that we don’t just get through this and say, “Boy, now we can go back to 2019 and forget about this pandemic thing.”

Kerr: Ed, and some of the things you describe require investment. And a lot of people are going to want to repair the balance sheets or the public coffers and that kind of stuff as they come out of this. But being prepared for the next pandemic would require some investment upfront.

Glaeser: That’s right. Absolutely, and it’ll cost billions. But spending billions to save trillions is usually a pretty good thing to do. This is a multi-trillion-dollar event that we’re going through, as well as a tens-of-thousands-of-lives event.

Kerr: Yeah. You recently coauthored with several of my colleagues a survey of small businesses and how they’re fairing in the pandemic. Can you share with us just a couple of the key findings?

Glaeser: Sure. Among the things that were striking to us was just starting with the way that the pandemic appears to have been just impacting the number of employees and the number of businesses that were open. We surveyed—this was through an online platform called Alignable. We got a fairly good response rate from this, and we worked fairly hard to try and make it somewhat comparable with the population as a whole. Now, it’s not perfect. Alignable isn’t an exact replica of the population, but it’s geographically diverse. It only has matches with firms that are less than 500 employees, so it’s relevant only for the smaller firms. But remember, 48 percent of American workers work at firms with less than 500 employees. I think the most striking thing to us is just the number of those firms that had closed, right, that were temporarily out of work. In our data, the fraction that was currently closed across the entire US was 44.6 percent. That number in the mid-Atlantic states, with mid-Atlantic division, which surrounds New York, was 54.1 percent. We didn’t ask them probabilities, because that tends to be a little hard. But the share that possibly expects to be closed in December, at least by one measure, was as high as 37 percent. Now, we’re counting as we think that they’re “likely” to be closed is the fact that if they say that they’re only “somewhat likely” to be open. That’s another way of saying, that is, 64 percent thought that it was “very likely” that they would be open. But it still suggests huge amounts of uncertainty. There’s no part of the region that is spared this. Even in the Mountain region, which is the lowest closure rates, we had 39 percent of these small businesses that were closed. And in terms of the employment gaps, mid-Atlantic has about 47 percent fewer employees than they had in January. And Mountain would have about 68 percent. That’s pretty much the range. It’s really quite striking. And, of course, the firms that are most likely to be closed are the smallest ones—so the ones that are most vulnerable are the ones with fewer than 10 employees, and the sort of larger firms are still in operation.

Kerr: Ed, very strong numbers. If you think about kind of the future—I guess the big question for many policy makers now is, how quickly can we reopen? And from an economic perspective, how quickly must we reopen? And from either the survey or also from your other experiences, do you have a sense of, at what point does it not become a temporary, people go back to the jobs they have before versus some kind of more long-term challenges?

Glaeser: Right. I think our survey does give you some information about the economic costs of staying closed. It doesn’t tell you at all what the health costs are. And obviously, if we open too soon and Covid rages just as much as it did before, that’s not going to be doing us any good, either. But, for example, we asked them what their probability was of being around if the Covid crisis lasts for one month or four months or six months, and it’s the probability of being around in December of this year. Again, we’re counting probability of being around as being “very likely” that you’ll be around, as opposed to “somewhat likely” means that we’re counting you as not being around. For restaurants, they were told that, given this hypothetical that the Covid crisis would last only one month, 72 percent of them said they thought it was “very likely” that they’d be around in December. If the crisis lasts for four months, that number drops to 30 percent; 6 months, 15 percent. All retails—outside of grocery—it went from 69 percent at one month, to 35 percent at four months. Certainly when you ask these small businesses, right, they certainly think that if this is a four-month event, it’s a much more disruptive event than if it’s a one-month event. Some industries we’re a little bit more optimistic that they could weather even a long event. So the professional service firms, 79 percent thought they’d be “very likely” to be around if it was one month, and still 63 percent if it was four months. But for the ones that directly faced consumers—the ones that are really likely to be shuttered right now—if this thing goes on for multiple months, they don’t have big cash cushions, and we have questions about that as well, they’re going to be gone.

Kerr: Wow, that’s scary, not only from the perspective of those businesses, but going back to our original kind of podcast conversation. For many cities, that is a big hollowing out of the workforce and the opportunities and just the way that the cities have typically functioned that would have to repair from that.

Glaeser: Absolutely. The cash story seems to be quite important. I mean, if you look at those businesses that have more than $10,000 a month in annual expenses, the median business in that category has less than two weeks of cash on hand.

Kerr: That’s a very tight margin.

Glaeser: That suggests that the loan program—the PPP—might be quite valuable for them. But we know the queues are huge, we know confusion about terms are huge, and so the operation of that program is going to be really important in determining whether it has the effect that policy makers are hoping that it will.

Kerr: Ed, thanks so much for joining us. This has been obviously a big shock for everybody, but a super big shock in the cities. And we appreciate you sharing your expertise around how cities function and how they can ideally respond to the pandemic.

Glaeser: Great. Thank you, Bill.

Kerr: Thank you for listening to this special episode of the Managing the Future of Work podcast. To find out more about our project on the future of work and for more information on the coronavirus’s impact, visit our website at hbs.edu/managing-the-future-of-work and sign up for our newsletter.