New health standards due to the coronavirus crisis: Remember that labour and capital are complementary for existing equipment but substitutable for new equipment

After the lockdowns, the main effect of the coronavirus crisis will probably stem from new health standards. Labour and capital are complementary for existing equipment . T he se new health standards will therefore reduce both hourly labour productivity and capital productivity; But labour and capital are substitutable for new equipment . A s the new health standards will increase the cost of labour, they will encourage investment in modernisation to substitute capital for labour. In the short term, there will therefore be stagflation (lower growth and higher inflation); in the medium term, if the health standards are kept in place, there will be automation and an upturn in hourly labour productivity.