Are the unvaccinated responsible for the slowing economy? Not really
The Atlanta Fed’s GDPNow tracker downgraded its forecast for Q3 GDP growth again: it has now dropped from 6 percent at the end of July to 1.3 percent now. Then came the…
Last week, I wrote about the belated realization of some policymakers that actions taken to slow or stop the spread of Covid-19 have costs as well as benefits. Sensible policy will come from weighing these against each other.
That has been complicated during this pandemic. One the one hand, policymakers have, too often, oversold the benefits of their measures. On the other, they have downplayed any costs: indeed, pointing out that these costs exist at all is likely to get you branded a ‘Covid denier’.
But these costs are very real. As I wrote in June, the economic suppression in the name of fighting Covid-19 will hurt today’s graduates for years to come:
Empirical research suggests that the effects of graduating during a recession are felt by those graduates for some time.
In a review last year, economist Hannes Schwandt wrote:
“Research shows that college graduates who start their working lives during a recession earn less for at least 10 to 15 years than those who graduate during periods of prosperity (Oyer 2006, Kahn 2010, Wozniak 2010, Oreopoulos et al. 2012).”
Schwandt and another economist, Till von Wachter, expand their analysis to look at those without college degrees and examine a broader range of metrics than just incomes. They write:
“Our first main finding is that high school graduates and dropouts suffered even stronger income losses than college graduates when entering the labor market during a recession. Second, we find that negative impacts on socioeconomic outcomes persist in the long run. In midlife, recession graduates earned less, while working more. And they were less likely to be married and more likely to be childless.
Our third important finding is that recession graduates had higher death rates when they reached middle age. These mortality increases stemmed mainly from diseases linked to unhealthy behaviors such as smoking, drinking, and eating poorly. In particular, we discovered a significantly higher risk of death from drug overdoses and other so-called “deaths of despair” among those who left school during a downturn.
Our results demonstrate that health, mortality, and economic and personal well-being in midlife can bear the lasting scars of disadvantages that come during young adulthood. Simply put, the bad luck of leaving school during hard times can lead to higher rates of early death and permanent differences in life circumstances.”
Another assessment of these costs comes from economists Francesco Bianchi, Giada Bianchi, and Dongho Song in a new paper titled ‘The Long-Term Impact of the COVID-19 Unemployment Shock on Life Expectancy and
Mortality Rates’. They “investigate the historical relation between unemployment, life expectancy, and mortality rates” and “find that shocks to unemployment are followed by statistically significant increases in mortality rates and declines in life expectancy”:
We use our results to assess the long-run effects of the COVID-19 economic recession on mortality and life expectancy. We estimate the size of the COVID-19-related unemployment to be between 2 and 5 times larger than the typical unemployment shock, depending on race/gender, resulting in a 3.0% increase in mortality rate and a 0.5% drop in life expectancy over the next 15 years for the overall American population. We also predict that the shock will disproportionately affect African-Americans and women, over a short horizon, while white men might suffer large consequences over longer horizons. These figures translate in a staggering 0.89 million additional deaths over the next 15 years.
That is 890,000 deaths resulting from the Covid-19 recession, 59,300 annually for the next 15 years.
Some element of this will be the result of the pandemic itself rather than the measures taken to fight it. But not all. And, as the economic suppression continues the share attributable to it will grow. Policymakers have to take this into account.
John Phelan is an economist at the Center of the American Experiment.