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The Virus and the Economy

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eye on the news

The Virus and the Economy

Widespread quarantines and shutdowns of industries have human costs, too. March 8, 2020
Covid-19
Economy, finance, and budgets
Health Care

The spread of the coronavirus has led to fears of a worldwide economic slowdown. China, where the virus first leaped into the human population, has quarantined large sections of the country, virtually shutting down economic activity. In South Korea, several companies—including the automaker Hyundai—closed facilities when workers there tested positive for the virus. The Italian government, meantime, has shuttered schools and universities and banned public attendance at sporting events—including the nation’s popular soccer league—for 30 days. Such responses, likely to spread to other countries as the virus itself travels, have led to estimates that containment efforts could cut worldwide economic growth in half this year. Whether that prediction proves accurate, or whether the toll proves even worse, may depend on how the economic impact of the virus plays out in the United States, the world’s largest and most consequential economy.

The U.S. has already taken several basic steps to stem the spread of the virus, including suspending flights from China and quarantining those returning from areas of the world where the infection is most intense. But as the virus spreads, officials contemplate stricter measures. These include banning public gatherings such as concerts, movies, and sports events; advising businesses to keep workers home; or even shutting down firms where the virus is detected.

It might be easy to justify such draconian measures based on the toll that the coronavirus can take on society. But what’s also worth contemplating is the human toll that a potentially sharp decline in economic activity would exact. While the simplest way to measure an economy may be in dollars and cents, economic activity also produces well-being. A decline in the economy sparks deterioration in public welfare. Those are human costs that must be measured against the inevitable cost of the virus itself. Extended school closures, for example, place a burden on employed parents, who must miss long periods of work; on households living paycheck-to-paycheck; and on the self-employed.

The current economic expansion, more than a decade old, demonstrates the salutary impact of good times. U.S. unemployment rates have plunged to such low levels that the demand for workers has started luring back the chronically unemployed—people who drop out of the workforce—into the labor market. One result is that the labor-participation rate, which had slid by several percentage points over 15 years, has sharply rebounded in the past four years. Companies now desperate for employees have extended their employment search to new markets, hiring the disabled and the long-term unemployed, and investing heavily in retraining out-of-work, but willing, job seekers.

This robust employment picture makes a sharp contrast with the American labor situation after the financial meltdown and recession of 2008 and 2009. As unemployment rates soared into double digits, businesses failed, individual finances deteriorated, and associated health problems began to proliferate. Research published last year in Clinical Psychological Science found that people who lost their jobs, watched their savings evaporate, or struggled to keep their homes suffered long-term psychological effects, including debilitating periods of anxiety and depression. Unemployment, the most human measure of economic failure, carries especially harsh consequences. According to a 2014 Gallup poll, the unemployed were twice as likely to say that they were depressed as those with jobs. Those without a job for a year were in even worse shape; they were twice as likely as those unemployed for only a month to say that they were depressed. Suicide rates also track with economic decline: as unemployment rises, so do suicides. Those out of work are also twice as likely to abuse drugs as those employed full-time. Divorce rates for the unemployed are similarly double the average for those with jobs. Economic decline doesn’t paint a happy human picture.

The problem: no easy ways exist to balance the economic cost of efforts to contain the virus with the toll that the virus itself takes on society. We still don’t know enough about the virus because we lack adequate information, including about such crucial factors as how deadly it really is and who it affects. Even the experts have disagreed. In recent days, growing evidence suggests that our approach should be surgical, rather than broad-based. Widespread quarantines and wholesale shutdowns of communities, for example, inevitably suppress the economy. Instead, we should focus our efforts on helping those overwhelmingly more vulnerable to the virus.

Harvard Medical School professor Jeremy Samuel Faust, writing recently in Slate, argues that the latest data suggest the coronavirus is far less deadly than previously thought—something we have discovered in the aftermath of previous epidemics, such as the 2009 H1N1 flu outbreak, where the actual mortality rate turned out to be one-tenth what was first reported. Increasingly, it seems that the coronavirus commonly takes a mild form, and that severe cases are especially rare among the young. The most vulnerable population is the elderly. One recent report in Italy found that the average age of those who had died in the country was 80. On the Diamond Princess, the cruise ship that was quarantined, 705 people tested positive for the virus, and six died—all were over 70. These rates are consistent with what we know about the flu. Every year, as many as 80 percent to 90 percent of those who die from seasonal influenza are elderly, many with health problems that the infection worsens.

“This all suggests that Covid-19 is a relatively benign disease for most young people, and a potentially devastating one for the old and chronically ill, albeit not nearly as risky as reported,” Faust writes. “In particular, we need to focus on the right people and the right places. Nursing homes, not schools. Hospitals, not planes.”

The biggest worry is that, in the general panic over the coronavirus—as healthy young people rush out to stockpile supplies and governments shut down soccer games—we’ll fail to direct our efforts where they are most needed. “What worries me the most is that people are going to be so panicked they will overwhelm the health-care system and push to the side people who really do need medical attention,” said Paul Offitt, a physician and infectious-disease expert at the University of Pennsylvania, in a recent interview. He noted that we’ve already seen probably 18,000 deaths this year in America from the flu, yet we’re far more terrified of coronavirus. “Maybe we need to give influenza virus a scarier name.” Many of those who die of flu reside in nursing homes, yet our efforts to protect them are sometimes wanting. Key personnel can be untrained in how to recognize or handle infectious diseases among the elderly. According to the Centers for Disease Control, more than 30 percent of staff who work in nursing homes don’t get vaccinated themselves, making them potential transmitters of the flu. Five patients have already died of coronavirus at a long-term-care facility in Seattle that previously had been cited for inadequate infection-control measures—suggesting that we’re making the same mistakes with coronavirus that we make with the flu.

It can be hard making good public policy when accurate information is so scarce. In the U.S., we’ve been fortunate so far, in part because of our distance from the initial outbreak and in part because of how early measures, like banning flights from China, have slowed the progress of the virus here. But we should pay close attention to how some of the more extreme measures to shut down public activity in places like Italy play out. It’s tempting to see such bans as the safest route to take in an emergency—and in some circumstances, they may be—but we can’t ignore the human cost of a widespread economic shutdown.

Photo by David Dee Delgado/Getty Images

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