The Covid-19 recession and health

08 Apr 2021

James Banks, Heidi Karjalainen, and Carol Propper consider how the Covid-19 recession will influence future health. 

At the end of 2020, the UK economy had shrunk by just under 10%, there had been over 100,000 deaths from Covid-19 and five percent of the labour force were unemployed. While the vaccines offer hope that the lockdown will ease, and the death toll will slow and the economy pick up, we know from past experience that major shocks to economic activity leave long shadows. Here we focus on the potential effect of the economic recession on future health.

Intuitively, it might seem natural to think that mortality increases in bad economic times. But when looking at mortality among the whole population (and not just those who lose a job as a result of a recession) the evidence is mixed, with some studies finding it to decline in recessions (for example, Ruhm 2000) or others finding it to be either unaffected by macroeconomic conditions or only slightly increasing in recessions. While deaths may not change very much, many studies find that mental illness and deaths by suicide increase in recessions, and a review of the evidence goes so far as to say that the deterioration of mental health in recessions is the only well-established finding across studies (Bellés-Obrero and Castelló, 2018).

Mortality during the Covid-19 pandemic and associated recession will be dominated by the direct effects of the pandemic and its associated effects on healthcare provision. Any aggregate short-run evidence from previous recessions will be even harder to generalise given the particular nature of the economic and social changes experienced within the pandemic, and the way these have fallen differentially on particular groups.

However, whilst the evidence on short-run effects of recessions on health may be mixed, the long-run health effects of economic downturns have been shown to be large and persistently negative, and it is here that we might see some more concrete implications for mortality and health of the Covid-19 pandemic.

A range of studies have found long-run consequences of recessions for mortality and morbidity. Workers who experience a recession in their fifties have been shown to subsequently die sooner (Coile et al. 2014). The unemployment caused by the 2007-9 global financial crisis increased the prevalence of chronic illness, especially mental illness, in the UK over the two years following the onset of the recession (Janke et al. 2020) which will then track through to subsequent mortality, given the link between long-run chronic illness and mortality (Kivimäki et al. 2018).

The long-run effects of recessions have been shown to be particularly strong on certain groups of people according to their situation at the time the economic shock hits. Recessions experienced in early childhood can have an impact on mortality at the end of life, implying effects that last the lifetime of the individuals who are born during recessions (for example, van den Berg et al. 2006). And all current younger generations may well have long-lasting effects of this pandemic given disruptions to primary and secondary schooling, higher education, and transitions into the labour market, which would all be expected to have permanent effects on life-time earnings. In addition, those with low incomes, insecure jobs, and poorer living situations and family support arrangements are more likely to have greater financial worries and poorer mental health outcomes in the pandemic, which are themselves risk factors for future poor physical health and  premature mortality.

Finally, the economic effects of the virus and the lockdown are not evenly distributed, with strong differential impact by occupation and geography. To the extent that those areas and occupational groups that have been hit hardest by Covid-19 do not recover, the pandemic may lead to not just an increase in mortality, but a further increase in inequalities in lifespan across people and areas. Decades of industrial decline in the United States may have led to a rise in deaths from alcohol, drugs and suicide (which have been termed ‘deaths of despair’, Case and Deaton, 2015, 2017). The US local labour markets with greater exposure to Chinese import competition experienced an economic decline that led to higher rates of physical and mental health problems (Adda and Fawaz, 2020) and increased mortality, especially from alcohol and drugs (for example, Pierce and Schott, 2020). This kind of structural change takes place over several business cycles rather than during one recession, and its effects are distinct from the health effects of the more temporary state of a recession.

So there will certainly be long-term effects that depend on how the remainder of the pandemic and the recession plays out, the policies that are put in place as a result, and the nature of post-pandemic outcomes when it comes to the structure and distribution of economic activity and the nature of our lifestyles. We will be feeling the health consequences of Covid-19 long after the virus itself is under control.

 

References

Adda, J. and Fawaz, Y. (2020). The Health Toll of Import Competition. Economic Journal, 130(630), 1501-1540.

Bellés-Obrero, C. and Vall Castelló, J.  (2018). The Business Cycle and Health. Oxford Research Encyclopedia of Economics and Finance.

Case, A. and Deaton, A. (2015). Rising Morbidity and Mortality in Midlife Among White Non-Hispanic Americans in the 21st Century. Proceedings of the National Academy of Sciences, 112(49), 15078-15083.

Case, A. and Deaton, A. (2017). Mortality and Morbidity in the 21st Century. Brookings Papers on Economic Activity, 397-476.

Coile, C. C., Levine, P. B. and McKnight, R. (2014). Recessions, Older Workers, and Longevity: How Long Are Recessions Good for Your Health? American Economic Journal: Economic Policy, 6(3), 92-119.

Janke, K., Lee, K., Propper, C., Shields, K. and Shields, M. A. (2020). Macroeconomic Conditions and Health in Britain: Aggregation, Dynamics and Local Area Heterogeneity. IZA DP No. 13091, March.

Kivimäki, M., Batty, G. D., Kawachi, I. and Steptoe, A. (eds.) (2018). The Routledge International Handbook of Psychosocial Epidemiology. Routledge, Abingdon, and Routledge Handbooks Online.

Pierce, J. R. and Schott, P. K. (2020). Trade Liberalization and Mortality: Evidence from US Counties. American Economic Review: Insights, 2(1), 47-64.

Ruhm, C. J. (2000). Are Recessions Good for Your Health? Quarterly Journal of Economics, 115(2), 617–650.

van den Berg, G. J., Lindeboom, M. and Portrait, F. (2006). Economic Conditions Early in Life and Individual Mortality. American Economic Review, 96(1), 290-302.

 

Further reading:

Social distancing saves lives. So do recessions: Anne Case and Angus Deaton discuss how the lockdown measures may actually save lives through mechanisms that are additional to avoiding the Covid-19-related deaths.

https://www.politico.com/news/magazine/2020/04/02/coronavirus-economy-reopen-deaths-balance-analysis-159248#2

Recessions and health: the long-term health consequences of responses to the coronavirus: James Banks, Heidi Karjalainen, and Carol Propper summarise some of the evidence on the impact of recessions on health.

https://www.ifs.org.uk/publications/14799

How might the Covid-19 recession affect your health? An economist explains: Christopher Ruhm talks about the potential effects of the current recession on health.

https://news.virginia.edu/content/how-might-covid-19-recession-affect-your-health-economist-explains

The impact of Covid-19 on chronic health in the UK: Katharina Janke, Kevin Lee, Carol Propper, Kalvinder Shields, and Michael Shields summarise the evidence from a recent study about long-term effects of recessions on chronic illness.

https://voxeu.org/article/impact-covid-19-chronic-health-uk

Covid-19 pandemic hits mental health, especially of the young and of women, and widens inequalities: James Banks and Xiaowei Xu analyse initial mental health impacts of Covid-19 and find substantial negative impacts on mental health across the population.

https://www.ifs.org.uk/publications/14876

For further details and a broader perspective, see Banks, J., Fancourt, D., and Xu, X., 2021, ‘Mental health and the COVID-19 pandemic’, in Helliwell, J., Layard, R., Sachs, J. and De Neve, J.-E. (eds.) World Happiness Report 2021, 20 March 2021.