Massive income-support programs deployed during the pandemic have been more than just a shot in the arm for the world’s economies, says Visiting Assistant Professor of Economics Abraham Asfaw.
They’ve been a matter of life and death.
Writing in Economics & Human Biology, Asfaw measured the effects and tradeoffs of income-support programs worldwide during the pandemic, such as paycheck protection and expanded unemployment benefits.
His conclusion: ISPs globally “avoided 3.6 million COVID-19 cases and 166,690 deaths” between Feb. 15 and May 15, 2020, the period of his study.
Asfaw’s paper, “The effect of income support programs on job search, workplace mobility, and COVID-19: International evidence,” combines data from several sources, including the Oxford University COVID-19 Government response tracker, Google community mobility reports, and Google job search trends in 178 countries.
The study significantly underscores the need for policymakers to consider public health benefits such as disease prevention and mortality reduction “when evaluating the total values of social insurance programs,” writes Asfaw.
Asfaw’s study is thought to be one of the first to provide evidence of social insurance programs’ effect on job search effort, workplace mobility, and COVID-19 case and mortality growth rates.
Typically — absent a pandemic, that is — nations use ISPs to help with “consumption smoothing,” a term that describes one’s ability to conduct their financial life as usual, such as buying groceries and paying for housing and transportation, despite disruptions.
But during the pandemic, ISPs took on a life-and-death purpose. As countries instituted drastic measures to fight the pandemic, including stay-at-home orders, ISPs made it financially possible for people to achieve physical distancing, including staying away from the in-person workplace.
“In the presence of a contagious respiratory disease,” writes Asfaw, the benefit of ISPs “can go beyond consumption smoothing” by “reducing workplace contacts and containing the virus’s spread in the community.”
(Asfaw does acknowledge that individuals could have used other “coping mechanisms,” besides ISPs, such as “credit cards, savings, loans from friends and family, to smooth their consumption and practice social distancing, reducing physical contacts in workplaces and other areas.”)
Asfaw notes that there is a tradeoff when it comes to ISPs. Critics have long argued that such programs hurt the economy by lowering unemployed workers’ incentive to apply for jobs and return to the workforce. As governments loosened unemployment eligibility criteria and increased benefits in the early months of the pandemic, those concerns have been front-of-mind among policymakers.
Indeed, Asfaw found that ISPs during the pandemic did lead to a “reduction in job-search effort levels” of between 6.6 and 11.6 percentage points in economies throughout the world.
At the same time, ISPs, by allowing workers, whether employed or not, to stay away from the in-person workplace, reduced the growth rate of COVID-19 cases (between 21.8 to 47.7 percentage points) and reduced COVID-19 mortality growth rates (between 17.1 to 29.7 percentage points).
Had people not had ISPs, and instead been out job hunting or been forced to work in-person, Asfaw’s research indicates it would have “come at the cost” of an additional 3.69 million COVID-19 cases and 166,690 deaths worldwide between Feb. 15 and May 15, 2020. (According to various sources, the actual death toll during that time was around 320,000 worldwide.)
Asfaw mentions other public-health benefits of ISPs, noting that loss of income due to job loss can adversely affect one’s mental health and potentially increase deaths by suicide.
“Therefore, to the degree ISPs improve general health and reduce non-COVID-19 mortality, the effects of the programs documented here underestimate their actual total health benefits,” he writes.
Asfaw adds, “The findings from this paper also strengthen the argument for a stronger social insurance program that can automatically replace lost income due to unemployment caused by a pandemic or other types of aggregate shocks.”