people in the fight against covid and economic recovery

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Professor James Banks, Heidi Karjalainen and Professor 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 per cent, there had been over 100,000 deaths from COVID-19 and five per cent 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 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.

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, while 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 review… goes so far as to say that the deterioration of mental health in recessions is the only well-established finding across studies

A range of studies have found long-run consequences of recessions for mortality and morbidity. Workers who experience a recession in their 50s have been shown to subsequently die sooner.

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 which will then track through to subsequent mortality, given the link between long-run chronic illness and mortality. 

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.

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. 

Current younger generations may well have long-lasting effects of this pandemic

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”). 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 and increased mortality, especially from alcohol and drugs.  

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. 

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Carol Propper

About Carol Propper

Chair in Economics
Professor Dame Carol Propper is Chair in Economics and a member of the Centre for Health Economics & Policy Innovation. In 2010, she was awarded a CBE for her services to social science. She was elected as a Fellow of the British Academy in 2014, and made an International Fellow of the US National Academy of Medicine in 2018. In 2019, she was elected President of the Royal Economic Society. She was made a dame in the 2021 New Year's Honours for her contribution to economics and public health.
James Banks

About James Banks

Professor of Economics, University of Manchester
Professor James Banks is Professor of Economics at the University of Manchester and Deputy Research Director of the Institute for Fiscal Studies (IFS).
Heidi Karjalainen

About Heidi Karjalainen

Research Economist, Institute of Fiscal Studies
Heidi Karjalainen is a Research Economist in the Pensions and Public Finance sector. Her current work includes research on pensions and saving for retirement, with a focus on pension saving of the self-employed.