#PandemicGoals: Help those in economic distress (Part II)
How do we mitigate the pain between onset to “back to normal”?
To look ahead by learning from the past, we’re homing in on the core economic problem present in three major goals during a burgeoning pandemic. In Part I, we put the brakes on infection. What can public policy do to address economic pain and (good news!) what will emerge naturally from ordinary economic activity?
1. Core Economic Problem: A problem of transition
The ripples of unemployment from 2020 are still being felt as we begin 2023. The labor force participation rate- a measure of how many people are working or trying to find work-remains 1.3 percentage points below its level three years ago.[1] The turmoil in labor markets arose both from dramatic shifts in individual economic activity as well from our public policy responses. No matter the source, however, a shift in economic activity means that businesses and individuals must transition to a new economic reality-not an easy task and often painful.
Sadly, this core economic problem is not new to a dynamic economy, but it loomed historically large with the sudden arrival of COVID-19. When markets face an abrupt drop in demand, employment and wages will follow. Such changes may be transitory- like dental visits, which rebounded after a few months, or be more permanent, like movie theater attendance, which dropped from an average of 6.9 films pre-pandemic to 3.6 films a year later.[2]
2. When a syringe is better than a Band-aid
A go-to government solution to this economic pain is unemployment payments, which were immediately deployed. However, unemployment payments are more like a Band-Aid for economic pain- they don’t address the fundamental problem that demand has changed or that old ways of operating are no longer feasible.
Instead of a Band-Aid, how about the vaccine that goes under it!? Effective vaccines cut to the core problem and let large segments of the economy get back to normal. Workers could return as well as customers and their dollars.
Public policy accelerated vaccine arrival early on by scaling up funding for development and manufacture of vaccine candidates. Operation Warp Speed (OWS) also simultaneously prepped for putting products into arms by funding products such as vials and syringes.
Even more influential, the Emergency Use Authorization for vaccines accelerated the bureaucracy-filled process of FDA approval from 5-10 years to under 10 months. Researchers estimate that the first five months of the vaccine campaign saved nearly 140,000 lives in deaths avoided, or between $625 billion and $1.4 trillion in the value a statistical life![3] Compare those numbers to anything a government could muster with a purely financial push: The beneficial impact of removing bureaucracy for private sector businesses was far greater than any financial aid.
(Read more about how OWS is a great example of public/private sector cooperation my piece "Out of the Pandemic Mud" in Discourse Magazine.)
3. Shopping for time
Businesses facing massive demand swings must make fundamental changes to adapt to new realities. Innovations, particularly virtual ones, helped businesses come out stronger than before. However, many industries were stuck in a “waiting game” for vaccine development before they could resume normal operations.
There are plentiful and heartening examples of communities working together to help workers and businesses in need. Within a months of pandemic onset, the Lilly Family School of Philanthropy estimated that grassroots community funds in the U.S. had raised more than $634 million to address food insecurity, mental health needs, and emergency financial assistance.[4] However, my favorite illustration of communities lifting businesses from the “waiting game” was the call to buy gift cards from local businesses. Communities recognized that these businesses offered valuable products and services, but it would be some time before they could be safely enjoyed. Initiatives such as Support Local by USA Today and Rally for Restaurants were creative ways to literally “buy time” for businesses struggling with the problem of transition.
This series is part of a larger discussion published by the Mercatus Center with my coauthor (and WFU Economics alum) Grace Lyons. Check it out!
As always, keep me updated on what you’re up to or reach out to chat with me about these issues!
Best,
TMD
Go back to “Putting the Brakes on Infection (Part I).”
[1] Bureau of Labor Statistics, “News Release: The Employment Situation- November 2022.” U.S. Department of Labor, December 2, 2022.
[2] Brenan, Megan, “Movie Theater Attendance Far Below Historical Norms” Gallup Polling. Economy. January 7, 2021.
[3] Gupta S, Cantor J, Simon KI, Bento AI, Wing C, Whaley CM. Vaccinations Against COVID-19 May Have Averted Up To 140,000 Deaths In The United States. Health Affairs (Millwood). 2021 Sep;40(9):1465-1472.
[4] Supporting Charitable Giving during the COVID-19 Crisis. Virtual Hearing before the Join Economic Committee, 116th Congress, 2nd Session (2020).