A new study reveals that government-imposed shutdowns and social distancing could cut the economic impact of COVID-19 in half.
While shuttering states has been met by some opposition, the survey by the University of Cambridge in the United Kingdom and the U.S. Federal Reserve Board found the economic price of the coronavirus would be worse without social distancing and the lockdown, CNBC reported on Wednesday (April 29).
Researchers, using a combination of U.S. economic and population data, analyzed macroeconomics with epidemiology to determine the economic impact of a lockdown, the news service reported.
A review of the data found that failure to impose a lockdown would be “extremely risky” for economic output, as the spread of the coronavirus would impact the workers who are essential to keeping the economy going, the 52-page report said.
Without any social distancing, the workforce would be highly impacted, and the economy would contract by as much as 30 percent per month as their industries bore the brunt of the virus, the study found. Researchers found that separating “core workers” in the healthcare, food and transportation industries must be kept apart from the rest of the nation's workforce to help protect the economy.
“Without public health restrictions, the random spread of the disease will inevitably hit sectors and industries that are essential for the economy to run,” said co-author and Professor Giancarlo Corsetti from Cambridge’s Faculty of Economics. “What seems clear to us is that taking no action is unacceptable from a public health perspective, and extremely risky from an economic perspective.”
The study considered several lockdown scenarios and examined how each would impact the economy.
In the first scenario, 15 percent of essential workers and 40 percent of the rest of the working population would work from home, while 30 percent of minors would also be kept at home. This would last for eight months, the study said, and would require one-third of the population to be in lockdown. Under this plan, the monthly economic reduction would be reduced by half to around 15 percent, compared to 30 percent if no action was taken, analysts forecasted.
“This milder lockdown scenario for eight months would be one in which we do not wait for the vaccine, but we hope for a form of herd immunity by exposing people very slowly to the disease,” Corsetti told CNBC. “As well as containing the loss of life, committing to long-term social distancing structured to keep core workers active can significantly smooth the economic costs of the disease. The more we can target lockdown policies toward sections of the population who are not active in the labor market, or who work outside of the core sector, the greater the benefit to the economy.”