Massive income-support programs deployed during the pandemic have been more than just a shot in the arm for the world鈥檚 economies, says Visiting Assistant Professor of Economics Abraham Asfaw.
They鈥檝e been a matter of life and death.
, 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 鈥渁voided 3.6 million COVID-19 cases and 166,690 deaths鈥� between Feb. 15 and May 15, 2020, the period of his study.
Asfaw’s paper, 鈥淭he effect of income support programs on job search, workplace mobility, and COVID-19: International evidence,鈥� combines data from several sources, including the , , 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 鈥渨hen evaluating the total values of social insurance programs,鈥� writes Asfaw.
Asfaw鈥檚 study is thought to be one of the first to provide evidence of social insurance programs鈥� effect on job search effort, workplace mobility, and COVID-19 case and mortality growth rates.
Typically 鈥� absent a pandemic, that is 鈥� nations use ISPs to help with 鈥渃onsumption smoothing,鈥� a term that describes one鈥檚 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.
鈥淚n the presence of a contagious respiratory disease,鈥� writes Asfaw, the benefit of ISPs 鈥渃an go beyond consumption smoothing鈥� by 鈥渞educing workplace contacts and containing the virus鈥檚 spread in the community.鈥�
(Asfaw does acknowledge that individuals could have used other 鈥渃oping mechanisms,鈥� besides ISPs, such as 鈥渃redit cards, savings, loans from friends and family, to smooth their consumption and practice social distancing, reducing physical contacts in workplaces and other areas.鈥�)
Titled “Movement focus #3, Chelsea, New York City,” this photograph was taken in the Manhattan neighborhood on June 20, 2020, during the city’s phased reopening. (Photograph by Andreas Komodromos, licensed under )
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鈥� 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 .
Indeed, Asfaw found that ISPs during the pandemic did lead to a 鈥渞eduction in job-search effort levels鈥� 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鈥檚 research indicates it would have 鈥渃ome at the cost鈥� of an additional 3.69 million COVID-19 cases and 166,690 deaths worldwide between Feb. 15 and May 15, 2020. (, 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鈥檚 mental health and potentially increase deaths by suicide.
鈥淭herefore, 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,鈥� he writes.
Asfaw adds, 鈥淭he 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.鈥�
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