There is a trade-off—lives lost vs economic losses—in terms of loosening restrictions on economic activity during the Covid-19 crisis. All economists know this, although we are often embarrassed to state publicly that this trade-off exists. But it makes sense to try to measure what this trade-off looks like, since this is the crucial choice that policymakers face, whether they are willing to acknowledge it or not.
Economists estimate the value of a life in the US at $10 million (I know doing this sounds crass). This calculation has been used countless times by governments in deciding whether to invest in various construction and other projects. The best estimate I’ve seen of the number of jobs lost during the crisis suggests that about 200 jobs are lost for each life saved by social distancing, business closures, and similar measures.
One life saved for 200 jobs lost might sound like an unacceptable trade-off, as it clearly does to those pushing for a rapid re-opening of Western economies. But a person’s life is lost forever, while the 200 jobs are lost temporarily, perhaps a half-year at most (which is much longer than the average duration of spells of unemployment in the US). If the worker is the average US worker, earning $40,000/year, the cost of jobs lost per life saved is $4 million (200 jobs x $40,000/year x ½ year). Comparing the two figures, $10 million per life saved vs $4 million for jobs lost, makes the correct choice pretty clear—don’t rush to re-open an economy.
Most of the lives lost are of older people, and many folks would argue that $10 million is too high a value of life for someone in his/her 70s (although at age 76, I object vehemently to that argument!). But even taking $5 million/life lost, this still exceeds the likely economic losses in terms of jobs lost (and hence goods and services foregone).
There’s another issue here that is ignored too often in this discussion: The lost lives are not randomly dispersed across the population. Not just old people, but poor people and minorities are disproportionately among those succumbing to Covid-19. This might cause some economists to lower still further their estimate of the value of lives lost, but even for an economist that would be extremely crass.
Moreover, many of those arguing for rapidly re-opening economies—leading politicians, for example—are among the wealthiest people in society. Re-opening the economy is unlikely to burden them and their wealthy friends. Advocating for one’s own gains while others bear the cost hardly seems moral.
It is reasonable to argue that a jobs–lives lost trade-off exists, provided one makes the comparisons correctly. It is incorrect in doing so to ignore the fact that the burdens and costs are not borne equally by all, but rather that the loss of life is borne disproportionately by the least fortunate. While the economic losses may also be disproportionate on minorities and the poor, monetary compensation through government programs offsets much of those losses. Nothing can offset the losses of people’s lives.
© Daniel S. Hamermesh
Daniel S. Hamermesh is Distinguished Scholar at Barnard College, USA, Director of Research Network at IZA, and Editor-in-Chief of IZA World of Labor
Read more on the coronavirus crisis:
"Coronavirus and the labor market," by Daniel S. Hamermesh
"Fighting a coronavirus recession," by Daniel S. Hamermesh
"Pandemics and the labor market—Then and now," by Karen Clay
"Pricing the lives saved by coronavirus policies," by W. Kip Viscusi
"Health effects of the coronavirus recession," by Christopher J. Ruhm
"The long-term consequences of missing a term of school," by Simon Burgess and Hans Sievertsen
"Coronavirus, telecommuting, and the labor market," by Nikos Askitas
"Expectations about Covid-19 social-distancing measures in Italy and their impact on compliance," by Guglielmo Briscese, Nicola Lacetera, Mario Macis, and Mirco Tonin
"The coronavirus crisis and the next generation," by Bart Cockx
"Korea: A paragon of dealing with coronavirus," by Sok Chul Hong
"Economic implications of postponing the Tokyo 2020 Olympic Games," by Peter J. Sloane
"The sudden growth of employee autonomy during the coronavirus lockdown," by Elisa Gerten and Michael Beckmann
"Mitigating the work–safety trade-off," by Tito Boeri, Alessandro Caiumi, Marco Paccagnella
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