Five predictions for the coronavirus recession
Spoiler alert: This recession will be deeper and more protracted unless we take action now.
If there’s one thing I know, it’s that economists shouldn’t make predictions, as we’re notoriously bad at it.
There — now that that’s out of the way — I am about to make five predictions about our economy over the next year.
The economic model of allowing economic inequality to fester has failed, and I believe next year we will all be able to see why this is true. I’ve worked side by side with some of the best economists and social scientists over the past 6 years, and these predictions are informed by that work.
Prediction 1. The economic crisis in the United States will be deeper and more protracted than that of our economic competitors.
It doesn’t have to be this way, of course, and there may still be time to ensure this is not the outcome. But the reality is that our nation has made a series of decisions over the past 50 years that has created underlying fragilities in our economy. These decisions have made our economy less effective in good times, and now, in the midst of what could be the worst economic crisis of our lifetime, those decisions may lead to our undoing.
We now know that the United States is experiencing a uniquely steep trajectory of coronavirus cases compared to other countries. It’s been remarkable to watch how even after learning about the experiences of other countries and imposing travel restrictions, still we were unable to flatten the curve of cases or deaths.
There’s a reason. Consider this: The United States is one of only two of the countries of which the Organisation for Economic Co-operation and Development is comprised which, at the onset of the crisis, did not have a nationwide policy in place providing all workers with the right to stay home and not lose a day’s pay if they fell sick, according to the University of California Los Angeles World Policy Center. The other country is South Korea. About 25 percent of all U.S. workers and a staggering 7 out of 10 low-income U.S. workers did not have access to paid sick days when the crisis hit.
This lack of paid sick days isn’t a simple omission. It is part of a pattern, one in which the United States lags behind all our economic competitors in ensuring that the people who make up our economy have access to what they need to be healthy.
It is important to note, however, that some states and cities across the United States have enacted policies to ensure access to paid sick days and paid family and medical leave. As of January 2020, more than 30 jurisdictions have laws on the books that give workers the right to paid sick days. On top of that, another eight states and the District of Columbia have, or soon will put in place, insurance systems to provide extended family and medical leave to recover from a serious illness or care for a seriously ill family member.
Prediction 2. States and localities with paid sick days and family and medical leave policies will see fewer transmissions of the coronavirus.
This is based on the latest research, which shows that mandated sick leave reduces the rate of flu by as much as 40 percent during seasonal waves of flu in the United States. We will be eager to study this at the Washington Center for Equitable Growth, and I hope to hear from other scholars about this as well.
Prediction 3. Too many U.S. workers fear going to the doctor, which will raise rates of transmission here, relative to our economic competitors.
It’s true that South Korea, a country that appears to have successfully “flattened the curve,” doesn’t guarantee paid sick leave to workers. But South Korea does provide nationalized healthcare, which guarantees most can access affordable care. The country’s vast scale of testing has been central to their approach: South Korea’s per-capita rate for testing is more than 40 times that of the United States. That has only been possible because people feel comfortable — even incentivized — to get tested.
The U.S. Congress finally made tests free with the relief package bill signed on March 18 (even though there still aren’t enough tests available). Even so, people in the United States, including those with health insurance, may fear the high cost of receiving care. A man in Vermont with health insurance went to the emergency room to get tested and is now facing more than $2,000 in medical bills.
The fear of getting slammed with high medical bills will continue to keep those who feel sick from seeing a doctor, increasing their chances of infecting others or ending up seriously ill, all while adding stress to our healthcare system.
The United States spends twice as much per person on healthcare compared to our economic competitors — and our life expectancy is shorter. In 2018, the United States spent nearly twice as much on healthcare as the average OECD country, according to the Commonwealth Fund. All of that spending amounts to 16.9 percent of Gross Domestic Product. And in 2019, amid a period of record economic expansion, the amount spent on health insurance premiums still surpassed wage growth.
For all that spending, millions of people across the country lack access to health insurance. Of the 27.5 million people without health insurance, the majority are low-wage, self-employed, and gig workers whose employers don’t provide coverage. And, though the Affordable Care Act decreased the rate of those who were uninsured from 16.3 percent in 2010 to 8.5 percent in 2018, that number actually rose in 2018 because the Trump administration has been chipping away at the law.
Prediction 4. This economic crisis is likely to be deep and protracted because we lack robust social insurance for tough economic times.
The United States spends just 0.6 percent of Gross Domestic Product on support exclusively for families and children, the second-lowest of all OECD countries. Our Unemployment Insurance system, put in place as part of the Social Security Act of 1935, was designed to help unemployed people across the country keep food on the table and pay their bills. That system has been weakened over the past few decades because of negligence by our elected officials — especially since the Great Recession of 2007–2009. Many states have both underfunded their Unemployment Insurance programs and made it harder for the unemployed to access benefits. The trust funds that states are supposed to shore up in good economic times are not prepared for a recession. Indeed, some have reserves that could run out in just six months.
To make matters worse, many workers who lose their jobs will lose their health insurance, meaning that unemployment benefits are essentially their only safety net. More than half of the U.S. population gets health insurance through their job or a family member’s job. Although unemployed workers have options for subsidized coverage, there are administrative hurdles and deadlines to navigate.
Prediction 5. In the end, we will feel the coronavirus recession more strongly because too many policymakers cannot accept the simple fact that the economy depends on people.
We are our nation’s producers and consumers. We need to be able to show up to work healthy so we can be productive, and we need to stay healthy to be able to spend money in our economy. For too long, too many of the officials we have elected to higher office have lost sight of this basic fact. The focus of policymakers has been on ensuring that markets work, and they’ve told us paid sick days and universal access to health insurance aren’t a necessary human right.
Though we may not be able to avoid experiencing another recession caused by a pandemic down the road, we can make it less severe. Together, we can build a more resilient economy by implementing policy solutions that will protect families across the income spectrum — not only for today but also for the future.
Heather Boushey is President and CEO of the Washington Center for Equitable Growth and the author of the book Unbound: How Inequality Constricts Our Economy and What We Can Do About It.