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A pedestrian wearing a face mask crosses an empty street amid the coronavirus outbreak on April 25, 2020 in San Francisco, California.
Liu Guanguan | China News Service via Getty Images
Enforcing eight-month “structured blocks” could halve the economic destruction Covid-19 would cause if social distancing measures were not imposed, according to researchers from the University of Cambridge and the Federal Reserve.
The reopening of the economy has been a point of tension in some countries, with economic damage against the protection of public health and protests against the closure measures that are being organized throughout the United States.
However, according to the study, released Wednesday by economists at Cambridge University and the United States Federal Reserve Board, the economic price of inaction when it comes to encouraging social distancing could be double that of a “structured lock”.
Using economic and population data from the USA. The researchers combined macroeconomics with epidemiology to determine the economic consequences of blockade policies. Analysts noted that its model could be applied to most developed economies.
They found that imposing any blockade would be “extremely risky” for economic production, since the spread of the virus would affect workers in sectors that were vital to keeping developed economies functional.
Without any social distancing, the core workforce would be hit hard, and the economy would shrink to a maximum monthly rate of 30% as its industries were under pressure, according to the study.
The researchers said that to protect the economy as much as possible, “core workers,” those in key industries like healthcare, food and transportation, must be separated from the rest of the workforce.
“What seems clear to us is that not taking action is unacceptable from a public health perspective, and extremely risky from an economic perspective,” the report’s authors said.
The report considered various closure policies, projecting how each scenario would affect the economy.
In the first scenario, 15% of main workers and 40% of the rest of the working population would work from home, while 30% of people of non-working age could also stay at home under lock and key. This would last eight months and would mean that a third of the entire population remained locked up during that period.
In this scenario, the maximum monthly economic contraction at any point in the close would halve to around 15%, compared to the maximum monthly contraction of 30% if no action was taken, according to analysts. They claimed that high levels of social distancing outside of the central workforce would act as a shield.
Giancarlo Corsetti, professor of economics at Cambridge University and co-author of the report, said that under this policy, the peak of the infected proportion of the population would drop from 40% to 15%, although he noted that even this level may still be ” too high “for health systems to cope with.
“This milder eight-month lockdown scenario would be one where we don’t expect the vaccine, but we do expect a form of collective immunity by exposing people very slowly to the disease,” he told CNBC in a phone call.
“In addition to containing loss of life, committing to structured long-term social distancing to keep core workers active can significantly soften the economic costs of the disease,” he added. “The more we can direct closure policies towards sectors of the population that are not active in the labor market, or that work outside the central sector, the greater the benefit for the economy.”
The researchers also modeled a scenario in which infection rates remained at a more manageable level of 1.5% of the population for 18 months, around the time period that many experts have projected to take a vaccine to reach the market.
In this stricter case, 25% of core workers, 60% of non-core workers and 47% of people of non-working age would need to be locked up. If this policy were implemented, the study projected a maximum monthly economic contraction of 20%.
A “very strict blockade” was also modeled, which would see 40% of central workers and 90% of the rest of the population locked up for three months. According to the study, this scenario would be as bad for the economy as having no blockage at all, since infection rates would simply be delayed and collective immunity would be avoided.
However, the researchers emphasized that the scenarios presented in their study were not prognostic, but should be taken as a “blueprint” for further analysis, as uncertainties remain as to how the coronavirus spreads.
Corsetti told CNBC that “there really was no tradeoff between health and the economy.”
“A problem that is currently missing from the discussion is the ability to distinguish between essential and non-core sectors, and this idea of thinking very carefully about the effect that people can have by walking and infecting these essential workers: essential workers they must be protected and protected, “he said.
“An unmitigated and very rapid spread of the disease would have been quite disastrous from an economic point of view: there was a high risk of a real and huge drop in production and economic activity.”
