Category: Economics

Some of my friends were discussing whether adjustments due to coronapanic will make it irrational for more Americans to work, rather than to set themselves up for welfare (means-tested public housing, Medicaid, SNAP, and Obamaphone). As with child support profits, there is a a lot of variability from state to state. From Cato’s work-versus-welfare trade-off 2013:

What’s changed with coronaplague? The desk jobs are less fun: sit at home and stare at a screen all day. The non-desk jobs are more dangerous: work in a supermarket and be exposed to hundreds of people every day, any one of whom might kill you with a breath.

What about spending? An MBA friend’s perspective:

I guess the worst-hit people will be those who earn $80-150k

They used to be able to afford a lot of “near luxury” stuff despite not being eligible for the good welfare gravy train and despite the high taxes that the government hits them with to support the welfare gravy train. but now they will be stuck at home. Near-luxury goods such as restaurant meals, airline tickets, theater tickets, and theme park tickets all go way up in price due to mandated de-crowding measures,

Everything will cost more. so the difference between their lifestyle and a welfare family will become minimal. since they won’t be able to afford meals out anymore. they would be better off not working, playing Xbox and swiping EBT card for food. do some cash labor for luxuries (if cash isn’t outlawed under the pretext that it spreads coronavirus!).

Readers: What do you think? Except for those who can earn well above the median, will working be a completely irrational choice for an American?

I personally don’t think economic performance is relevant when evaluating coronaplague policy. In a world where people don’t care about anything other than Covid-19 death risk, what difference does it make if they’re getting richer or poorer? That said, unemployment and poverty do lead to poor health outcomes and death. It just takes a while. So there is also a health angle to economics (see this post from March: “If All Lives Have Equal Value, why does Bill Gates support shutting down the U.S. economy?”).

“‘Striking’ Crisis Gap Exposed as Swedish Economy Stands Out” (Bloomber, June 16):

In a report on Monday, Capital Economics presented data that give Sweden an irrefutable edge. From peak to trough, Swedish GDP will shrink 8%; in the U.K. and Italy, the contraction is somewhere between 25% and 30%, according to estimates covering the fourth quarter of 2019 through to the second quarter of 2020. The U.S. is somewhere in the middle, it said.

Sweden has kept shops, gyms, schools and restaurants open throughout the pandemic. But the strategy, which the government says wasn’t shaped with the economy in mind, has resulted in one of the world’s highest mortality rates. Sweden’s state epidemiologist recently acknowledged he would have opted for a tighter lockdown with the benefit of hindsight.

(The article is written for American members of the Church of Shutdown, so the journalist points that Sweden has “one of the world’s highest mortality rates” without noting that the U.S. overall, in Month 4 of various degrees of shutdown, is only about 30 percent behind Sweden, that plenty of U.S. states have experienced higher death rates so far than Sweden, and that some countries that did shut down actually have higher mortality rates than Sweden. And, of course, Sweden is not actually planning on a “tighter lockdown” even when the inevitable second wave hits (Sweden’s latest plan).)

A figure from the article:

A gun enthusiast friend is able to say, in response to about 90 percent of news articles about companies or universities, “most gunshot wounds are self-inflicted.” These economic data from the Shutdown Karen countries add some ammunition to his theory!

(Again, since nobody cares about how poor they become, as long as they can be saved from the evil virus, I don’t think the self-inflicted impoverishment of the shutdown nations is relevant except that it will inevitably result in a shorter life expectancy and more deaths in the long run than any conceivable savings of Covid-19 deaths from the shutdown. See the Preston curve of life expectancy vs. per capita income.)

There might be some measurement errors for the U.S. A lot of our GDP for this quarter, for example, is going to be cleaning up cities after riots, the classic broken window fallacy. Also, people have been spending like crazy to try to adapt to the shutdown. Americans would prefer to go to a gym, but they’re buying home exercise gear as an interim stopgap. (Sweden’s gyms never closed, so they wouldn’t have as much of this type of no-added-value spending.) Americans would prefer to meet people in person, but they’re buying webcams for the Zoom sessions that they don’t enjoy. Ordinarily, Americans don’t need everything in the house or yard to be perfect, but as long as they’re locked into their houses why not fix everything up and tell the landscapers to go deluxe? (Anecdote: We had our shrubs mulched for the first time! I wanted to give Joe the Electrician some work, so we had him do a bunch of low-importance fixes (bad news for the Democrats who envision themselves as champions of the working American; like Joe the Plumber, Joe the Electrician is not easy to persuade: “The thing about Trump is that he does what he said he was going to do.”). Maybe all of this will cost $3,000 and add $500 in long-term value to the house?)

All of my friends in the new work-from-home economy say that coworkers with newly unskooled children to manage are “useless”. Employers who fire their least productive employees, therefore, in an age-neutral manner, may actually be firing an older-than-average population (and, coincidentally, saving a ton of money on employer-provided health care for both these older adults and their children!).

I’m wondering if the new “wear a mask 8 hours/day” policies will also winnow the older workers out of the U.S. labor force. Older people have reduced lung capacity and muscular strength compared to the young, so they are going to be more impaired by the masks. Already in retail stores I have noticed some older workers struggling and, in some cases, wearing the mask around their necks, even when interacting fairly closely with customers.

Finally, you have the actual risk of coronaplague. As workers get closer to the average age of a Covid-19-tagged death (82 in Massachusetts), they might not want to take the risk of coming into contact with a lot of co-workers, customers, etc.

Related:

• The Age Discrimination in Employment Act of 1967 (EEOC): “The ADEA prohibits employment discrimination against persons 40 years of age or older.” (i.e., employers wouldn’t hire people over 40 without the threat of lawsuits and coercion by the government)
• “Lung Capacity and Aging” (American Lung Association): “Your lungs mature by the time you are about 20-25 years old. After about the age of 35, it is normal for your lung function to decline gradually as you age. This can make breathing slightly more difficult as you get older.”

Text from a pilot:

A good friend’s daughter works at a local restaurant in summer breaks from college. They called her up and offered her $40 an hour to come and hand out the take out orders because they could not get anyone employed full time before to show up until unemployment runs out. She ended up making $800 for one shift because the guilty-conscience of the Wellesley Elite was tipping her $20 for each bag of food she brought to their Mercedes while saying “Thank you for your front line service”.

Now that the summer heat is upon us and wearing a mask will become more uncomfortable, what will be the additional wage that employers will have to pay to entice workers into these jobs where hours of mask use is required?

Related:

• https://philip.greenspun.com/blog/2020/05/03/donutnomics-during-the-coronaplague/

The average age of a Covid-19-tagged death here in Massachusetts is 82. Thus, presumably to the extent that any lives are saved from Covid-19 by our educational, social, and economic shutdown, they will be roughly 82-year-old lives.

Let’s assume for sake of argument that the shutdown makes sense as a mechanism for saving lives. Flatten the Curve will save more people from Covid-19 by delaying their infection than will be killed from (a) the shutdown of regular health care, (b) poverty and unemployment, (c) starvation in poor countries, (d) the suspension of clinical trials for new drugs, (e) the suspension of clinical training for the next generation of medical doctors, etc.

Now that we’ve assumed shutdown is an actual life-saving mechanism, we come to the cost and who pays. Just this year’s federal budget deficit is on track to be $4 trillion. So that’s $4 trillion that will be borrowed before the inevitable bailout of the big-spending state governments (not allowed to issue bonds so they borrow by making public employee pension promises that they don’t fund).

The ordinary borrowing mechanism of the federal government imposes the costs onto people who are still young enough to work and pay taxes, right? And since federal government tends not to repay debt, but merely roll it over and pay more interest, the younger the person the more he/she/ze/they will have to pay, right? Is it fair to say, then, that Americans who are currently in their 20s will bear the highest burden from coronashutdown? (current children will pay too, but they won’t start paying taxes for a few years yet so their future payments have to be discounted)

Is this our revenge on them for saying “OK Boomer”?

(The young folks above would be violating our Massachusetts town’s mask order, but the photo is from Portsmouth, New Hampshire (“Stay Home or Die” will be the new license plate motto?) so they’re not breaking the law there.)