Most Canadians now understand the importance of physical distancing in order to limit spread of COVID-19 and reduce burden on the health care system. But saving lives also requires avoiding a prolonged recession.

Concerns about mass job displacement from a coronavirus recession are not just economic. Efforts to rapidly reduce the number of new cases of the coronavirus should be motivated not only from trying to avoid higher mortality directly caused from the disease, but also higher mortality from massive job loss.

Using Nicholas Kristof and Stuart Thompson’s handy interactive model with its default assumptions and Canada's population of 37.5 million people, physical distancing for just 30 days would lead to more than 81,500 deaths. The benefits of “flattening the curve” kick in by waiting longer. We could bring the number of deaths under 10,000 with 60 days of isolation, or shrink deaths dramatically to under 2,500 with 90 days of isolation. (Of course these projections depend on how well containment efforts go — you can try out different scenarios yourself).

Also important is avoiding a prolonged recession. Research by labour economists has consistently shown that workers laid off often experience large and permanent wage losses even after being rehired and especially in times of high unemployment. One estimate found that, when unemployment exceeds 8 per cent, displaced workers experience a staggering loss equivalent to 2.8 years of their pre-displacement earnings.

Concerns about mass job displacement from a coronavirus recession are not just economic. Layoffs and unemployment spells involve a higher incidence of short- and long-term health problems, likely driven by heightened stress and anxiety. Convincing research suggests that adults who lose stable jobs during a recession are twice as likely to die within the first year of displacement and remained significantly more likely to die over the next 20 years. This translates into a reduction in life expectancy of 1.5 years.

We can use these findings to estimate roughly the number of years lost due to a COVID-19 recession. Obviously, the calculations are back-of-the-envelope, since very little is known about this type of economic shock driven by the need to stay home. A crucial unknown is the portion of unemployed realistically on furlough from businesses that will restart when safe to do so. Unfortunately, the more prolonged the isolation period, the more likely firms file for bankruptcy or scale back their workforce.

Let’s compare two scenarios. Most Canadian banks currently forecast that layoffs are largely temporary, and that consumers and businesses will bounce back after the government pays to pause the economy for a couple of months. Under this “best-case scenario,” using the average of the Big Five banks’ projections, unemployment rises from 5.7 per cent last quarter (winter 2019) to 8.3 per cent in third quarter (summer 2020), a 2.6 percentage point increase. The Office of the Parliamentary Budget Officer, on the other hand, assumes that social distancing and self-isolation measures will remain in place at least through August, and that unemployment will rise to 12.7 per cent by third quarter.

Under the “best-case scenario,” 494,000 more Canadians will find themselves unemployed from the recession (2.6 per cent, 19 million employed last quarter). If mortality rates rise by 1.5 per cent, as they did in the study mentioned above, then 741,000 life years will be lost. In the alternative, “large recession” scenario, unemployment increases instead by 7 percentage points and 1,995,000 life years will be lost.

The point is that the health consequences from a severe recession are worth worrying about when considering long-term impacts from COVID-19. This includes effects not only on mortality, but on mental health and intergenerational effects on children with displaced parents.

We must carefully navigate between a rock and a hard place. Isolation is imperative, both for reducing cases of the coronavirus and for getting to a state where people can confidently return to work.

Not enough isolation will lead to thousands dying prematurely. Too much isolation will also lead to thousands dying prematurely. We get one shot at avoiding both scenarios.

If people are not all in on their physical distancing efforts, the lockdown to get this under control will need to last longer. The recession will be more severe, and thousands of additional lives will be lost. For the next few weeks, let’s try harder to ensure our collective efforts to contain the spread work.

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