Coronavirus: Australia’s next priority is to keep people employed

Coronavirus: Australia’s next priority is to keep people employed. By Adam Creighton.

The hundreds, probably thousands, of businesses that close and lay off staff won’t suddenly reappear later. Skills will atrophy and the businesses that survive will emerge facing less competition. …

If wages dry up loans can’t be serviced, household budgets tighten, rippling throughout the economy.

It’s not all about money, either; unemployment fuels social breakdown, including drug abuse, and divorce. The highest economic priority for government should be to help businesses keep people employed. …

Economics versus health:

Governments are rightly focused on preventing the spread of disease. But by “flattening the curve” the economic pain is drawn out. Businesses that could survive two months of shutdown might not be able to survive four.

It’s unedifying but governments do put monetary values on human life, implicitly. That’s why we don’t have double the number of ambulances or hospitals — because the additional people that would be saved aren’t deemed worth the diversion of resources from other things. State and federal governments spend about one sixth of GDP keeping us healthy and safe. A 2014 Australian government document put the “statistical value” of a life at $4.2m, and the value of a year of life at $182,000. “The value of statistical life is most appropriately measured by estimating how much society is willing to pay to reduce the risk of death,” it stated.

If 1000 more people died but we avoid a 1930s-style depression, would it be worth it? It’s a hypothetical question because governments can’t know how effective their health measures are in advance. There’s no neat menu of policy options and trade-offs.

Yet in the natural desire to save everyone, a society that’s had little hardship for 30 years might be blase. …

‘Til next time:

On the bright side, a vaccine will be found and activity will rebound rapidly once the crisis passes. And we will be more ready for the next pandemic: between 1700 and around 1900, the average period between flu pandemics was about 50 years — it appears to have shrunk significantly, to a decade.