Lockdown or no lockdown
COVID-19’s economic destruction followed similar path: study
A group of economists studying how South Korea fought the COVID-19 outbreak without stay-at-home orders found that the country still experienced significant job losses in a pattern similar to that of countries that imposed lockdowns.
The study, from economists at Seoul’s Myongji University, Queen Mary University of London and St. Louis’s Washington University, also suggests that Canada’s slowly reopening economy may not go back entirely to normal as long as the virus is still prevalent.
“At most, half the job losses in the United States and the United Kingdom can be attributed to lockdowns,” the economists argue. Most job losses came from reduced hiring by businesses and a significant amount of nonparticipation in the labour market, rather than unemployment.
The same types of workers are feeling the effects, whether their country implemented a lockdown or not, the study claims. Lesseducated workers, young people, workers in low-wage occupations and the selfemployed lost were hardest hit, even when researchers controlled for industry effects that might over-represent these people.
“Lifting of lockdowns may lead to only modest recoveries in employment absent larger reductions in COVID19 rates,” the paper warns.
The economists looked at labour-market effects in South Korea, where no lockdown was imposed, and compared the economic impact across different areas. One particularly bad local outbreak al-lowed the researchers to estimate that one additional infection for every thousand people causes a two to three per cent drop in local employment.
“The best way to revive the labour market is to eradicate the virus,” reads the paper by economists Sangmin Aum from the Myongji University in Seoul, Sang Yon Lee from Queen Mary University of London and Yongseok Shin from Washington University in St. Louis.
The study manages to untangle the many different factors in unemployment by concentrating on a localized outbreak in South Korea caused by a notorious event that spiked the transmission rate in the country.
In mid-February, the country had only 30 infections, but “Patient 31” attended a religious gathering in the city of Daegu. Ten days later, the country had more than 3,000 infections almost entirely clustered around Daegu. More than 60 per cent of them were traced back to that single gathering.
South Korea managed to quash the outbreak and maintains one of the lowest death rates in the world, mainly due to widespread testing, a robust contact-tracing regime and comparatively intru-sive tracking measures, including monitoring quarantine-breakers with electronic wristbands.
The study is a working paper released for discussion by the National Bureau of Economic Re-search in the United States before peer review. Although working papers haven’t gone through the rigorous publication process, they are a timely way to compare the results of the COVID-19 out-break around the world.
Countries that didn’t implement a lockdown have also suffered economic damage from the pan-demic due to the disruptions in global travel and trade.
Sweden, which kept most schools, businesses and restaurants open after experiencing its own COVID-19 outbreak, is still expecting its economy to contract by seven per cent this year. Swe-den’s exports depend heavily on demand from other countries, many of which went into full lock-downs.