The Economic And Health Trade-Offs Of Reopening The Economy
The lockdown measures imposed to try and halt the spread of the covid-19 virus have had a profound impact across the economy, but while the impact has been widespread, it’s equally true that not all businesses have had to shut. As economies begin to open again as lockdown measures ease, calculations are being made about the economic and health tradeoffs from opening some businesses versus others.
It’s a topic covered in recent research from MIT, which uses a range of data on business and consumer activity to enable measurements to be made against 26 different types of businesses in terms of their health risks and economic usefulness. For instance, businesses that are vital to the economy and also able to operate in an uncrowded way scored highly, whereas businesses that aren’t so vital to the economy and often result in large crowds appeared at the other end of the spectrum.
For instance, banks performed well in the analysis, as they ranked first in terms of their economic importance, but only 14th in terms of the health risk their operation poses. By contrast, liquor and tobacco stores tended to come at the bottom of the league table, alongside businesses such as juice bars, cafes and gyms. For instance, cafes, dessert parlors and juice bars were the three highest risk businesses in the list, with all three also falling in the bottom half in terms of economic importance.
The researchers gathered anonymized data from around 47 million mobile phones between January 2019 and March 2020. During this time, some 6 million visits were recorded to business venues across the United States. Around 57% of these visits were to the 26 types of business analyzed for the research.
The location data from the phones was monitored over this prolonged period to help the team understand what typical footfall each of the business types experienced. This was then augmented with data from the U.S. Census Bureau for payroll, employment, and revenue to determine the importance of each industry to the economy.
In total, they assessed 1.43 million firms, which had 32 million employees and $5.6 trillion in revenue. In addition, a survey was conducted of over 1,000 people to understand public preferences about the different types of business.
A key theme to emerge is that people are clearly trying to continue with useful and essential business, while also trying to limit the potential for interactions with strangers.
“The idea was, how can we think about rationing social contacts in a way that gives us the most bang for our buck, in terms of meetings, while keeping the risk of COVID transmission as low as possible?,” the researchers explain.
The researchers attempted to gauge the risk from the aggregate public exposure of each business type. For instance, each of the 17.6 million movie goers in February 2020 would spend a couple of hours in the theater, which compares to the 900 million visits to (sit down) restaurants in the same month, therefore restaurants are deemed to be higher risk than theaters.
“It’s not danger per visit, but it’s a cumulative danger,” the researchers explain. “If you look at movie theaters, they seem dangerous, but not that many people go to the movies every day … and restaurants are a good counter-example.”
Based upon their analysis, the researchers believe that policymakers have generally made pretty robust decisions to date about which businesses should close, and which should remain open. A couple of obvious exceptions to this, however, are tobacco and liquor stores, which have generally stayed open throughout the pandemic. For instance, liquor stores were ranked 20th in terms of their economic importance, and 12th highest in terms of risk.
“What really jumps out at us is liquor and tobacco stores,” the researchers explain. “Most states have allowed liquor stores to remain open. This is a bit of a bad call from our perspective, because liquor stores don’t create a lot of social value. If you ask people which stores they want to be open, liquor stores are near the bottom of that list. They don’t have that many receipts or employees, and they tend to be these small, crowded places where people are up against each other trying to navigate.”
Ready to open
Among the sectors that should be re-opening, the researchers highlight higher education, which ranked 8th in terms of their economic importance, and just 17th in terms of their health risk. This could be improved still further if on-campus living arrangements could be made safer, as the remainder of university life is already fairly safe.
For instance, campuses are generally quite large, and typically consist of the same group of young people going to the same places. The researchers believe that most of the concern comes from residential facilities, and any social activities undertaken by the students. While they accept those risks are very much present, they believe the teaching and research aspects of university life are relatively low risk, while providing considerable economic and social value.
Throughout the pandemic, there has been a strong desire among policymakers to be “led by the science”, and whilst that pact has been fraying in recent weeks, it’s important that the best evidence is still used to guide actions so that the right steps are taken from both health and economic perspectives. For their part, the researchers plan to continue monitoring movements as mitigation processes are implemented, such as the installation of safety partitions in supermarkets or limiting numbers in hair salons at any one time.
“Moving forward, an interesting exercise would be to see how dangerous these locations are once you implement these mitigation strategies.” the researchers conclude. “Those are all interesting open questions, seeing which business adapt. And some of these adaptations will probably be temporary changes, but other business practices may stick in the COVID age.”