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Recessions are good for the nation’s health

Many readers at this time of the year will be looking forward to their summer break, perhaps contemplating with a certain amount of envy their colleagues who have already departed.  But is leisure good for you?  A bit of a no brainer one might think.  Indeed, until recently the consensus amongst applied economists was that even enforced leisure, by being made unemployed, seemed to be a good thing.

Recessions obviously make more time available for leisure as unemployment rises and opportunities for overtime shrink.  The financial crisis led to more innovative ways of expanding leisure time amongst the labour force.  Many people were given the option of switching to a part-time basis with reduced income rather than losing their job altogether.  The most extreme version of this is of course zero hours contracts.  Given the choice, most people in these situations would choose to work, and work full time, rather than being forced to take more leisure time.

But there is a substantial literature suggesting that recessions actually increase longevity, and lead to a general improvement in the overall health of a nation.  The most famous example is the sharp increase in life expectancy which took place during the 1930s in the United States, at the time of the Great Depression when unemployment rates touched 25 per cent.  This, however, is basically attributable to massive improvements in the public provision of better sewers and better water supplies not just in that decade, but throughout the opening decades of the 20th century.

The academic work investigating outcomes in more recent decades assigns specific short-term benefits to the health consequences of recessions.   The levels of smoking are reduced, because people cannot afford to buy as many cigarettes.  People take more physical exercise.    They walk rather than use cars or public transport. The splendidly named Tinna Asgeisdottir demonstrated very clear health benefits of the financial crisis in Iceland in a National Bureau of Economic Research (NBER) paper. Economists have even discovered positive benefits for the health of people in care homes.  During recessions, the quality of staff competing for these jobs rises, because relatively skilled people are made unemployed, and so the overall standard of care increases.

These findings may seem somewhat implausible, but they emerge from careful statistical analysis of large scale data sets.  However, a new paper in the American Economic Association’s journal Economic Policy does find strong evidence that recessions are particularly bad for workers approaching retirement age.  Courtney Coile and colleagues at the NBER merge data from sources such as the US Census and the Vital Statistics data base from the National Center of Health Statistics and examine the survival probabilities of those in the 55 to 65 age group.  Even for this group, the short-term experience of a recession is for mortality to fall.  But it soon rises quite sharply, resulting in lower survival rates at older ages.  Of course, one reason is peculiar to America, namely the lack of access to health care when unemployed.  Perhaps in Europe even this group benefit from enforce leisure.

As published in City AM on Tuesday 5th August

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