The surprising public health benefit of unemployment

4th April, 2024

Here’s a discovery to bring you up short: unemployment is good for you. Really? Well, no, not really. But a new research paper has found a correlation that points in that direction: more unemployment, fewer deaths. Underneath lies something real, shocking and yet somehow inspiring.

First, let’s unpack the research, conducted by economists Amy Finkelstein, Matthew Notowidigdo, Frank Schilbach and Jonathan Zhang. They examine the impact of the great recession of 2007-09 on death rates in different parts of the US, some of which suffered sharper increases in unemployment than others. They discover this striking correlation: when the unemployment rate rises by one percentage point in one of the US’s 741 city regions or “commuting zones”, the mortality rate in that area falls by 0.5 per cent. This benefit persists for at least a decade, and it is spread evenly across the age distribution although, in absolute terms, the elderly are most at risk of death and so enjoyed the largest benefit.

Given that the great recession pushed unemployment rates up by nearly five percentage points, that suggests that mortality rates were reduced by more than 2 per cent as a result of the financial crisis and subsequent downturn. Or, as the researchers put it, “these estimates imply that The Great Recession provided one in twenty-five 55-year-olds with an extra year of life.”

These are huge effects. What might explain them? There is no shortage of theories: recessions take people from low-quality, high-stress jobs; by freeing up labour, recessions might improve the quality of care in nursing homes; people who lose their jobs tend to smoke less, eat less fast food and have more time to exercise; recessions may reduce the spread of transmissible diseases.

But Finkelstein and her co-authors find scant evidence for any of this. Instead, they point to air pollution. The air becomes cleaner in areas where the economy slumps. The researchers estimate that this cleaner air accounts for more than one-third of the mortality reduction. This may come as a surprise, because we are not accustomed to regarding air pollution as a problem for rich countries — the trope is that industrialising cities in Asia are smog-ridden, but that for America and Europe the only pollutant that need worry us is the greenhouse gas carbon dioxide.

There is some truth in that. As Hannah Ritchie’s book Not the End of the World documents, local air pollutants such as nitrogen oxide, carbon monoxide, black carbon and sulphur dioxide have plummeted in the UK after peaking more than 50 years ago (they are also beginning to fall in China). Globally, estimated death rates from air pollution have nearly halved since 1990, according to the Institute for Health Metrics and Evaluation, and they have long been higher in middle-income countries than rich ones.

Even so, air pollution increases the risk of both respiratory and cardiovascular disease, and the global number of deaths caused by air pollution is estimated by both the World Health Organization and the IHME as still being around seven million people a year, nearly as much as the death toll from smoking. In the US, the death toll from air pollution is often estimated to be about 100,000 people a year. These numbers are uncertain, but however we look at them, they are large.

What makes the study by Finkelstein and her colleagues so shocking is that they were not examining the effect of a dramatic shutdown of everyday economic activity because of a lockdown or a natural disaster: this was merely a recession, albeit a severe one. Most people kept their jobs; everyday life would have seemed like business as usual. And yet pollution from sources such as traffic fell sufficiently to produce a substantial and lasting drop in the death rate.

One response to this discovery is to join the “degrowth” movement calling for curbs on economic activity. Quite apart from the fact that this is politically unthinkable, it would also be unwise. We know that rich countries enjoy cleaner air than middle-income countries and we also know — thanks to the work of economists Hannes Schwandt and Till von Wachter — that while the great recession may have given everyone’s lungs a break, it is likely to do lasting harm to the health of young people who graduated into the teeth of that downturn.

But above all, we know that there are much easier ways to reduce air pollution than a severe recession. Start by replacing some (then most, then all) diesel cars with electric cars, some gas stoves with induction hobs and some gas boilers with heat pumps. These steps move combustion, and thus pollution, away from people. Meanwhile, generate the electricity for the new clean appliances from nuclear or renewable sources, and the pollution is all but eliminated.

Better technology and smarter regulations can do more for air quality than the worst recession you can imagine, and they can do it at low cost, too.

It may occur that all this is something we might care to do anyway as part of decarbonising the energy system and limiting climate change. Quite so, but it seems striking that one can make such a strong case for these clean technologies without any reference to the greenhouse effect.

As Chris Goodall explains in his new book Possible: Ways to Net Zero, removing fossil fuels from our energy system is technologically feasible, but it is a daunting task requiring huge upgrades to the electricity grid, our storage capacity and much else besides. We should take heart from the fact that these steps to fight climate change will also lead to large and immediate gains in our day-to-day health. No great recession is required.

Written for and first published in the Financial Times on 8 March 2024.

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