ECONOMIC IMPACTS OF A PANDEMIC Dr. Mike Walden Reynolds Distinguished Professor & Extension Economist North Carolina State University

SHORT ANSWER Impact will be BIG and HARMFUL, affecting almost every person in some way.

CBO STUDY (Dec. 2005) Background Big concern now is with avian flu Deadly to poultry Over 100 recorded human cases CBO= Congressional Business Office

2. Study Approach Examine past pandemics Estimate 3% to 4% chance of occurring in any given year Chance of severe pandemic: 0.3% in any given year

3. Develop two estimates and apply to today Severe case U.S. (similar to 1918-19) pandemic: affects 90 million people with 2 million deaths Mild case: similar to 1957 & 1968 outbreaks: affects 75 million people with 100,000 deaths Assume no effective vaccine. As noted on slide 3, source is the Congressional Business Office.

Short Term Impacts Severe Case 30% of workers sick in most sectors 2.5% of them die Survivors miss 3 weeks of work

Severe case continued Applying average worker productivity rates, loss to economy is: $600 billion (2005$), or 5% of GDP

Mild Case 25% of workers sick in most sectors 0.1% of them die Survivors miss 4 days of work

Mild case continued Applying average worker productivity rates, loss to economy is: $180 billion (2005$), or 1.5% of GDP

5. Long Term Impacts Difficult to quantify, but could have adverse impacts on size of future labor supply.

Centers for Disease Control and Prevention Study, 1999 Considered medical costs and lost labor value

1. Medical Impacts 90,000 – 200,000 deaths 300,000 – 700,000 other hospitalizations 18 mil. – 42 mil. outpatient visits 20 mil. – 47 mil. other illnesses

2. Costs Total costs to U.S. economy between $100 billion and $215

Conclusions Economic impact of a pandemic on the U.S. economy will be BIG – somewhere between a mild and severe recession

Conclusions - continued Suggests money spent preventing or containing a pandemic will be well spent !!!

References Congressional Budget Office, A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues, December 8, 2005 Centers for Disease Control and Prevention, The Economic Impact of Pandemic Influenza in the U.S.: Priorities for Intervention, 1999.