Compassion: An Economic Perspective

By: Dr. M. Ray Perryman
Published in syndication December 23, 2020

To say that 2020 has been a rough year is an extreme understatement. The pandemic and actions taken to slow the spread of COVID-19 have been disruptive and, in many cases, devastating. Millions have slipped into poverty, are now food insecure or face housing challenges, or are experiencing mental health issues.

It is worthy of note that, beyond the pressing human concerns for those affected, failing to support these vulnerable populations has profound economic consequences. We've studied these phenomena for decades, and the empirical evidence is incontrovertible.

Beyond the obvious consequences of poverty and the incalculable toll on the stability and dignity of families across the US, there is also a tremendous economic cost. For example, health care needs of people who are food insecure are higher due to increased incidence and severity of disease. In addition, outcomes are worse, thus reducing productivity and lifetime earnings.

Education expenses are also higher. Food insecurity is associated with a greater need for intervention, and achievement levels (and, hence, lifetime earnings) are negatively affected. COVID slide only magnifies the issue.

The dislocations caused by the pandemic and the necessary response have caused millions to lose jobs and, for many, their health insurance. Every person who loses health insurance costs the economy about $46,000 per year.

Others are facing eviction, and we estimate that every newly homeless person brings long-term economic losses of over $900,000. The added stress is also contributing to domestic violence, and every child suffering first time maltreatment brings lifetime costs of almost $2 million.

The negative effects of poverty and food insecurity multiply as they work their way through the business complex and are largely borne by the whole of society. Even after fully accounting for various stimulus packages, we have determined that the increase in poverty in the US during the pandemic will bring long-term losses of $436.4 billion in gross product and 4.7 million job-years of employment (a job-year is the equivalent of one person working for one year). For Texas, the pandemic-related losses are $48.5 billion in output and over 500,000 job-years.

The benefits of reducing such problems are profound. We estimate that every $1.00 contributed to combat hunger yields $33.00 in benefits to the economy. Government investments in food programs, mental health services, and indigent health care brings dynamic annual rates of return to taxpayers of between 40% and 111%.

The humanitarian reasons for easing these burdens are readily apparent. In this season of giving and celebration, it is also an economic imperative. In fact, if we fail to do so, we will permanently lose substantial potential activity and productivity even as vaccinations and therapeutics bring prospects of recovery much closer to reality. Happy Holidays! Stay safe!