Note: Around here we have a rule that reads, in part, “as much of your birthday as possible should be spent on a golf course.” Enjoy this week’s P3, abridged, birthday edition.
Politics, Policy & Power. From the perspective of health policy and the broader U.S. health care system, I am not quick to make comparisons between the 1918 H1N1 Influenza A and COVID-19 pandemics. First off, it is grossly unfair to Spaniards who were collectively tagged as patient zeros. Second, the U.S. health care system and the American economy are very, very different today than they were in the early 20th century. Because of that, the death toll from H1N1 was enormous. In the U.S. about 650 per 100,000 population died, much lower than COVID-19’s death toll of 200/100k (thus far).
Nonetheless, in terms of impact, the 1918 H1N1 pandemic comes closer in terms of mortality, labor disruptions and inflation than anything else in the 20th century. The estimated U.S. death toll from the H2N2 pandemic of 1957-58 was about 120,000. The 1968 H3N2 virus was about 100,000. Both took less than 100 lives per 100,000 populations. Both mid-century events appear to have had little impact on the American economy in terms of wages, inflation or labor supply.
What about the 1918 pandemic?
Knowing what we know about COVID-19’s impact to date, the answer has to be “some” although there are a number of confounding trends and events that make it hard to quantify.
The 1918 H1N1 influenza pandemic killed 650,000 mostly working age adults, a significant labor reduction in a country of just 100 million people. In part due to the reduced availability of workers, wages in the young manufacturing sector rose 42% between January and December of 2018. That increase also, no doubt, reflected wartime demands for supplies. After a pause in early 2019 during de-mobilization, manufacturing wages continued their ascent until the recession of 1920-21.
Since labor inflation between 1918 and 1920 was due to several factors, it is safe to say we probably won’t see a 42% increase in hourly rates. However, we should remember that demands for onshore manufacturing are likely to rise in certain sectors like pharmaceutics, medical supplies, computer ships, and critical metals like steel.
We should also remember that those advances in wage rates, often under gruesome working conditions, gave rise to the labor movement which sought to maintain the high levels and improve the circumstances under which they were earned. The very clear and present labor disruptions brought on by COVID-19 once again place labor in a much more secure position versus capital for the first time in 30 years.
The renewed power of labor will also result in conflict. Aside from working conditions, the early 20th century labor movement sought to exclude certain workers who might be willing to degrade the wage scale. Employers reached down into the southern United States for African American tenant farmers and sharecroppers, many of whom literally had to escape to make a new life in Chicago, New York and Los Angeles. Thus, began The Great Migration that lasted until 1940.
Finally, the newly formed Federal Reserve has been credited with the Recession of 1920-21. Facing both wage and price inflation, the bank moved too quickly to rate rates and should have given the economy time to work it out according to Robert Barro and others. The period is known as the Forgotten Recession but don’ t let that fool you. It is well studied by economists and their influence will not be nothing.
Have a great rest of your weekend.
Emily Evans
Managing Director – Health Policy
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