In-Depth: States with stricter COVID restrictions fared better economically, report finds

Posted at 5:07 PM, Jun 09, 2021
and last updated 2021-06-09 20:33:38-04

SAN DIEGO (KGTV) -- It’s arguably the most pressing political question of the pandemic: should states lock down more to protect health, or loosen up restrictions to preserve the economy?

New data from the UCLA Anderson Forecast suggests the underlying assumption in that question may be all wrong.

With few exceptions, states with more stringent pandemic policies fared better economically in 2020 as measured by their gross domestic product, according to the latest UCLA Anderson report.

“On average, the states that had more stringent interventions had better health outcomes and better economic outcomes,” said Forecast director Jerry Nickelsburg.

Florida’s Governor Ron DeSantis has repeatedly pointed to his state’s rapid reopening as an economic success story. DeSantis allowed bars and restaurants to operate at full indoor capacity during the winter surge, then banned mask mandates and COVID passports in May.

Yet California, with more stringent policies that won’t begin to expire until June 15, had both lower infection rates and a better GDP performance than Florida and Texas, Nickelsburg said.

Gross Domestic Product is the sum of all goods and services. All states saw a decline in GDP in 2020.

Nickelsburg examined states with populations of at least five million, assessed their pandemic policies using a stringency index score created by Oxford University, and compared their infection rates and declines in GDP.

The state of Washington had the smallest decline, despite stringent pandemic rules.

California’s economy ranked 8th, ahead of states that opened up fast: Florida, Indiana and Texas.

The same pattern played out in Scandinavian countries like Sweden, Denmark and Norway, the report notes. Countries with stricter policies generally had better infection rates and better economic results.

“There's also research that suggests that that's what happened in the 1918 influenza pandemic, so this is not a fluke,” Nickelsburg said.

To be sure, certain sectors of the economy performed better in states like Florida than California, particularly restaurants and bars.

That’s one reason Florida's unemployment rate of 4.3 percent is lower than California’s rate of 8.3 percent.

But the unemployment rates alone tell a misleading and incomplete picture, Nickelsburg argues. For example, there’s evidence that businesses in states that opened up early reduced worker hours more sharply.

Although each state has a different composition of sectors that drive its GDP, Nickelsburg says systematically comparing the GDP of large states helps reveal the overall economic impact.

The bottom line is that keeping people healthy is good for business. The more employees fall ill, the more they miss work, he said.

“If more people are ill, absenteeism is higher. Economic output is less,” Nickelsburg said.

The report does highlight two notable exceptions. Michigan and New York had stringent pandemic policies and relatively modest infection rates, but their economies were hit the hardest.

That may be because of some unique factors within each state, Nickelsburg said. Michigan suffered from the shutdown of the automobile industry and cross-border travel with Canada.

New York is more of a mystery, Nickelsburg acknowledges, but he suspects workers who typically commuted to Manhattan from nearby states like New Jersey and Connecticut may have largely stayed home.