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Worsening health is an economic headwind

by Ozva Admin

The writer is executive director of the Royal Society of Arts.

As individuals, we often take our health for granted. It’s only when ill health strikes that the benefits of good health become truly apparent.

The same is true of economies. Having long taken good health for granted, many economies are now waking up to the severe economic and social costs of poor health.

Until the 20th century, people’s lives were well described by the writings of the English philosopher Thomas Hobbes in the 17th century: short and brutal. The average lifespan was just over 40 years and had hovered around these levels for many centuries.

The 20th century marked a turning point in life expectancy and much more. Medical, economic, and social advances have allowed people in many countries to free themselves from their Hobbesian chains. In the UK, average longevity doubled in the short space of a century, from 40 to over 80 years. This was an unprecedented leap in human life expectancy.

This stretch transformed not only lives but economies. Falls in child mortality and increases in longevity meant that the UK workforce nearly doubled between 1900 and 2000. And this increase in labor supply added directly and significantly to the UK’s growth potential, the first cylinder of economic growth. Improved health also boosted worker productivity in the workplace, for example due to reduced absences, the second growth cylinder.

To a large extent, the five-fold increase in living standards during the 20th century, unprecedented in human history, can be attributed to better health outcomes. By igniting the twin cylinders of economic growth (labor market activity and productivity), good health was a hero of the 20th century growth story, though largely unheralded.

Without warning, that is, before it went into reverse. Because improvements in life expectancy this century have stalled in a number of countries, including the UK and the US. In some of the poorest places and among some of the poorest households, life expectancy is now falling. As much as a third of the lives of the poorest people are now lived in poor Health.

In the UK, the proportion of the working-age population reporting prolonged illness has risen to one in six or around 7 million people, standing at just over 5 million in 2010. While Covid- 19 has made things worse, these increases predate the pandemic. They reflect a steady increase in, among other things, cardiovascular and mental health problems.

The rise in ill health in the UK has been fastest among 16-24 year olds, especially mental health problems. One in eight now report a long-term illness. High and rising levels of economic and financial insecurity seem to have been the main driver, after more than a decade of stagnant real wages. As real incomes will contract sharply in the coming year, these pressures will only worsen.

In addition to their impact on people, these adverse health trends now have macroeconomic consequences. They are contributing to stagnant UK productivity, given strong evidence that poor physical and particularly mental health result in lower levels of productivity in the workplace.

And health problems are now contributing to the decline in the UK workforce. It’s over half a million below pre-Covid levels, and some surveys suggest that up to two-thirds of this reflects poor health. In the UK around 2.5 million people are now financially inactive due to ill health.

Having been a strong tailwind for two centuries, health is now a strong headwind for UK economic growth, perhaps for the first time since the Industrial Revolution. The twin cylinders of growth now appear to be stagnant in the case of productivity or reversed in the case of activity, with health a key contributor.

It is not just economies that feel these pressures. Health systems are too. In the UK, the NHS has seen hospital waiting lists nearly double since 2010. Health service workers are now as sick as those they treat, with one in five reporting high levels of depression.

This adverse feedback loop between economic and medical health, in a context of an increasingly fragile health system, must somehow be broken and the system’s resilience strengthened.

While there are no quick fixes or one-size-fits-all solutions, a much more pronounced bias in support towards preventive health measures, including increased investment in health education in schools, mental health issues in young people, and measures to encourage improved diet, are necessary conditions to restore growth.

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