The worse the economy gets, the longer people live

A weak labor market, like the one we’ve experienced since the financial crisis in 2008, imposes enormous stress on people. Given the added anxiety created by a weak economy, you might think life expectancy would decline. Oddly, though, during recessions, exactly the opposite tends to happen: Life expectancy rises.

It’s happening again now.

The age-adjusted death rate in the US declined by 2 percent from 2007 to 2010, according to preliminary data from the Centers for Disease Control and Prevention. As a result, projected life expectancy at birth rose to 78.7 years in 2010 from 77.9 years in 2007, an increase of 0.8 year.

In contrast, from 2004 to 2007, when the economy was much stronger, life expectancy rose by only 0.4 year.

Life expectancy appears to have risen more in the states with relatively large increases in unemployment. In Michigan and Illinois, for example, where joblessness rose much more than in North Dakota or Iowa, age-adjusted death rates have had a steeper decline since 2007. (In the states with the smallest increase in unemployment, the death rates have perversely risen.)

These cross-state data are consistent with historical patterns that economists Douglas Miller, Marianne Page, Ann Stevens and Mateusz Filipski have found. Their research shows that a one-percentage-point increase in a state’s unemployment rate is associated with a 0.5 percent reduction in the state’s mortality rate.

More proof

During the Great Depression, too, life expectancy rose, according to research by Jose Tapia Granados and Ana Diez Roux of the University of Michigan. As they conclude, “The evolution of population health during the years 1920-1940 confirms the counter-intuitive hypothesis that, as in other historical periods and market economies, population health tends to evolve better during recessions than in expansions.”

How could this be? In a series of important papers, Christopher Ruhm, an economist at the University of Virginia, has explored the reasons. It appears that while suicide rates rise during downturns, other types of fatalities, such as from motor-vehicle accidents, fall more. The surprising findings apply even to heart attacks. In a study titled “A Healthy Economy Can Break Your Heart,” Ruhm finds that higher unemployment reduces deaths from heart attacks, perhaps because when there is less economic activity, hazards such as air pollution and traffic congestion are less severe. Smoking and obesity also tend to decline, Ruhm has found.

By the way, the reduction in deaths averted tends to be proportionally smaller for the elderly, but larger in absolute numbers -- because their underlying mortality rates are higher than those of younger people. This may partly explain why, over the past few years, Medicare spending has decelerated more than commercial health-care spending has. The big debate concerning the recent slowing in the growth of health-care costs is over whether it reflects structural changes (and therefore will last) or merely the weak economy (and therefore will fade). I believe the weight of evidence suggests a significant structural component.

However, for those who argue that the trend is entirely cyclical, the disproportionate effect of recessions on life expectancy for the elderly may help make their case. After all, it has been hard to see why Medicare spending growth should fall more in response to an economic decline than other types of health spending would, when most Medicare beneficiaries have Medigap insurance that covers co-payments, and a larger share of their income (through Social Security) is protected from economic fluctuations. But perhaps the recession could have a pronounced effect on Medicare spending because the economic slowdown causes a larger decline in deaths (and associated hospitalizations) among the elderly.

Little comfort

What can we make of all this? That life expectancy seems to go up rather than down during recessions is little comfort to those suffering through a weak labor market. What’s more, the rise in suicide rates is particularly worrisome, because the sense of loss from a suicide is particularly high. Despite the increase in life expectancy from a recession, therefore, the best policy approach remains an aggressive support for the economy now, coupled with lots of deficit reduction enacted today but implemented later on.

Peter Orszag
Peter Orszag is vice chairman of global banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.