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August 26, 2021

Learning loss likely to hinder US growth – leading macroeconomic influencers

Wharton estimates learning loss from Covid school closures reduced US GDP by 3.6% in 2050.

Economists believe that a drop in learning drags down the economic growth and wages. The Wharton model projects that learning losses experienced by the current K-12 students lead to a 3.6% decrease in US GDP and a 3.5% decrease in hourly wages by 2050.

João Pedro Azevedo

João Pedro Azevedo, a development economist and EdTech fellow and education statistics coordinator from the World Bank Education Global Practice, shared an article on Penn Wharton Business Model (PWBM) from Wharton estimating that the learning loss from Covid school closures reduced US GDP by 3.6% in 2050.

Extending the 2021-22 school year by one month would cost about $75bn nationally but would limit the reduction in GDP to 3.1%. This smaller reduction in GDP produces a net present value gain of $1.2tn over the next three decades, equal to about a $16 return for each $1 invested in extending the 2021-22 school year.

During 2020-2021, schools across the US and the world resorted to remote learning approaches due to the Covid-19 pandemic. Studies suggest that remote education reduces learning outcomes leading to students earning less wages in the future as a result of low labour productivity.

Labour productivity is directly proportional to the production of goods, services and wealth in the economy. Economists believe that the current set of students with reduced education and lower productivity will be a drag on US productivity for decades to come.

Simon Baptist

Simon Baptist, global chief economist at The Economist Intelligence Unit (EIU), shared an article on how experts have run out of models to predict how much GDP the world is losing due to the unequal distribution and access to coronavirus vaccines. The EIU report also explores the growth in digital payments in a post-Covid world.

Data has shown that richer nations have administered 100 times more of the Covid-19 vaccines to its population compared to vulnerable economies. Economists believe delay in vaccinating the entire world will come with a high cost. The EIU report reveals that countries that will not have vaccinated 60% of their population by mid-2022 will record GDP losses totalling $2.3trn by 2025.

The report also highlights that emerging countries are more likely to shoulder around two-thirds of these losses, further delaying their economic recovery. In addition to these costs, unequal access to Covid-19 vaccines will have huge social, political, and geopolitical consequences.

Brett House

Brett House, vice president and deputy chief economist at Scotiabank, retweeted an article on Latin American economies on the road to recovery like most nations, but not yet out of danger from the Covid-19 pandemic as various countries in the region face political challenges to manage this recovery.

Brett points at an unprecedented shut down of Latin American economies in the second quarter of 2020 during the onset of the Covid-19 pandemic. However, the rebound and recovery like most parts of the world has been faster than the initial projections.

Most of the major economies in the region hit 95% reopening in terms of economic activity towards the start of this year or the start of spring this year. Brett states that like all other nations, what is lagging the overall economic recovery is the recovery in employment.

The service sector including hospitality, tourism, culture, travel, and entertainment have been particularly slowest to reopen compared to the overall economy due to physical distancing protocols and due to the fact that these are more labour-intensive sectors employing large proportions of the population.

 

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