School Closures Across Globe May Be Slight Positive for Economy

(Bloomberg) -- As schools close across the globe to slow the spread of coronavirus, the jury is out on what the economic and social impact will be.

Some jobs are not easily transferable to the home, and some not at all, particularly manufacturing work, which means some economies will cope better than others. A surge in home computing use could put strains on broadband networks, causing crashes.

“How big an economic negative depends on how many people take unpaid leave, the economic value of their jobs, and to what extent this is offset by spending on entertainment” and other sectors, according to UBS Global Chief Economist Paul Donovan.

The advantages may be slightly positive for the economy as teachers, children and others left at home spend more on various activities, from online gaming to redecorating, Donovan said in a post on LinkedIn.

It’s true that the extraordinary global situation could see more people streaming television and movies as they pass the time at home, but there’s also a downside for such services. Needham, an investment bank, has warned that growth in Netflix Inc.’s international subscribers could be at risk because it’s a “luxury at a time when paychecks from employment may have stopped.”

Italy, the hardest hit European country from the virus outbreak has put 60 million people under lockdown and closed all schools, hitting some 3.3 million pre-school and primary-school pupils. Countries including neighboring France, are following suit after the global death toll from the disease topped 5,000.

While keeping children at home may be inevitable in case of a serious pandemic, the costs of absenteeism could be high and the measures may backfire if health professionals that should be fighting the virus are forced to stay home with kids.

A Brookings Institution study from 2009 by Howard Lempel, Ross Hammond and Joshua Epstein calculated that a 4-week school closing in New York could cost as much as $1.1 billion.

UBS’s Donovan acknowledged the potential economic cost of parents taking unpaid leave to look after their children. Austria, where schools will be closed as of Monday, has taken that into account: while teaching is suspended, children up to the age of 14 will be supervised.

--With assistance from Boris Groendahl.

To contact the reporter on this story: Alessandra Migliaccio in Rome at amigliaccio@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss

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