Long Covid and the Labor Market: The Impact of Chronic Illness on Employment and Economic Output

The pandemic has had a significant impact on the labor market, particularly in terms of long-term illness and disability. Many people who have contracted COVID-19 develop "Long Covid," which refers to the long-term effects of the disease that last for weeks or months after initial infection. These long-term effects can include fatigue, respiratory difficulties, and heart problems, which can greatly affect a person's ability to work.

One recent study by the Statistique Canada showed that the risk of Long Covid was 38% with three infections. This indicates the significant impact of repeated infections on the risk of long-term illness. South Korea and some other countries are putting the impact of Long Covid considerably higher than 38%.

The chronic illness caused by Long Covid is a significant public health concern because it can result in a loss of 21% of health-related quality of life, similar to the effects of traumatic brain injury or complete hearing loss. Among US adults, 5.3% reported having Long Covid in October 2023, and 1 in 4 with Long Covid consistently report significant activity limitations from its symptoms. Across the 12-month sample of 757,580 US adults, 1.5% (n= 10,401) met the case definition of disabling Long Covid. Their estimated frequency of the population equates to 3,801,986 adults with long term symptoms after COVID that significantly limits daily activity.

The impact of Long Covid on the EU labor market has also been examined. Currently, it is estimated that 1.7% of the EU population has long Covid in 2021 and 2.9% in 2022. This results in a negative impact on labor supply of 0.2-0.3% in 2021 and 0.3-0.5% in 2022. In person equivalents, this means that long Covid is assumed to have reduced labor supply by 364,000 to 663,000 in 2021 and by 621,000 to 1,112,000 in 2022 – combining the effects of lower productivity, higher sick leaves, lower hours, and increased unemployment or inactivity. While there are mixed indicators of the impact of long Covid on the labor market, including increased sick leave and disability, it warrants careful monitoring.

Long-term illness is also having a significant impact on the German economy. According to analysis by VFA, Germany's association of research-based pharmaceutical companies, absences due to health problems have surpassed pandemic totals and are reaching record highs in 2023. This has led to a reduction in Germany's gross domestic product (GDP) by 0.5% last year. While there are many factors at play, it is clear that illness is playing a role in Germany's poor economic performance.

Increasing payroll costs are the biggest source of inflation for small businesses, with 59% of entrepreneurs reporting higher labor costs in January 2024, according to a survey conducted for The Wall Street Journal by Vistage Worldwide, a business-coaching and peer-advisory firm. As a percentage of sales, restaurants rely more on labor than other retail sectors, making rising wages particularly draining on profits. This, in combination with rising supply costs, is creating a budget squeeze that is forcing many restaurants to close.

Overall, the impact of Long Covid on the labor market is significant and is likely to continue to be a concern for many years to come. While public health officials have largely failed to acknowledge the long-term harm caused by Covid infection, the impact on the labor market and economic output is impossible to ignore.

Read more