In the history of Europe, pandemics have usually resulted in higher wages. This is the conclusion of a recent study by the San Francisco Fed, a branch of the Federal Reserve.
Researchers have studied 14 pandemics since the 14th century that have killed at least 100,000 people, starting with the big plague waves. They found that there were striking macroeconomic effects that lasted for 40 years.
As companies’ profits fell, wages of employees rose. It is the opposite of what happens in a war. Since capital and values are massively destroyed in wars, there is then a lively economic expansion.
Read the original San Francisco Fed study here.
After pandemics, there is usually no destruction. But what usually happened after pandemics was a lack of workers due to the high death rates. This favored wage increases.
The question is whether this will be similar in the current Covid-19 pandemic. On the other hand, there is an argument that the fatalities are mostly elderly people who are no longer working.
Falling interest rates
On the other hand, it is not clear how the pandemic will develop, especially since many workers who continue to work during these times are very exposed to the infections.
Interesting for investors: After pandemics, interest rates have mostly dropped. At the same time, however, people have saved more to prepare themselves for future crises. That does not necessarily mean that this will also be the case this time.
Increasing voices are interesting, however, which call for a fairer policy in the aftermath of the pandemic. That could include equity investors in their considerations.
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