Pandemics and inequality

See How the Coronavirus Might Reduce Income Inequality: The Black Death and other pandemics pushed wages higher, but the impact will likely be different this time, economists say by Paul Hannon of The WSJ. Excerpts:

"Past pandemics have shifted the balance of bargaining power toward workers and away from owners"

"Economic historians have long thought that the Black Death, among other pandemics, had a significant impact on how income is shared between those who own land and other assets and those who provide the labor.

The most direct and brutal way in which that impact is felt is a change in the supply of labor. Viruses and bacteria kill workers, who become less plentiful as a result. For those who survive, wages rise. At the same time, land and other assets are unscathed, and the returns to their owners decline. The result is a more equal distribution of incomes.

The Black Death, a bacterial infection that devastated populations in Europe and Asia in the mid-14th century, is the most widely studied of past pandemics. The full extent of its consequences are still debated, but it almost certainly resulted in higher wages for workers in northwestern Europe."

"In a paper published this month by the National Bureau of Economic Research, three economists examined 15 outbreaks that each accounted for more than 100,000 deaths, the most fatal being the Spanish flu, which took an estimated 100 million lives between 1918 and 1920.

They found that real wages typically rose for three decades after an outbreak, by as much as 5% at their peak. Over that same period, the natural rate of interest—a measure of the return on capital—declined by one-and-a-half percentage points. Overall, pandemics narrowed the income gap between workers and owners of capital."

"the tendency of Covid-19 to kill older people who may have already retired while often sparing the lives of the working age or younger. That is why Stanford University historian Walter Scheidel doesn’t expect to see an impact on wages."