Dr Chloe Billing looks into the importance of high-quality data and the impact having access to this can have on influencing decision making and policy. By way of example, she looks at the impact the recent DELVE report has had on supply chains and intraregional inequalities.
On the 14th August, the DELVE initiative released their fifth report on the economic aspects of the COVID-19 crisis. DELVE: Data Evaluation and Learning for Viral Epidemics is a multi-disciplinary group, convened by the Royal Society, to support a data-driven approach for managing the pandemic. The report draws on recent economic work and includes insight on the following: (i) economic models that can incorporate insights from epidemiology; (ii) evidence of the pandemic’s economic impact; and (iii) data, tools and methods that will be useful in monitoring the economy as it attempts to recover.
This blog pulls out key findings from the report that specifically relate to the West Midlands economy and provide further context, based on research that we are undertaking at WM REDI.
The Importance of Data
The report highlights the importance of accessing a range of high-quality data sources (such as public transport, consumer spending and financial transactions) to inform strategic and tailored policymaking. This attests to the value of this weekly West Midlands monitor and the ongoing work of the Office for Data Analytics.
The report specifically points to the value of increasing access to payments data, which is typically held by private/commercial institutions. The primary advantage of payments data is it provides a near real-time account of economic activity, supporting evidence-based timely policy responses. Additionally, the granularity of payment data provides a measure of the extent to which individual firms and households are affected by economic shocks. This can be used to point to the heterogeneity across income groups, as well as, the impact of uncertainty on different consumption patterns. For example, analysis of granular financial transactions data by the DELVE initiative (2020) revealed, “More affluent households have increased substantially their savings during the lockdown by cutting non-essential spending”. In contrast, low-earning families “have increased their borrowing to fund spending on essential consumption such as groceries, food, and utility bills”. Granular datasets such as these are important since aggregate measures like changes to Gross Domestic Product (GDP) and employment numbers are limited in telling the full story of the impact of the pandemic. The report calls for action from the UK government to ensure more financial data is made available for such analysis, to keep up with its European counterparts.
In addition to having access to a range of data sources, policymakers must also be flexible to adjust in accordance with the data, as the epidemic evolves and the uncertainties change. For example, “labour market strategy should be sensitive to the persistence of the crisis and the likelihood of further waves of infection” (DELVE, 2020). Any economic assessment made about the data must be set within the context of the basic immunology facts we currently know about COVID-19 and adjust as new understandings emerge.
Furthermore, analysing the impact of the crisis on the economy must consider the impact of human behavioural changes on key business and household decisions. This requires an understanding of the “incentives and disincentives that firms and households face” (DELVE, 2020). This understanding can be reached by surveying individual households, entrepreneurs and risk capital providers, an activity which is currently being undertaken by multiple regional stakeholders including the MIT REAP West Midlands cohort.
Nature of Sectors and Supply Chains
The report outlines the importance of recognising the interdependencies between different sectors when measuring the impact of the pandemic. This interdependency means that changes or policy measures on one sector can have a ‘knock-on effect’ on other sectors in the economy. The way in which different sectors are interlinked was also highlighted in Dr Andre Carrascal Incera’s recent blog on the ‘Economic Exposure to COVID-19’ using the SEIM-UK Input-Output framework. For example, the Health Care system relies on basic pharmaceutical products and pharmaceutical preparations; Computer, electronic and optical products; Scientific research and development services; Architectural and engineering services; technical testing and analysis services; and Residential care and social work activities. Similarly, in a recent policy briefing, Dr Amir Qamar and Professor Simon Collinson pointed to the interconnected nature of automotive supply chains and the high concentration of other firms that are highly dependent on the industry.
The DELVE Initiative (2020) also outlines the consequences of global supply chains and how “the effectiveness of the existing UK strategy will depend on the policies that other countries implement”. Specific sectors are more exposed to supply chain fragmentation in the West Midlands, as argued by Dr Andre Carrascal Incera. For example, 18.8% of the machinery and equipment sector (SIC code – CK) is related to foreign exports. Similarly, the manufacturing of transport equipment (SIC code – CL), central to the economy of the region, mainly sells its products for foreign markets (18.6%). Of the top-ranking sectors related to foreign exports, the analysis identified administrative and support service activities (SIC code – N), whereby 22.1% of its activity would be directly and indirectly affected by a shock in foreign exports in general. In a recent blog, Professor Raquel Ortega-Argiles also concluded that the West Midlands region has the highest EU trade dependency on imports. The DELVE (2020) report outlines how “these exposure levels have brought to the forefront the need to monitor and design supply chains that are responsive to shocks”. For example, it is important to understand which industry sectors and specific firms are essential for meeting the demand for key goods and services in a crisis. Policy interventions to avoid supply chain disruption in the future would require more granular data to answer these questions. Professor Raquel Ortega-Argiles’s blog also stressed the value for the region to develop an ‘economic diversification strategy’ around its core set of existing capabilities and skills, since technological diversification has proved to be associated with stronger and more resilient growth.
The report also explores the uneven distribution of the economic effects of the pandemic and calls for any policy interventions to account for how different households and firms have been impacted differently. For example, there is evidence to suggest that women have been hit harder by the impact of the pandemic. This was consistent with the findings in a recent blog by Professor Anne Green, which argued that women – particularly those from BAME groups – are on the frontline of the Covid-19 crisis. This is a result of women comprising a large proportion of health/care workers and also being concentrated in sectors and occupations vulnerable to precarity and poverty. Furthermore, Professor Green found that women in social grades D and E have been disproportionately impacted by furlough and amongst parents; a mothers’ work time is more likely to be interrupted by caring responsibilities than a fathers’ work time. The crisis has exacerbated gender inequality in the labour market. Furthermore, the DELVE (2020) report argues that low-earning workers are in jobs that tend to be harder to perform remotely, increasing their risk of unemployment or infection in the workplace, if mitigating steps are not taken. The adaptation to working from home is not always possible and has been unequal across different occupations and industries. Understanding what drives differences in the ability to work from home across workers and firms is important for understanding what future policies around homeworking should be.
The report concludes with a set of ‘smart’ non-pharmaceutical interventions, which take into account the findings from the DELVE initiative. These policy recommendations are primarily aimed at the National level, but are also relevant to have sight of at the local level:
- Workplace rotation schemes: Rotations or split shifts have an exponential impact on infection rates, for example having just two cohorts or rotations within a workplace.
- Subsidised workplace testing: Test-Track-Isolate (TTI) could help identify and control workplace outbreaks quickly, particularly in key sectors and those occupations in which ‘high-contact’ is a feature.
- Flexible furloughing: A more flexible furlough scheme could help to open up the labour market and incentivise business investment in new home-working technologies. With the possibility of continued economic disruption in 2021 and beyond, there is a need to develop effective job-creation schemes in occupations and firms that can adapt to these new circumstances.
- Sick pay: Current sick pay arrangements create a financial disincentive to self-isolate, with half of workers continuing to work through mild coronavirus symptoms, which in turn makes it more difficult to control transmission. Reviewing statutory sick pay could help incentivise those with symptoms to self-isolate.
- Reopening schools: Schools can prepare for the potential future resurgence of the epidemic with rotation schemes and better online provision for teaching and examinations.
- Capitalising on government commitments to net-zero and addressing regional inequalities: The government before the crisis had committed to net-zero carbon emissions by 2050 and to ‘level up’ the economy. A recovery plan could seek to progress these agendas. For example, promoting employment schemes supported by training programs in clean energy sectors and home insulation can aid in reducing carbon emissions.
- Unemployment support: As the furlough scheme unwinds, it may be beneficial to review the design of unemployment support systems and schemes designed to help individuals back into work.
The DELVE Initiative (2020), Economic Aspects of the COVID-19 Crisis in the UK. DELVE Report No. 5. Published 14 August 2020. Available from http://rs-delve.github.io/reports/2020/08/14/economic-aspects-of-the-covid19-crisis-in-the-uk.html.
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The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WM REDI or the University of Birmingham