Restarting “Normal” Life after Covid-19: Systematically negative expectations regarding the future and the recovery, majoritarian fears of an economic depression, a new outbreak, & a permanent restriction on freedom

Restarting “Normal” Life after Covid-19 and the Lockdown: Evidence from Spain, the United Kingdom, and Italy. Cristiano Codagnone, Francesco Bogliacino, Camilo Gómez, Frans Folkvord, Giovanni Liva, Rafael Charris, Felipe Montealegre, Francisco Lupiañez Villanueva & Giuseppe A. Veltri. Social Indicators Research, May 8 2021. https://rd.springer.com/article/10.1007/s11205-021-02697-5

Abstract: In this article, we examine the expectations of the economic outlook, fear of the future, and behavioural change during the first Covid-19 wave, for three European countries (Spain, the United Kingdom, and Italy) that have been severely hit. We use a novel dataset that we collected to monitor the three countries during the crisis. As outcome variables, we used expectations (e.g., economic outlook, labour market situation, recovery), fear (e.g., scenario of new outburst, economic depression, restriction to individual rights and freedom), and behavioural change across the following dimensions: savings, cultural consumption, social capital, and risky behaviour. We provide descriptive evidence that is representative of the population of interest, and we estimate the impact of exposure to shock occurred during the crisis on the same outcome variables, using matching techniques. Our main findings are the following: we detected systematically negative expectations regarding the future and the recovery, majoritarian fears of an economic depression, a new outbreak, and a permanent restriction on freedom, a reduction in saving and in social capital. Exposure to shocks decreased expected job prospects, increased withdrawal from accumulated savings, and reduced contacts with the network relevant to job advancement, whereas it had inconclusive effects over fears.

Discussion and Conclusions

In this article, we have shown the beliefs, fears, and behavioural changes of citizens in three countries (Spain, the United Kingdom and Italy), on the verge of the post Covid-19 first wave. We have discussed how the crisis always forces citizens to reassess their beliefs, their fears and their behaviour. We postulate that the climate of uncertainty and the exposure to shocks that occurred during the crisis were likely to shape those outcome variables. This contribution fills a gap in the current literature on the effects of Covid-19 and related lockdown mitigation strategy where evidence is largely missing on how the gradient of exposure to negative shocks has shaped expectations and emotions about the future, and behavioural change. We did so, by presenting a novel database from a longitudinal study conducted in three waves in Spain, the United Kingdom and Italy between April 24 and May 20 (Bogliacino et al. 2020). We focussed on the data from the third wave on expectations (general, labour market situation, recovery), fear (scenario of new outbreak, economic depression, restriction to individual rights and freedom), and behavioural change across the following dimensions: savings, cultural consumption, social capital, unhealthy lifestyle. We used, however, also the data from wave 1 and wave 2 to control for the effects of, respectively, socio-economic background and health status (from wave I), and the indirect effect via cognitive performances and preferences (from wave II).

At descriptive level, the findings support our initial hypotheses, showing that most of the respondents in the three countries report negative expectations about the future and appear entrenched by possibly unjustified fears about extremely negative scenarios. The descriptive results are consistent with the hypothesis that, given the objective and subjectively perceived radical uncertainty and the framing adopted by governments and the media, even those individuals who were not severely impacted by the pandemic and/or lockdown have updated their expectations about the future and are fearful about what awaits in the coming months. Two findings from those presented earlier suffice here to support this statement: 56% of the sample expected 2021 to be worse than 2020; an economic depression was considered somewhat likely or very likely by 91% of sample. Descriptive data are also quite unequivocal on the fact that this has produced sizeable behavioural changes for what concerns savings and social capital. Almost one third of the sample was forced to use their savings during lockdown more than in last month before the outbreak of Covid-19. This evidence suggests a tangible behavioural change and a source of worry that feeds back into the creation of negative expectations and fears. As much as 47.3% of the sample has lost contact with people relevant for their career, status or the future possibility to get a job during the lockdown as compared to before the outbreak of the pandemic. Behavioural changes are less pronounced for what concerns risky health behaviour and more polarized for the case of cultural consumption. Only 23% of the sample indicated that they adopted unhealthier lifestyle during the lockdown compared to before. On the other hand, for cultural consumption 22.1% have increased it, 36.5 maintained the same pattern, and 41.4% consumed less.

We presented a DAG positing that negative shocks have a direct effect on our outcome variables, an indirect effect via cognitive ability and preferences, and are potentially confounded by socio-economic background, and health status. Controlling for the latter three causal paths via adoption of a selection on observables research design, we have been able to conclude that the gradient of exposure to negative events (above the median) has statistically significant effects on six out of 10 outcomes. First, being severely exposed to shocks determined stronger negative expectations about one’s future jobs prospects. Second, the severity of exposure decreased the fears of an economic depression, of a new outbreak of the pandemic, and of permanent limitations to our freedom and rights, although the result was not robust to the choice of the estimator. Third, individuals who were more severely exposed to shocks used their saving more than before the pandemic outbreak in ways that are more marked than had they not experienced. Fifth, the same applied to social capital in that strong negative shocks led individuals to disregard instrumental social relations more than in presence of milder exposure to shocks.

With respect to the latter findings, it is important to remark, in particular, the first and the last results for, if consolidated, could lead to a negatively self-propelling loop. It is known that income and employment shocks exert negative effects on social capital reducing the social networks that help the unemployed to find new opportunities (Machin & Manning, 1998). Decades of research demonstrate that social connections are vital to wellbeing and coping with difficult situations (Sibley et al., 2020) and that those without social connections and with pre-existing vulnerabilities may be more at risk. As high exposure to shocks is making individuals, at the same time, more pessimistic on their jobs’ prospect and using less their social capital, there is a short-term negative interaction effect that may become a long-term effect, especially if expectations and fears are reinforced. Furthermore, the sociological literature and the literature on the psychology of class already tell us that more vulnerable groups are less used to take advantage of social capital and tend to interpret constraints and the structure of opportunities in self-limiting way. This already entrenched patterns could be multiplied by the negative shocks produced by Covid-19 and related lockdown mitigation strategies, so that the impact of the latter would become even more unequal than it is currently being shown to be. The emerging studies cited in the introduction about the inequality effect of lockdown, in fact, focus only on the tangible dimensions. Our findings suggest that there is a less tangible dimension related to habitus, beliefs, and emotions that could further exacerbate the inequalities generated by the pandemic and lockdown.

One of the strengths of the current study is that we have conducted data collection in three separate countries that have been more severely hit by the Covid-19 than other European countries. Second, the richness of the data made it possible to provide a characterization of the outcome variables that is representative of the population of interest (external validity), and to estimate a plausible counterfactual of exposure to shock to identify the causal impact (internal validity). Third, as the literature on Covid-19 is expanding rapidly, only limited studies have focused on the psychological, social, and economic consequences of the current economic halt. Nonetheless, the current study also has some limitations. First, although our surveys have been conducted for several weeks, following the panel for a longer period would have provided us with a better understanding of the long-term effects of the pandemic and the lock-down situation on people’s health and well-being, and of course ideally, one would have included a baseline pre-lockdown. Second, this study focused on three countries that have been hit hardest by the pandemic, whereby Spain and Italy had very strict lockdown regulations. If we would have included also countries that have experienced less health consequences of the Covid-19, such as Eastern European countries, or countries that implemented less strict regulations, such as the Netherlands and Germany, the comparisons between countries could have been richer. Third, regional variations are also very important to understand the first wave of the Covid-19, as it was clearly the case for Italy, but exploring them was beyond the scope of this paper.

Our findings have clear policy implications. From the first set of results, we infer the need for policies that are able to restore hope and reduce radical uncertainty. Government ought to present the citizenry with contingent mid-term plan, not only in terms of public budget resources earmarked to the purpose. Particularly, they should mitigate fears that very pessimistic scenarios will occur. The second set of implications from the results concerns the consequences of shocks. Government should recognize that the degree of exposure has been heterogenous and should design new instruments of social policy and social assistance that provide coverage even to those households which are normally outside the range of social insurance schemes, softening the deaccumulation that took place from private assets and savings. Moreover, they might introduce active labour market policies to counteract the neglect of important networking activities during the lockdowns. Finally, they should mitigate negative job prospect expectations, as this may lead to an exit of the labour force with detrimental consequences in the long term.