The Economic Costs of COVID-19 for Ontario: How bad is it so far and how bad could it get?

By Huw Lloyd Ellis, Queen’s University

Huw Lloyd Ellis is a Professor of Economics at Queen’s University. Here, he discusses the new STUDIO model developed by Queen’s University economists and Limestone Analytics for assessing the impact of COVID-19.

We all know its bad. COVID-19 and the lockdowns needed to counter it have created a global economic storm whose impact on Ontario since mid March has been more disruptive than any downturn that most of us have seen in our lifetimes. We’ve seen large downturns in the level of employment. A large fraction of those still employed are working from home and many of those still employed were working reduced hours.

Understanding the economic costs in terms of lost production from these adjustments is important for many reasons. Firstly, these costs translate into major losses in household incomes that may never be recouped. These losses are far from equally distributed and depend crucially on where people live and the industries in which they work. Secondly, the resulting loss in the tax base adds an additional strain on government finances over and above those created by increased spending to offset the size and impacts of layoffs and business distress. The ongoing losses in production today represent a permanent loss in economic wealth that will impact our future after-tax incomes for many years.

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