It has been the most egalitarian of all the 11 recessions since World War II. In various ways, it has touched every social class through job loss, pay cuts, depressed home values, shrunken stock portfolios, eroded retirement savings, grown children returning home—and anxiety about all of the above. The Great Recession (as it is widely called) has changed America psychologically, politically, economically, and socially. Just how will be examined and debated for years. Here comes a booming cottage industry of scholars, pollsters, and pundits.
A new study from the Pew Research Center, based on an opinion survey in May of nearly 3,000 Americans and an exhaustive evaluation of economic data, provides a preview. Not surprisingly, it confirms that Americans have become more frugal; 71 percent say they’re buying less expensive brands, 57 percent say they’ve trimmed or eliminated vacations. Life plans have changed; 11 percent say they’ve postponed marriage or children, while 9 percent have moved in with parents.
One interesting finding is that the elderly have been relatively sheltered. According to the report, “[O]lder adults (ages 65 and older) are much less likely than younger age groups to have cut back on spending, loaned or borrowed money, had trouble paying for medical bills or housing, or had to increase their credit card debt.” For example, 28 percent of Americans under 65 borrowed money from family or friends; only 5 percent of those 65 and older did. Confidence in retirement savings dropped sharply for younger Americans (including those 50 to 64), not those 65 and over.
But other refuges from the Great Recession have been scarce. Previous recessions have focused their hurt on the young and unskilled. This remains true. Almost one fifth of workers 16 to 24 were unemployed at the end of 2009, a near doubling since late 2007. Among those without a high-school diploma, joblessness was 50 percent higher than the average. Still, the economic and spiritual damage extends much further, for many reasons.
First, the huge job loss: by most measures (length of unemployment, permanent firings as opposed to temporary layoffs), joblessness is the worst since World War II. (Though the unemployment rate never reached the 10.8 percent of late 1982, economists John Schmitt and Dean Baker have shown this mostly reflected the 1980s’ younger labor force; younger workers change jobs more often and have higher jobless rates.)
Second, pay cuts: these affected almost a quarter of workers, including nearly a fifth of those with family incomes exceeding $75,000.
Third, the loss of housing and stock market wealth: that decline (more than 25 percent on an annual basis) was concentrated among higher-income Americans, who own a disproportionate share of the wealth.
Finally, children: all those jobless college grads and crashing kids must alarm their parents.
One paradox identified by Pew is that some groups that “have been hardest hit by this recession (including blacks, young adults and Democrats) are significantly more upbeat than their more sheltered counterparts (including whites, older adults and Republicans) about a recovery.” For instance: blacks suffer much higher unemployment than whites (15.4 percent vs. 8.6 percent in June) but believe more strongly than whites that recovery has begun (47 percent to 38 percent). Pew’s explanation for this is politics. With a Democratic administration, Democrats are more upbeat and Republicans are more glum.
Another theory—more powerful, I think—is that the Great Recession, though jarring to almost everyone, was most disruptive and disillusioning to those who previously were the most protected. It punctured their cocoons so unexpectedly that they became more cautious and fearful, whereas those who even in good times faced job loss and income shifts (many blacks, the young and the poor) were less surprised and affected. One legacy of the Great Recession is that insecurity and uncertainty have gone upscale. People feel more exposed. They tend to plan for the worst rather than hope for the best. Their reluctance to make major purchase commitments (a new car or home) validates their pessimism by retarding recovery.
Is this a passing mood or an enduring shift? Most Americans, Pew says, believe adverse economic changes will be temporary. Optimism will return. That depends on how quickly—and whether—the Great Recession releases its stranglehold on the American psyche.
Robert Samuelson is also the author of The Great Inflation and Its Aftermath: The Past and Future of American Affluence and Untruth: Why the Conventional Wisdom Is (Almost Always) Wrong.