Money Culture

Great Depression Holds Lesson for Our Time

Photograph by Lewis Hines, West Virginia 1937.

The Great Depression, sparked by a devastating collapse in stocks followed by 25 percent unemployment, remains the deepest recession in U.S. history.

A new study laying out the long-term negative impacts to Americans born during that time might be consequential for today’s youngest citizens –  teenagers born during the Great Recession of 2008 and 2009 and toddlers born in the midst of the steep COVID downturn in 2020.

The researchers found that the stresses and financial strains on parents from the Depression’s extraordinarily high unemployment over a protracted period of time did long-term damage to the health and careers of their children that persisted late into their lives. In a separate but related paper, they also found that people exposed to the Depression in utero experienced an acceleration in the aging process after age 75.

“The shock of the Great Depression was massive and everyone, no matter what group they belonged to, was to some extent impacted,” concluded the researchers, Valentina Duque and Lauren Schmitz.

For a whole host of reasons, a parent’s loss of income and joblessness have a huge impact on their children’s development and socioeconomic status, which in turn determine how they will do when they grow up. Prenatal stress on mothers, for example, has been linked to lower earnings for their offspring as adults. In utero stress also contributes to cognitive and behavioral problems late in life.

A father’s financial distress can harm the long-term health of children if the family can’t afford to buy nutritious groceries and quality healthcare or isn’t able to relocate to another part of the country with better job prospects.

To assess the Depression’s impact on health and careers, this study used a survey of older Americans. The researchers identified adults born in the 1930s to analyze how they fared late in their careers based on how severe the Depression was in the state where they were born or lived as young children.

The analysis, using IRS tax records, indicated that the offspring of the Depression’s parents living in states with larger declines in wages earned less throughout their careers – the impact in utero was larger than for the workers exposed to the Depression as young children.

The Depression created other deficiencies too: by the time the people born in more depressed states reached their 50s and early 60s, they were less productive and less attached to the labor force than their counterparts who grew up in states with stronger economies during that difficult time. They also had poorer health, were more often disabled, and had higher mortality due to health problems like diabetes and cardiovascular disease.

However, the impact on Depression-era babies might have been worse if the New Deal social programs, still arguably the most ambitious package of reforms in U.S. history, had not passed. The New Deal “may have ameliorated some of the negative impacts of the Great Depression,” the researchers concluded.

This has relevance to teenagers born in the Great Recession and to pandemic babies. Similar to the New Deal programs of the 1930s, Congress passed massive relief programs to combat the 2008-2009 recession and to soften the blow from the COVID downturn.  The COVID package offered particularly generous benefits to the unemployed, along with monthly support payments to parents and relief checks to all adults.

The COVID assistance, for example, “may play a significant role in mitigating the future long-term adverse effects of the COVID-19 recession on the aging outcomes of children born during this time,” the researchers predicted.

To read this study, authored by Valentina Duque and Lauren Schmitz, see “The Influence of Early-life Economic Shocks on Aging Outcomes: Evidence from the U.S. Great Depression.” A related paper is “In Utero Exposure to the Great Depression is Reflected in Late-life Epigenetic Aging Signatures.”

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.

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