Posts Tagged "Great Recession"

The Economics of Being Black in the U.S.

Unemployment DisparitiesThe COVID-19 recession demonstrates an axiom of economics. Black unemployment always exceeds the rate for whites, the spikes are higher in recessions, and, in a recovery, employment recovers more slowly.

A record number of Black Americans were employed in 2019. But when the economy seized up in the spring, their unemployment rate soared to 17 percent, before floating down to a still-high 12.1 percent in September.  Meanwhile, the white unemployment rate dropped in half, to 7 percent.

The much higher peaks in the unemployment rate for Blacks than whites and the slower recovery are baked into the economy.

This phenomenon occurred during the “jobless recovery” from the 2001 downturn. When the economy had finally restored all of the jobs lost in that recession, the Black jobless rate remained stubbornly higher.

And after the 2008-2009 recession, as the University of California, Berkeley’s Labor Center accurately predicted at the time, Black unemployment hovered at “catastrophic levels” longer than the white rate did.  This disparity is now the issue in the COVID-19 recession.

Geoffrey Sanzenbacher, a Boston College economist who writes a blog about inequality, gives three interrelated reasons for Black workers’ higher unemployment rates.

First, “The U.S. still has a tremendous amount of education inequality, and the unemployment rate is always higher for people with less education,” he wrote in an email. Despite the big strides by Black men and women to obtain college degrees, roughly 30 percent have degrees, compared with more than 40 percent of whites, he said.

Second, Black workers without degrees are vulnerable because they are more likely to earn an hourly wage. An hourly paycheck means that a company can cut costs by simply reducing or eliminating a worker’s hours. “It’s much easier to lay off hourly workers, whose employment is more flexible by nature, than salaried workers,” Sanzenbacher said. …Learn More

Silhouettes of people

2020 Disability Blogs Tackle Myriad Issues

Squared Away has featured numerous articles this year – the 30th anniversary of the Americans with Disabilities Act – about the challenges that people with disabilities must deal with.

One in four adults in this country has some type of disability. What becomes clear when looking back at this collection of articles is the importance of ensuring that those who are capable of working get the support they need to overcome their unique challenges.

Employment rates, which are lower for people with disabilities, can be improved greatly if they receive support. One recent blog examined a program to assist people with severe intellectual or learning disabilities. The federal-state Vocational Rehabilitation program supplies coaches who help their clients find appropriate work and then smooth the bumps in the employer-employee relationship.

Another program that provides day care to children with disabilities has been effective in keeping their mothers – often single, low-income workers – in the labor force.

The logistical barriers to working are inherently higher for people with disabilities. Yet they are more likely than others to hold low-paying jobs with just-in-time scheduling or shifts that aren’t the same from week to week, according to research covered in an August blog. Imagine arranging special transportation or child care to accommodate these unpredictable schedules.

Economic factors also affect whether people find work or wind up on Social Security disability insurance. Amid the COVID-19 recession, researchers are concerned about the long-term impact of workers with disabilities losing their jobs. During the Great Recession, applications for Social Security disability benefits surged. Once people apply for disability benefits, the odds of ever going back to work decline.

Recessions are also an obstacle for people from low-income families trying to move up the economic ladder. Yet a researcher found that if they can manage to earn more than their parents, they will have more success staying off the disability rolls. One big reason: workers with good jobs and higher incomes are healthier because they can afford better medical care.

Our disability blogs cover research being funded by the U.S. Social Security Administration, which also supports this blog. Here is the complete list of the 2020 headlines:

Work:

Same Disability: Some Have Tougher Jobs

Same Arthritis but Some Feel More Pain

Disabilities and the Toll of Irregular Hours


Economy:
Learn More

Despair Grips Lower-Paid White Workers

Book Cover of Deaths of DespairLong before COVID-19 upended our world, the lives of lower-paid, less-educated workers had already been coming apart.

“It’s the other epidemic, but it’s an epidemic that’s been occurring under the radar for a long time,” Anne Case said in her keynote address for the annual meeting of the Retirement and Disability Research Consortium, which was held online early this month.

Case, a Princeton University economist, was referring to the findings from her seminal work on the deterioration in financial well-being and rising death rates among white, non-Hispanics without a bachelor’s degree. Case, along with her husband, Angus Deaton, also at Princeton, have just published a book on their research, “Deaths of Despair and the Future of Capitalism.”

The deaths of despair they refer to are due to drug addiction, liver disease from alcoholism, and suicide. In writing this book, they are shining a spotlight on a phenomenon affecting people who no longer have a voice, in part because labor unions, once powerful advocates, have declined.

In 2018, some 158,000 white adults of all ages without a college degree died from addiction, alcoholism and suicide, according to Case and Deaton’s research – more than double the number in 1992 and on par with COVID-19 deaths to date.

But the death rate is just the tip of an iceberg of woe that includes an increase in physical pain, declining mental health, and a loss of a sense of self, Case said.

One disturbing trend is the relatively recent phenomenon of rising suicides among white women without a bachelor’s degree. Although suicides among their male counterparts are still much higher, women’s suicides in recent years have been increasing at roughly the same pace.

What is at the root of this despair? Case provides economic explanations, including a long-term decline in men’s wages and in the percentage who are employed. However, economics is inadequate to explain the despair. …Learn More

Art saying Now what?

Recession Destabilizes Boomers’ Finances

The COVID-19 recession has changed everything.

This extreme disruption in our lives is always top of mind, which was reflected in our most widely read articles so far this year, based on the blog’s traffic.

Baby boomers, their retirement plans having been deeply affected by the Great Recession, are once again reassessing their finances. One popular article explained that the boomers who were in their early to late 50s during the previous recession lost about 3 percent of their total wealth at the time. This put their retirement planning at a distinct disadvantage compared with earlier generations in their 50s, whose wealth, rather than shrinking, grew 3 percent to 8 percent. The current recession is the second major setback in just over a decade.

Prior to the pandemic, readers liked articles about making careful retirement plans. Post-pandemic, the most popular article was about laid-off boomers desperate for income who may have to start their Social Security prematurely. The retirement benefits can be claimed as early as age 62, but doing so locks in the smallest possible monthly Social Security check – for life.

Even before Millennials were hit by the recession, they were already farther behind older generational groups when they were the same age. One article explained that the typical Millennial had just $12,000 in wealth. They are “the only generation to have fallen further behind” during the pre-pandemic recovery, the Federal Reserve said.

Here are a dozen of this blog’s most popular articles for the first half of 2020. They are grouped into three topics: COVID-19 and Your Finances, Retirement Planning, and Retirement Uncertainties.

COVID-19 and Your Finances:

Social Security Tapped More in Downturn

Lost Wealth Today vs the Great Recession

Boomers Facing Tough Financial DecisionsLearn More

Woman with mental health problems

Recessions Hit Depressed Workers Hard

Anyone who’s suffered through depression knows it can be difficult to get out of bed, much less find the energy to go to work. Mental illness has been on the rise, and depression and myriad other symptoms get in the way of being a productive employee.

So it’s not surprising that men and women with mental illness are much less likely to be employed than people who have no symptoms. But the problem gets worse in a recession.

In 2008, the first year of the Great Recession, the economy slowed sharply as 2.6 million workers lost their jobs. During that time, people who suffered from mental illness left the labor force at a much faster pace than everyone else, according to a new study from the Retirement and Disability Research Consortium.

The researchers compared average labor force participation, as reported in the National Health Interview Survey, for three periods. Two periods of consistent economic growth bracketed a period that included the onset of the Great Recession: 1997-1999, 2006-2008, and 2015-2017.

Labor force participation for people with no mental illness dipped less than 1 percent between the late 1990s and the period that included the recession. By 2015-2017, roughly three out of four of them were still in the labor force – only slightly below pre-recession levels.

Contrast this relative stability to large declines in activity for people with mental illness – the more severe the condition, the steeper the drop. Participation fell 17 percent among people with the most severe forms of mental illness between the late 1990s and the period that included the recession. By 2015-2017, only 38 percent of them remained in the labor force – well below pre-recession levels. …Learn More

Recession Slams Millennials – Again

Woman waving to a friend

Several young adults in my life have been derailed by the COVID-19 recession.

A few examples. My daughter-in-law just finished her graduate degree in occupational therapy and sailed through her certification only to be met by a stalled job market. A friend’s daughter, fresh out of nursing school, has already been turned down for one job. My nephew, a late bloomer who had finally snared a job making jewelry for a major retailer, was laid off and is floundering again.

Student loans, the Great Recession, and now a pandemic – Millennials can’t seem to catch a break.

Going into this pandemic, people in their 20s and 30s already had lower wages, more student debt, and less wealth than previous generations at the same age. This recession arrives at a critical time when Millennials were trying to catch up, build careers and strive for financial goals.

For the youngest ones, this is their first recession. But the downturn is the second blow for older Millennials, many of whom had the bad luck of entering the job market in the midst of the Great Recession a decade ago.

Does this double jeopardy put them in danger of becoming “a lost generation”? Millennials’ predicament prompted the Federal Reserve Bank of St. Louis to ask this question in a new report on their finances.

The COVID-19 recession, the report said, “could upend many of their lives.”

The situation is far from hopeless, of course – they have several decades to make up for this rough patch! There’s no reason they can’t overcome the setbacks with some pluck and determination.

But this will require much more effort to pull off amid the highest unemployment rate since the Great Depression. The Federal Reserve estimates more than 5.5 million Millennials have become unemployed this year – African-Americans bore a disproportionate share of the layoffs.

Young adults were over-represented in the food service, hospitality, and leisure industries slammed by state shutdowns to control the pandemic. And as the recession plays out, Millennials, with their shorter tenures in the labor market, will continue to be vulnerable to layoffs.

Don’t forget about Generation Z either. The recession will be a tough period for its oldest members, who are just graduating from college and haven’t built up their resumés. They may be less appealing job candidates when so many experienced people are eager to work and willing to compromise on pay at a time of sky-high unemployment. …Learn More

Puzzle of heads

Disability Applications Spike in Recession

During the Great Recession, the record numbers of Americans who applied for disability included many people who lost their jobs – and it might happen again as the COVID-19 recession plays out.

A 2018 study estimated that 1 million people applied who would not have done so if there hadn’t been a recession. By October 2009, as the jobless rate was peaking, the additional applicants increased the total applications to the U.S. Social Security Administration by 16.5 percent.

The average age of these applicants was 53, and they tended to have impairments that were musculoskeletal or cognitive in nature. Because these impairments are less severe, they were more likely to be denied benefits, often resulting in an appeal.

In contrast, the people who would’ve sought disability benefits even in a strong economy tended to have serious medical conditions such as Crohn’s or chronic kidney disease that usually qualify them automatically under the disability program’s vetting system.

Ultimately, among the applicants who applied in response to the recession, 42 percent were awarded benefits, according to the study funded by the Social Security Administration and based on an analysis of the agency’s disability records.

When they did receive benefits, they were more often awarded on the basis of having a functional limitation and no transferable skills. As a result, many people who used to work were nevertheless approved for benefits, because their options for transferring their skills from their old job to a new job were limited.

Adding so many people to the disability system carried a steep price in terms of an increase in administrative and benefit costs. But the formerly productive workers also paid a price.

“Once people qualify” for disability benefits, the researchers said, “they rarely re-enter the labor force.” …Learn More