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Great Recession

New RSF Research Examines the Effect of the Recession on State Tax Revenues

February 13, 2014

New research funded by the Russell Sage Foundation sheds important light on the impact of economic downturns on state tax revenues. In 2007, on the eve of the recession, 49 percent of state tax revenues came from consumption taxes, and 32 percent from income taxes. Conventional wisdom has held that since consumption is more likely to remain stable than income during economic recessions, revenue from consumption taxes will similarly be less volatile than revenue from income taxes.

A Broken Public? Americans’ Responses to the Great Recession

November 25, 2013

Clem Brooks and Jeff Manza have published an article—“A Broken Public? Americans’ Responses to the Great Recession”—in the latest issue of the American Sociological Review. The paper, funded by the Russell Sage Foundation’s Great Recession Initiative, examines why support for income transfer policies among the American public declined between 2008 and 2010. Here is the abstract:

Did Americans respond to the recent Great Recession by demanding that government provide policy solutions to rising income insecurity, an expectation of state-of-the-art theorizing on the dynamics of mass opinion? Or did the recession erode support for government activism, in line with alternative scholarship pointing to economic factors having the reverse effect? We find that public support for government social programs declined sharply between 2008 and 2010, yet both fixed-effects and repeated survey analyses suggest economic change had little impact on policy-attitude formation. What accounts for these surprising developments? We consider alternative microfoundations emphasizing the importance of prior beliefs and biases to the formation of policy attitudes. Analyzing the General Social Surveys panel, our results suggest political partisanship has been central. Gallup and Evaluations of Government and Society surveys provide further evidence against the potentially confounding scenario of government overreach, in which federal programs adopted during the recession and the Obama presidency propelled voters away from government. We note implications for theoretical models of opinion formation, as well as directions for partisanship scholarship and interdisciplinary research on the Great Recession.

New Issue of Annals Addresses the Effects of the Great Recession, with Contributions by RSF Grantees

October 30, 2013

The November issue of the Annals of the American Academy of Political and Social Science examines the aftermath of the Great Recession and the ways in which federal and state policies affected the course of the crisis. The issue includes an introduction by Russell Sage Foundation president, Sheldon Danziger, and features contributions from a distinguished group of leading social scientists, including several papers by scholars who contributed research to the Foundation’s Great Recession Initiative.
 
As Danziger outlines in his introduction, the Great Recession—which the National Bureau of Economic Research officially dates as lasting from December 2007 through June 2009—marks the most severe economic downturn since the Great Depression in the 1930s. In looking at the lingering effects on the housing market, unemployment rate, and an ever-widening wealth gap, research from the issue documents the significant social and economic costs of the recession—effects that are likely to persist for at least another decade.
 
The Russell Sage Foundation’s Great Recession Initiative provided support for many of the papers published in this issue of the Annals. Established in 2010, the Great Recession Initiative is a major research project which examines the effects of the Great Recession across a broad swath of America’s social and economic life. Moving beyond a simple description of trends, the Initiative analyzes some unanticipated implications of the downturn and uses a variety of methods and datasets to investigate many of the vexing and often unprecedented policy problems posed by the economic disruption, such as the slow recovery of the labor market and the rightward drift of political sentiment. In collaboration with the Stanford Center on Poverty and Inequality, the Foundation also launched the Recession Trends website as part of the Initiative, a resource dedicated to monitoring the social and economic fallout of the recession.

How the Great Recession Had (At Least Some) Positive Effects on Young People

Jean M. Twenge, San Diego State University
July 11, 2013

With support from our Great Recession initiative, Jean M. Twenge and Patricia Greenfield have examined whether and how young Americans' values and behaviors have changed in response to the recession. In this blog post, Professor Twenge discusses some of the main findings of their research project.

Amid the massive unemployment, widespread foreclosures, and economic pain of the Great Recession is a possible upside: More young people looking outside themselves.

In her previous research and theorizing, my co-author Patricia M. Greenfield of UCLA found that greater economic resources lead to focusing on the individual self, whereas more modest economic means lead to focusing on the community and the society as a whole. Thus, the widespread economic deprivation of the Great Recession was a natural experiment to test this theory. Dr. Greenfield’s graduate student, Heejung Park, took the lead on the project. We drew from a nationally representative sample of about half a million high school seniors – known as Monitoring the Future (MtF) – conducted annually since 1976.

For an initial look, we compared high school students’ values and behaviors in three eras: 1976-1978 (the earliest three years of the MtF survey), 2004-2006 (the recent, pre-recession era), and 2008-2010 (the recession era.) Previous research had shown that concern for others (for example, thinking about social problems and contributing to an international relief fund) and environmental concern (making an effort to save energy and help the environment) declined between the 1970s and the 2000s.

But then, during the recession years, concern for others and environmentalism increased, reversing the previous trend. Although these community-oriented views and behaviors did not return to where they were in the 1970s, just a few years of a severe recession turned around trends that had built for decades. For example, 36% of recession-era students said they were willing to take a bike or mass transit instead of driving, compared to 28% in 2004-2006 and 49% in 1976-78. Sixty-three percent of recession-era youth said they made an effort to turn the heat down at home in order to save energy, compared to 55% before the recession. Thirty percent of recession-era students said they thought about social problems quite often, up from 26% before the recession, and 43% of recession-era students said they thought it was important to “correct social and economic inequalities,” compared to 38% before the recession.

Community Well-Being and the Great Recession

May 15, 2013

Our partner website, Recession Trends, has published a report on how the Great Recession has impacted neighborhoods in America. Here is an excerpt:

Although most research has focused on individual-level outcomes, many of the conventional narratives about the Great Recession are in fact neighborhood-level narratives. In discussing the housing crisis, for example, we don’t just focus on individuals facing foreclosure but on entire neighborhoods that were hard hit by the housing crisis, where one can find house after house on the same streets all in foreclosure. Likewise, the unemployment crisis is often understood to be spatially clustered, with areas that depend disproportionately on construction, manufacturing, and other heavily-affected industries typically presumed to be especially hard hit.

The Great Recession and the Racial Wealth Gap

May 2, 2013

The Urban Institute has released a report that analyzes the Great Recession's impact on the racial wealth gap in America. Here is the abstract:

Income inequality understates the size of the economic gap between whites and minorities in the United States. In 2010, whites on average had two times the income of blacks and Hispanics, but six times the wealth. Analyses of wealth accumulation over the life cycle show that the racial wealth gap grows sharply with age. Wealth isn't just money in the bank, it's insurance against tough times, tuition to get a better education and a better job, savings to retire on, and a springboard into the middle class.

The study shows that the 2007-2009 downturn sharply decreased the wealth holdings of white, black and Hispanic families, with Hispanics experiencing the largest decline:

Like a lot of young families,many Hispanic families bought homes just before the recession. Because they started with higher debt-to-asset values, the sharp decline in housing prices meant an even sharper cut in Hispanics’ wealth. As a result, they were also more likely to end up underwater or with negative home equity. Between 2007 and 2010, Hispanics saw their home equity cut in half, compared with about a quarter for black and white families.

In contrast, black families lost the most in retirement assets, while white families experienced a slight increase. On average, blacks saw their retirement assets fall by 35 percent during the Great Recession,compared with a smaller(but still substantial) decline of 18 percent for Hispanic families.

Wealth Disparities Before and After the Great Recession

April 23, 2013

With the support of the Foundation, Fabian T. Pfeffer, Sheldon Danziger and Robert F. Schoeni have published a working paper entitled, "Wealth Disparities Before and After the Great Recession." Here is the abstract:

The collapse of the labor, housing, and stock markets beginning in 2007 created unprecedented challenges for American families. This study examines disparities in wealth holdings leading up to the Great Recession and during the first years of the recovery. All socioeconomic groups experienced declines in wealth following the recession, with higher wealth families experiencing larger absolute declines. In percentage terms, however, the declines were greater for less-advantaged groups as measured by minority status, education, and pre-recession income and wealth, leading to a substantial rise in wealth inequality in just a few years. Despite large changes in wealth, longitudinal analyses demonstrate little change in mobility in the ranking of particular families in the wealth distribution. Between 2007 and 2011, one fourth of American families lost at least 75 percent of their wealth, and more than half of all families lost at least 25 percent of their wealth. Multivariate longitudinal analyses document that these large relative losses were disproportionally concentrated among lower income, less educated, and minority households.

New Working Paper: The Great Recession and the Social Safety Net

April 8, 2013

Supported by our Great Recession initiative, economist Robert A. Moffitt has released a working paper that investigates the performance of the social safety net during the Great Recession. Here is the abstract:

The social safety net responded in significant and favorable ways during the Great Recession. Aggregate per capita expenditures grew significantly, with particularly strong growth in the SNAP, EITC, UI, and Medicaid programs. Distributionally, the increase in transfers was widely shared across demographic groups, including families with and without children, single parent and two-parent families. Transfers grew as well among families with more employed members and with fewer employed members. However, the increase in transfer amounts was not strongly progressive across income classes within the low-income population, increasingly slightly more for those just below the poverty line and those just above it, compared to those at the bottom of the income distribution. This is mainly the result of the EITC program, which provides greater benefits to those with higher family earnings. The expansions of SNAP and UI benefited those at the bottom of the income distribution to a greater extent.

Stagnant Wealth for Future American Generations

April 2, 2013

With the Foundation's support, the Urban Institute has published a report on the stagnating levels of wealth among younger Americans. Entitled "Lost Generations? Wealth Building Among Young Americans," the study shows that, contrary to historical wealth accumulation patterns, Americans under 40 are not richer than previous cohorts:

As a society gets wealthier, children are typically richer than their parents, and each generation is typically wealthier than the previous one at any given age. For example, near peak wealth accumulation in their mid-50s to mid-60s, those born in 1943–51 are wealthier than those born in 1934–42, who are wealthier than those born in 1925–33. This pattern does not hold for the younger among us. People born starting in 1952 no longer find their wealth above the prior cohort by 2010. Nor is the most recent 1970–78 cohort’s average above prior cohorts. Younger cohorts’ average wealth is simply no longer outpacing older cohorts.

Looking at it another way, 65- to 73-year-olds today have far more wealth than 65- to 73-year-olds did in 1983. More generally, the net worth of those 47 and older is roughly double that of someone the same age 27 years earlier. Today’s adults in their mid-30s or younger—the prime time for career and family formation—benefited little from the doubling of the economy since the early 1980s and have accumulated no more wealth than their counterparts 25 years ago.

In an interview with the New York Times, Signe-Mary McKernan, one of the study's authors, explained the implications of this worrying trend:

Strong and sustained job and wage growth would cure many of the ills facing younger workers, experts said. But their delayed or diminished wealth accumulation might still have a lasting impact on their finances.

“It’s a little bit of a tipping-point moment,” said McKernan. “If we don’t address it today, they might never catch up.”

For instance, the researchers said, if a person delayed the purchase of a home to age 40 instead of buying at age 30, that might result in a $42,000 loss in home equity by the time she reaches 60, given trends in wealth accumulation over the past few decades.

State Pensions After the Financial Crash

March 5, 2013

As part of our Great Recession initiative, Alicia Munnell and her colleagues at the Center for Retirement Research at Boston College have published a new report on state and local pension plans in the aftermath of the 2007 financial crash. Here is the abstract:

State and local governments have been facing an extraordinarily difficult fiscal environment in recent years. One of many challenges has been restoring public pension plans to a sound fiscal footing after the economic crisis of 2007-09. States have begun to respond by enacting a mix of revenue increases and benefit cuts. These changes will, over time, improve the financial outlook for plans and help ease their impact on other budget priorities. This study analyzes the nature and magnitude of these effects by analyzing pension costs before the financial crisis, after the financial crisis, and after reforms for a sample of 32 plans in 15 states. The results show that most of the sample plans responded with significant pension reforms, generally increasing employee contributions and lowering benefits for new employees; the changes were largest for plans with serious underfunding and those with generous benefits; in most cases, reforms fully offset or more than offset the impact of the financial crisis on the sponsors’ annual required contribution; and employer contributions to accruing benefits for new employees were cut in half, sharply lowering compensation for future workers. In short, states have made more changes than commonly thought. Whether these changes stick or not is an open question.

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