Over the last 20 years, immigrant settlement patterns in the U.S. have changed dramatically. In 1990, 84 percent of new immigrants settled in California, Texas, or Illinois; by 2000, that number had dropped to just 53%. Increased immigration, restrictive laws in traditional destinations, and economic pull to new destinations have led to increasing geographic dispersion of new immigrants to parts of the U.S. that previously had little or no immigrant population. At the same time, immigrants, especially Mexican immigrants, have become an increasingly large section of our labor force.
As a result of the Great Recession, state and local budgets are facing severe fiscal pressure. A recent study showed an unprecedented two-year decline in state spending, and the trend does not seem likely to end soon. Tax revenues were down 12 percent in 2009, and only slightly less in 2010. There have already been spending cuts in 46 states, including cuts to health care, education, and services to the poor, elderly, and disabled. At the same time cuts are being made, higher levels of unemployment and underemployment have increased the demand for state transfer programs.
Different tribes of economists tend to view recessions quite differently. Keynesians suggest that recessions result from economy-wide slumps in demand and do not produce a lasting change in industrial structure. An alternate view, often associated with Joseph Schumpeter, is that recessions promote “creative destruction” and help reallocate labor and other resources away from less-productive firms to more-productive competitors. Much is at stake in this debate.
During and since the Great Recession, millions of Americans have relied on government transfer and social insurance programs to make ends meet. In principle, these programs, collectively known as the ‘social safety net,’ should help replace lost income during economic downturns when unemployment is high and wages are low. But due to major restructuring in the 1990s, these programs may no longer function as well as they have in past downturns. Welfare reform, for example, created lifetime caps for receipt for welfare and made support contingent on employment.
According to recent estimates, over 60 percent of U.S. households experienced a decline in wealth during the Great Recession. High rates of unemployment meant that many families could not make mortgage payments and lost their homes, and even those able to keep their homes saw their value plummet. Other families lost assets in the stock market decline, and still others were forced to make early withdrawals from retirement accounts or rely on credit cards to pay day-to-day expenses.
The Great Recession may have had both subtle and profound effects on the organization and patterns of family life in the United States. Unemployment and the loss of family income or wealth can lead to changes in preferences and priorities for families. Previous research has found these disruptions vary by class, the level of unemployment and the gender of the parent. For example, studies have shown that fathers’ job loss has negative implications for family life and child development, but mothers’ job loss does not.
The recession may still hold the greatest consequences for older Americans, who have the least time to recover from its effects before reaching retirement. The housing market remains weak, leaving many who are dependent on the worth of their home with an uncertain asset at best. In addition, workers may have been forced to dip into their retirement savings during a period of unemployment, and employment instability reduces Social Security and pension credits.
Over 90 percent of all funding for primary and secondary public schools in the U.S. comes from state and local government. Therefore, the fiscal crisis now faced by state governments in the wake of the recession, and similar budgetary problems just beginning to surface at the local level, are likely to have profound effects on the nation’s public schools. Authoritative estimates put the aggregate state budget shortfall for the next fiscal year at about $112 billion, or 18 percent of current budgetary levels.