Economy March 2010

How a New Jobless Era Will Transform America

The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.
The Social Fabric

No one tries harder than the jobless to find silver linings in this national economic disaster. Many of the people I spoke with for this story said that unemployment, while extremely painful, had improved them in some ways: they’d become less materialistic and more financially prudent; they were using free time to volunteer more, and were enjoying that; they were more empathetic now, they said, and more aware of the struggles of others.

In limited respects, perhaps the recession will leave society better off. At the very least, it’s awoken us from our national fever dream of easy riches and bigger houses, and put a necessary end to an era of reckless personal spending. Perhaps it will leave us humbler, and gentler toward one another, too—at least in the long run. A recent paper by the economists Paola Giuliano and Antonio Spilimbergo shows that generations that endured a recession in early adulthood became more concerned about inequality and more cognizant of the role luck plays in life. And in his book, Children of the Great Depression, Glen Elder wrote that adolescents who experienced hardship in the 1930s became especially adaptable, family-oriented adults; perhaps, as a result of this recession, today’s adolescents will be pampered less and counted on for more, and will grow into adults who feel less entitled than recent generations.

But for the most part, these benefits seem thin, uncertain, and far off. In The Moral Consequences of Economic Growth, the economic historian Benjamin Friedman argues that both inside and outside the U.S., lengthy periods of economic stagnation or decline have almost always left society more mean-spirited and less inclusive, and have usually stopped or reversed the advance of rights and freedoms. A high level of national wealth, Friedman writes, “is no bar to a society’s retreat into rigidity and intolerance once enough of its citizens lose the sense that they are getting ahead.” When material progress falters, Friedman concludes, people become more jealous of their status relative to others. Anti-immigrant sentiment typically increases, as does conflict between races and classes; concern for the poor tends to decline.

Social forces take time to grow strong, and time to dissipate again. Friedman told me that the phenomenon he’s studied “is not about business cycles … It’s not about people comparing where they are now to where they were a year ago.” The relevant comparisons are much broader: What opportunities are available to me, relative to those of my parents? What opportunities do my children have? What is the trajectory of my career?

It’s been only about two years since this most recent recession started, but then again, most people hadn’t been getting ahead for a decade. In a Pew survey in the spring of 2008, more than half of all respondents said that over the past five years, they either hadn’t moved forward in life or had actually fallen backward, the most downbeat assessment that either Pew or Gallup has ever recorded, in nearly a half century of polling. Median household income in 2008 was the lowest since 1997, adjusting for inflation. “On the latest income data,” Friedman said, “we’re 11 years into a period of decline.” By the time we get out of the current downturn, we’ll likely be “up to a decade and a half. And that’s surely enough.”

Income inequality usually falls during a recession, and the economist and happiness expert Andrew Clark says that trend typically provides some emotional salve to the poor and the middle class. (Surveys, lab experiments, and brain readings all show that, for better or worse, schadenfreude is a powerful psychological force: at any fixed level of income, people are happier when the income of others is reduced.) But income inequality hasn’t shrunk in this recession. In 2007–08, the most recent year for which data is available, it widened.

Indeed, this period of economic weakness may reinforce class divides, and decrease opportunities to cross them—especially for young people. The research of Till Von Wachter, the economist at Columbia University, suggests that not all people graduating into a recession see their life chances dimmed: those with degrees from elite universities catch up fairly quickly to where they otherwise would have been if they’d graduated in better times; it’s the masses beneath them that are left behind. Princeton’s 2009 graduating class found more jobs in financial services than in any other industry. According to Princeton’s career-services director, Beverly Hamilton-Chandler, campus visits and hiring by the big investment banks have been down, but that decline has been partly offset by an uptick in recruiting by hedge funds and boutique financial firms.

In the Internet age, it is particularly easy to see the bile that has always lurked within American society. More difficult, in the moment, is discerning precisely how these lean times are affecting society’s character. In many respects, the U.S. was more socially tolerant entering this recession than at any time in its history, and a variety of national polls on social conflict since then have shown mixed results. Signs of looming class warfare or racial conflagration are not much in evidence. But some seeds of discontent are slowly germinating. The town-hall meetings last summer and fall were contentious, often uncivil, and at times given over to inchoate outrage. One National Journal poll in October showed that whites (especially white men) were feeling particularly anxious about their future and alienated by the government. We will have to wait and see exactly how these hard times will reshape our social fabric. But they certainly will reshape it, and all the more so the longer they extend.

A slowly sinking generation; a remorseless assault on the identity of many men; the dissolution of families and the collapse of neighborhoods; a thinning veneer of national amity—the social legacies of the Great Recession are still being written, but their breadth and depth are immense. As problems, they are enormously complex, and their solutions will be equally so.

Of necessity, those solutions must include measures to bolster the economy in the short term, and to clear the way for faster long-term growth; to support the jobless today, and to ensure that we are creating the kinds of jobs (and the kinds of skills within the population) that can allow for a more broadly shared prosperity in the future. A few of the solutions—like more-aggressive support for the unemployed, and employer tax credits or other subsidies to get people back to work faster—are straightforward and obvious, or at least they should be. Many are not.

At the very least, though, we should make the return to a more normal jobs environment an unflagging national priority. The stock market has rallied, the financial system has stabilized, and job losses have slowed; by the time you read this, the unemployment rate might be down a little. Yet the difference between “turning the corner” and a return to any sort of normalcy is vast.

We are in a very deep hole, and we’ve been in it for a relatively long time already. Concerns over deficits are understandable, but in these times, our bias should be toward doing too much rather than doing too little. That implies some small risk to the government’s ability to continue borrowing in the future; and it implies somewhat higher taxes in the future too. But that seems a trade worth making. We are living through a slow-motion social catastrophe, one that could stain our culture and weaken our nation for many, many years to come. We have a civic—and indeed a moral—responsibility to do everything in our power to stop it now, before it gets even worse.

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Don Peck is a deputy managing editor of The Atlantic.

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