An Unequal-Opportunity Recession
There are long-lasting, durable consequences of entering the world of work in bad economic times. For young people joining the labor force in the midst of the Great Recession, short-term well-being may not be the only thing at stake. Their lives will likely be scarred in important, negative ways for years to come.
We know that those who enter the labor market in times of economic decline are seriously affected. For example, economists have studied what happened to the cohort who tried to find a toehold in the market of the early 1980s, the last time unemployment exceeded 10 percent. Analyzing a rich longitudinal data set, Lisa Kahn at the Yale School of Management recently examined the outcomes for white male college graduates who entered the labor market before, during and after the recession of the early 1980s. She finds that even fifteen years afterward, the workers who had entered the labor market during the recession continued to face significantly lower wages.
Scarring is produced by biographies that are deemed deviant or suspect: long periods of unemployment, jobs with fewer responsibilities than one's education should lead to and the like. We should all remember how hard it is to find work right now and cut future applicants some slack. Sadly, that is not what happens in the real world. Employers have choices in all but the tightest of labor markets, and they don't willingly select people who look like oddballs, no matter who was (or was not) at fault.
The Great Recession is reminding us of how unequal the distribution of damage can be. While virtually everyone other than the top 1 percent is suffering in some fashion, the depth of the fallout varies a great deal by race, education and gender.
African-Americans have been hit hardest by unemployment, with the current jobless rate, 15.5 percent, nearly double that of whites and running almost six points north of the total unemployment rate. These figures are affected by many trends, including racial preferences in the labor market, but one of the key reasons for the disparity lies in educational attainment. Low-skilled workers, defined by high school qualifications or less, are disproportionately members of minority groups, and collectively they have been hammered in this labor market.
In the Great Recession, men have suffered more than women in the employment sweepstakes, leading some to deem this downturn the "mancession." The gender disparity is not unprecedented; during the 1930s, women had an easier time finding and keeping jobs than the men in their families because they were cheaper to employ and the occupations they typically filled did not feel the impact of the Depression in the same way that men's jobs did. Construction, steel, heavy manufacturing—those were industries that men flocked to, and they were all but destroyed in the early 1930s. We are seeing a similar pattern of male disadvantage emerge now, exacerbated by the relative success of women in higher education, which is translating into some degree of protection in this storm that men are increasingly going without.
Most worrying for the long-term health of the American worker is the experience of young people; unemployment for people between 16 and 24 is roughly double that of all workers. The pages of our daily newspapers are filled with the forlorn faces of freshly minted college graduates, burdened by debt, who cannot find work. Their counterparts who have less education are far more desperate. But, any way we cut the deck, it is the new entrant to the job market who is really out of luck in the Great Recession.
Young black men are the most disadvantaged of all in the job tournament, but young workers across the board are in terrible shape in this labor market. And if previous recessions are an indication of what's to come, we can expect these stumbling entries into the world of work to translate into long-term disadvantages, relative to those who come of age in a climate of opportunity.
Underemployment is almost as serious as joblessness for millions of Americans. As of March, nearly 6 percent of the workforce was working part time on an involuntary basis, and the lion's share of these workers are at the bottom of the class structure. Andrew Sum and his colleagues at Northeastern University's Center for Labor Market Studies have found that between October and December of last year, more than 20 percent of workers in the lowest tenth of household income were employed part time against their will; only 1.6 percent of the workers in the top tenth faced this problem.
Even when workers find new jobs, a soft labor market leaves them vulnerable to downward mobility. The Bureau of Labor Statistics tracks "displaced workers," meaning those who have lost or left their jobs because their employers abolished their positions, an insufficient amount of work was available or their plant or company shut down. Between 2005 and 2007, 8.3 million workers were deemed officially displaced. Among those who had had full-time jobs for at least three years and who found new full-time positions by January 2008, nearly half were earning less than they had in their previous job, and a quarter of them suffered losses in excess of 20 percent.
The displaced are at high risk for long-term unemployment, a major source of scarring, and here race enters the equation in pernicious ways. Of the workers who had held their job for at least three years before being displaced, 17 percent of white and Hispanic workers were still unemployed in 2008. But more than 28 percent of the African-Americans were unemployed in the same period.
The social problems that poverty experts worry about—teen pregnancy, high unemployment rates among young black men, low educational attainment—are all very sensitive to the economic condition of the country. Most of these indicators fell sharply or stabilized during the prosperous period of the late 1990s. That golden age is long past, but it reminds us that the dismal situation at play in the current economic moment is hardly inevitable. Good times—labor shortages, high growth, low inflation—create a playing field that, if not level, is at least a fine place for most young workers to start. Sadly, this may be the period we come to remember as the start of a culture of hardship and poor prospects for the nation's youth, who have no choice but to start their careers in a weak labor market.
Also in This Forum
Robert Reich, "Unjust Spoils"
Dean Baker, "The Right Prescription for an Ailing Economy"
Orlando Patterson, "For African-Americans, A Virtual Depression—Why?"
Jeff Madrick, "American Incomes: Soaring or Static"
Matt Yglesias, "A Great Time to Be Alive?"