Abstract

Although ten years have passed since the Great Recession has begun, and experts have declared that the American economy has added jobs that were lost, studies have shown that groups of Americans are not benefitting from this recovery. The Organization for Economic Cooperation and Development (OECD) acknowledge that the difficulties are not over, and that some changes are permanent. The American middle class continues to struggle. Black and Hispanic Americans have experienced loss in wealth, creating a greater gap between the aforementioned groups and white Americans. Furthermore, recovery has benefitted certain cities over others, and poverty rate has increased in distressed communities.

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The Organization for Economic Cooperation and Development (OECD) has acknowledged the Great Recession of 2008 permanently lowered incomes for many worldwide. [1] Although the largest economy in the world is said to have bounced back from this recession, there are certain groups that have not benefited from recent US economic growth. Middle-class, black, and Hispanic Americans are particularly afflicted from a recovery that has been slower than previous recessions. Americans living in what are called distressed communities are facing higher levels of poverty and lower education rates. These groups, and indeed Americans as a whole, are facing job insecurity and stagnant wages after a recession that experts did not predict and still do not understand.

The State of Working America found that in between the years 2008 and 2009, 8.4 million jobs were lost in the US labour market, or, 6.1% of all employment.[2] Now, the American employment rate is nearing full employment and has been deemed “healthy” by the Federal Reserve. [3] However, the growth experienced since has not been enough to put certain Americans back to work. Close to one million Americans between the ages of 25 and 54 are either no longer working or have given up the search for employment, and as such, are not benefitting from the jobs being added to the economy.[4] In October 2010, the economy had 5.45% fewer jobs than before the recession took place.[5] These statistics are in stark comparison to recessions that took place in the early 1990s, where it took the economy roughly 10 months to add the same number of jobs it had lost.

Black and Hispanic workers are struggling with higher unemployment rates post-recession than white workers. According to the Pew Institute, the black unemployment rate has increased from 8.6% to 15.6%, the Hispanic unemployment rate increased from 5.9% to 12.6%, while the white unemployment rate increased from 3.7% to 8%. [6] In general, black workers face an unemployment rate that is roughly twice as high as the white employment rate, whether or not the economy is in recession.[7] It should be noted that “marginally attached” workers are not even counted in unemployment rates, i.e., workers who have become so discouraged that they have given up looking for work.

The recession has further increased the wealth gap between black, Hispanic Americans and white Americans, to the largest it has been in the last twenty-five years. [8] Black Americans, Hispanic Americans have faced great setbacks in their wealth. In particular, Hispanic and Black Americans saw a loss of 51% and 23% of their home equity, while white Americans experienced a home equity loss of 18%.[9] Black and Hispanic Americans are more likely than white Americans to have their wealth invested in their homes, than other assets. Hispanic Americans also had a large concentration of housing in California, where the housing market was particularly affected by the 2008 crisis.[10] It should be noted that while Asian Americans had the highest household wealth amongst all ethnic groups prior to the recession, they also faced the second largest setback in their median household wealth.[11]

The American middle class, in general, has also been hurt. A 2015 working paper by the National Bureau of Economic Research has shown that the majority of jobs lost in the recession were those categorized as “middle-skill”, such as manufacturing, mail delivery, and administration work, effectively pushing the middle-class out of the labour market.[12] This is despite the growth that the economy has experienced since the recession. These “middle skill” jobs require more education than a high school diploma, but not more than a college (university) degree. This loss in middle-skill jobs disproportionately affects the middle class and lower-income workers. In general, middle-skill jobs have been decreasing since before the 2008 recession. The decrease in this type of work available also appears to explain the drop in male workforce participation rate in the last several decades.[13]

Change in skill level demanded by employers can be explained by several reasons. One could be that the companies who did survive post-recession, were forced to make technical changes, either by replacing labour filled by middle-skilled workers, or requiring workers to possess different skill sets.[14] Of course, in the short term, workers cannot adjust quickly to this change in skill demand, and find themselves without job opportunities. In general, some workers cannot adjust to changes in the skills demanded, even in the long term. Even if they do adjust, they can find themselves still undesirable by employers. Another reason may be that some companies used the recession as an excuse to remove jobs that could be more cheaply performed with technology. Responses vary in their approach to the problem of changing skills demanded by the market. Some scholars maintain that workers, especially younger ones, who find themselves lacking the right skills, must look for training opportunities to make up this gap. In doing so, they can find work. However, it is more difficult for older workers to do this, because employers are wary to invest in what they consider to be an ageing employee who will soon leave the workforce. This puts older workers in a difficult situation, especially those who have lost their jobs and cannot afford to not work. According to a Pew Institute study, 63% of workers aged 50 to 61 may have to postpone retirement.[15]

Recovery has favoured particular American ZIP codes, while other areas, termed distressed communities, are still suffering. Despite the jobs that have been added to the economy in the last seven years, only one in four new jobs are in these economically lagging ZIP codes.[16] Some of these distressed communities include Cleveland, Ohio, Newark, New Jersey, and Detroit, Michigan. Furthermore, the poverty rate in these distressed communities is higher than the national average. Adults in these communities have double the chances of being out of work than adults in wealthier zip codes, according to a report produced by the Economic Innovation Group in the US. [17] The difference between the “have-nots” and the “haves” is so large, that, the co-founder of the Economic Innovation Group, John Littieri, claims comparing the two groups of ZIP codes is like looking at two different countries. [18]

While the US has steadily added jobs to their economy, special attention must be paid to those communities not experiencing benefits. In particular, these include distressed communities, black and Hispanic communities, and middle-class Americans. The young and the elderly are also two groups that are struggling to be competitive in the job market without the right skills demanded by employers. As always, experiences are unique within groups, to be sure, but policies cannot be designed without understanding the unique circumstances each group may face. This recession was clearly a lesson for all economists and policy-makers worldwide, and serious considerations need to be taken in order to better prepare for the next recession, which will be on its way if and when global growth slows post-recovery.

Farah KAMMOURIEH

 

References

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