Great Recession’s psychological fallout

The economic effects of the Great Recession have been easy to see: a stock market crash, a sickening drop in home values and household wealth, and the throbbing pain of persistent unemployment.

But a deep recession does more than economic damage. When short-term unemployment turns into long-term unemployment, as it has in this recession to a level unseen since the 1930s, rates of depression (the psychiatric kind) increase, anxiety rises and behavior changes in ways both expected and unexpected.

Take birthrates, for example. They have fallen during the last two years, most sharply in states with high unemployment and mortgage foreclosure rates, like California and Arizona. That’s not surprising; couples who are worried about keeping their jobs and their houses are likely to hesitate before expanding their families.

But here’s something more surprising: As the recession deepens, participation in civic activities — community organizations, volunteer groups, even church attendance and social clubs — is likely to drop. Sociologists once assumed that during hard times people would naturally band together, if only to protest their plight or to give each other solace. It turns out that the opposite is true: Economic distress causes people to withdraw.


“Rather than get together and hold community meetings or march in protest, the effect of unemployment in the Great Depression was to cause people to hunker down,” said Robert D. Putnam, the Harvard sociologist whose book, “Bowling Alone,” examines Americans’ civic engagement in the 20th century. “We found exactly the same thing in the recessions of the 1970s and 1980s … and I’m pretty confident we’ll see the same pattern in this recession too.”

Though a few political movements, such as the “tea party,” may have been invigorated by the downturn, more broad-based civic organizations such as the League of Women Voters have seen their membership drop.

Why does civic participation drop during hard times? Jennie E. Brand of UCLA studied the ripple effect of unemployment among families in Wisconsin, and she says there are several reasons: People who lose their jobs feel depressed; they sometimes feel ashamed of their financial troubles; they lose some of their trust in society; and some of them move to new communities where they have no ties.

Brand’s most important finding is that the social and psychological effects of unemployment can be lifelong, even if the economic distress is only transient.

“People who lost their jobs, even once, were roughly 30% less likely to participate in community activities, and that lasted through their lives,” she said of her Wisconsin study. “Twenty years later, they were still less likely to participate.”

A study just released by the Pew Research Center suggests that if this recession has a similar effect, the impact on American society could be deep and long.

In a Pew poll, more than half of all adults in the labor force said they have lost a job or suffered a reduction in income because of the recession. Six in 10 said they have cut back on their spending. Almost two-thirds said they don’t expect their household finances to recover for at least three years.

That “new frugality” can be seen in economic statistics. Sales of luxury goods have dropped; sales at Wal-Mart have grown. The average size of new homes built dropped 6% between 2007 and 2009.

In the Pew poll, fewer than half the respondents said they expect their children to live better than they do — a significant expression of long-term pessimism. (A decade ago, a solid majority said they expected that their children would live better.)

But the poll also suggests that some people are more pessimistic than others. Younger respondents appeared more confident in the future than their parents. Blacks and Latinos were more optimistic than whites, even though they suffered more from unemployment and loss of household wealth (on a percentage basis). The most pessimistic group was middle-aged, middle-class whites — who presumably lost the most wealth in home values and retirement funds and have the least time to make it up.

The contest between pessimism and optimism has real effects on the way we live. Pessimists don’t stimulate the economy by buying new houses or big-ticket consumer goods. Pessimists don’t invest money in the stock market. Pessimists, as Putnam and Brand both discovered, don’t participate in community-building organizations. Pessimists don’t even have babies.

And pessimists vote differently from optimists. In the Pew poll, 55% of Democrats said they expect that their children will enjoy a higher standard of living; only 37% of Republicans shared that faith.

Democrats have consoled themselves with the prospect that the economy will recover smartly during the next two years and that, even if they lose seats in Congress in November, a subsequent recovery will make it easy for President Obama to win reelection in 2012, just as Ronald Reagan won after a deep recession in 1984.

But will the recovery be enough to reduce voters’ pervasive pessimism?

The enduring impact of a recession depends on how deep and long it is. “What made the Great Depression so great?” asked William A. Galston of the Brookings Institution. “Depth and duration. Garden-variety recessions have had no permanent effect on public consciousness, but the Great Depression shaped a generation.”

This recession has already been more than garden variety. The longer it lasts, the deeper and broader the scars will be.