Recession

01.12.12

The Recession’s Permanent Victims

How many Americans will never recover from the Great Recession?
A homeless man reads at his makeshift tent beside a street in Las Vegas on November 13, 2011. The Labor Department said the economy managed to break away from three months of 9.1 percent unemployment in October, but that jobs are being generated at a pace that offers little succor to the 14 million Americans looking for work. US officials have launched an independent review process in which individuals can challenge foreclosures carried out by 14 major lenders in the wake of the 2008 financial crisis. Independent consultants would assess if borrowers lost out financially "through errors, misrepresentations or other deficiencies in foreclosure practices," the Office of the Comptroller of the Currency said.
Jewel Samad / AFP / Getty Images

America will recover from today’s slump. But not all Americans.

The Pew survey collects sobering data on what happens to Americans who experience sharp income losses. Most eventually struggle back to their feet. But a substantial minority never do:

Half of adults who experienced a one-year income loss of more than 25 percent recovered within four years, a recovery rate that was stable over time.

One-third, however, failed to recover even after 10 years

It won’t surprise you to hear that recovery is not random. The college-educated and the married were the most likely to recover; the non-college and unmarried were least likely to recover.

Here’s the good news: from 1967 to 2004, more Americans experienced substantial gains (ie, more than 5%) than substantial losses (also of more than 5%).

Here’s news that is both good and surprising: the ratio of winners-to-losers didn’t change much between 1967 and 2004.

And here’s the most surprising part of all. In the early 1970s, a marital split was much more likely to be disastrous for the woman than the man: 63% of women but only 30% of men suffered a sharp income drop after divorce. By the mid-2000s, divorce had become somewhat less disastrous for women and considerably more disastrous for men, converging on an equally disastrous likelihood of loss of 47% for men and 49% for women.

Of course, it’s very possible—maybe likely—that all this information has been rendered purely historical by the terrible catastrophe of the Great Recession.