The social changes brought by recessions

Here is my column on the social changes occasioned by recessions.  Of course recessions are mostly bad and this one is no exception.  Still, one underappreciated fact is that health outcomes appear to improve in recessions, not get worse (even though health care access and coverage decline):

Sure, it's stressful to miss a paycheck, but eliminating the stresses of a job may have some beneficial effects. Perhaps more
important, people may take fewer car trips, thus lowering the risk of
accidents, and spend less on alcohol and tobacco. They also have more
time for exercise and sleep, and tend to choose home cooking over fast
food.  In a 2003 paper, “Healthy Living in Hard Times,” Christopher J. Ruhm, an economist at the University of North Carolina
at Greensboro, found that the death rate falls as unemployment rises.
In the United States, he found, a 1 percent increase in the
unemployment rate, on average, decreases the death rate by 0.5 percent.

In this recession the consumption of the wealthy is taking a bigger hit than is usually the case in a downturn:

In any recession, the poor suffer the most pain. But in cultural
influence, it may well be the rich who lose the most in the current
crisis. This downturn is bringing a larger-than-usual decline in
consumption by the wealthy.

The shift has been documented by Jonathan A. Parker and Annette Vissing-Jorgenson, finance professors at Northwestern University, in their recent paper,
“Who Bears Aggregate Fluctuations and How? Estimates and Implications
for Consumption Inequality.” Of course, people who held much wealth in
real estate or stocks
have taken heavy losses. But most important, the paper says, the labor
incomes of high earners have declined more than in past recessions, as
seen in the financial sector.

Popular culture’s catering to the
wealthy may also decline in this downturn. We can expect a shift away
from the lionizing of fancy restaurants, for example, and toward more
use of public libraries. Such changes tend to occur in downturns, but
this time they may be especially pronounced.


A recession can also put those important things into focus, like family and friends. When you spend more time with family and less time stressing over work, your health is likely to improve. Many of the expensive things you can do with family often have the least amount of interaction, consider a board game vs. a movie.

Hiking in the Hollywood Hills of Los Angeles was never fashionable until the 1992 recession, when suddenly hiking became In in LA, and has maintained a lot of its popularity ever since.

Well, maybe. Another explanation is that in times of high unemployment, people defer non-acute medical care, which while increasing morbidity, in the short run decreases mortality--going to the hospital is dangerous. You may have seen the documented declines in mortality during medical strikes/slowdowns.

Certainly it is likely that more than one thing is going on.

Recession in developing countries like India is mild and yet to be felt fully.However some different social impacts I observe from my state which is a consumerist state.Alcoholism increased since unemployed,without having anything to do,turned to heavy drinking.Obesity increses due to the switch back to well prepared home-made food rather than adulterated hotel food.People resort to extended sleeping and fewer exercises too.

To give the obligatory Austrian plug, let's not forget that in terms of sustainable resource allocation, the boom period is bad, while the recession is good. The moment resources stopped flowing into housing, that's when the recovery started.

Let's see, if we want to lower the death rate by 2 percent, we should raise marginal tax rates enough to get a 4 percent rise in the unemployment rate. Maybe economists have been focusing on this economic growth and improved living standards in the wrong way. Perhaps, we should look to sub-Saharan Africa economies in an entirely different light--low rates of obesity, little job stress, and relatively few wealthy to suffer through income losses.

Much of the consumption, and celebration of consumption in popular culture, was not done by or aimed at the wealthy per se. It was aimed at people living beyond their means, racking up debts, aspiring to merely look and feel wealthy.

Recessions are often an opportunity for the rich to get richer. They have cash in reserve and enough of a financial cushion to have a patient long-term perspective.

In an economic crisis, valuable assets pass from faltering hands into stronger hands. Think Warren Buffett, not some sushi-eating metrosexual blingtard.

From what I have read, it seems that in recessions violent crime goes down because people drink less. People die less because they drink less and drive less. Recessions also teach people to save and to invest more carefully.

So recessions are in net bad because people are poorer and worse than that is that the losses are concentrated on those that lose their jobs (in fact that those with safe jobs and few investments improve end up better off) but some effects are positive.

Comments for this post are closed