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The Social Effects of Hard Times
Anthony HeathUniversities of Manchester and
Oxford
The Hard Times project
• Collaborative project between Manchester (ISC) and Harvard (Bob Putnam)
• Aims – to explore the social effects of recessions in the US and GB
• Separate reports by Yaojun Li, Siobhan McAndrew, Lindsey Macmillan, James Laurence, Chaeyoon Lim, Paul Hepburn, Maria Grasso
• Book in preparation by Tom Clark (Guardian leader writer)
What kinds of effects might hard times have?
The classic literature on the great depression suggests that hard times, associated with mass unemployment, had destructive effects on individuals and communities, leading to apathy, social isolation and lack of civic engagement, undermining social solidarity (NB contrast with effect of war on promoting solidarity)
Marienthal by Marie Jahoda, Paul Lazarsfeld and Hans Zeiselwas the classic study – study of an extreme case of a small Austrian town experiencing mass unemployment at a time when welfare benefits were minimal
But the focus on the damaging effects of unemployment on individuals and communities may remain relevant even if the scale of unemployment or financial loss due to unemployment is not as great now as it was then
Continuities with Marienthal
• Focus remains unemployment and on groups vulnerable to unemployment – we do not expect major effects on people who retain their jobs (though effect of squeeze on living standards is needs to be investigated)
• Focus continues to be on social consequences of hard times – for civic life, ethnic relations, family life and divorce, apathy and (absence of) collective protest, suicide and subjective well‐being
• But a new focus is on the long‐term scarring effects of hard times
What might the mechanisms be?
The classic studies emphasized the psychological mechanisms involved
“Loss of feeling of control has important consequences. It causes the worker to feel a minimum of responsibility for his own fate, for responsibility goes with control” (E W Bakke1933)
“In those early months, a feeling of irrevocability and hopelessness had a much more paralyzing effect than economic deprivation itself” (Jahoda1933)
“psychological deprivation is one of the chief components of poverty … And the terrible thing that is happening to these people is that they feel themselves to be rejects, outcasts … They tend to be hopeless and passive … lonely and isolated. To be poor is not simply to be deprived of the material things of this world, it is to enter a fatal, futile universe, an America within America with a twisted spirit”(Harrington, The Other America, 1963)
Change in real GDP per capita on preceding year, US and UK, 1900‐2009(%)
A brief digression
• Standard British way of defining a recession – two successive quarters of negative growth ‐ is arbitrary and pretty uninformative. US peak‐to‐trough measure seems better
• No particular theoretical or empirical reason to expect changes in growth rates in themselves to have negative social effects (especially if all the benefits of what growth there was previously had gone to the top 1%)
• So focus throughout remains primarily on unemployment and displacement
Effects of unemployment on happiness
Imagine that your household income increased by 50%, and how much happier that would make you. Imagine that this is 100 units. Compared with that: A household income cutof 33%...
… cuts your well‐being by 100
Being unemployed not employed…
… cut by 300
Having an insecure rather than secure job…
… cut by 150
Being divorced rather than married…
… cut by 250
Reporting that most people can be trusted…
… rises by 100
Source: Drawn from Layard, ‘What Would Make a Happier Society?’.
Harmonised measures of the monthly unemployment rate, US and UK
How might GB and US differ?
In many ways GB and US are similar – both are highly unequal societies, with liberal welfare systems and deregulated labour markets, high divorce rates and continuing ethnic divisions
But GB continues to have more generous welfare benefits (albeit eroding over time), which might in turn have crowded out voluntary and community charitable action
GB also has a stronger and more centralized state and the public feel that government should take greater responsibility for people’s problems
US and UK net replacement rates by family type
Source: OECD, Tax‐Benefit Models. NRR after tax and including unemployment benefits, social assistance, family and housing benefits in the sixtieth month of benefit receipt.
0 10 20 30 40 50 60 70 80 90
Single personOne‐earner married coupleTwo‐earner married couple
Lone parentOne‐earner married coupleTwo‐earner married couple
Single personOne‐earner married coupleTwo‐earner married couple
Lone parentOne‐earner married coupleTwo‐earner married couple
Single personOne‐earner married coupleTwo‐earner married couple
Lone parentOne‐earner married coupleTwo‐earner married couple
No
children
2 children
No
children
2 children
No
children
2 children
67% of avg wage
100%
of avg wage15
0% of avg wage
Net replacement rate %
US
UK
OECD Summary Replacement Rate Measure, 1961‐2007 (%)
0
5
10
15
20
25
30
1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005
UK
US
Some expectations
Britain’s (slightly more) generous welfare state might cushion the impact of unemployment, reducing tensions but also encouraging welfare dependency and reducing self‐reliance or a sense of individual responsibility
The US might be expected to be a bit more resilient to the effects of hard times, with individual responsibility and community action playing a large role in responding to the social consequences of the recession
What stories are emerging from the data?
• In all three of the recent major periods of hard times, vulnerable groups such as ethnic minorities, the young, and the poorly educated (those at the back of the job queue) have been hit hardest. Ie we are not ‘all in it together’ – the most vulnerable take the hardest hit
• The size of the hit was pretty similar in both countries – greater in GB in the 1980s and possibly smaller in the 2008‐ period (though perhaps still to early to tell)
Trends in gender inequalities in unemployment (Source: pooled GHS/LFS)
010
20Pe
rcen
t
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012Year
Men Women
Trends in age inequalities: men
010
2030
Per
cent
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012Year
16-24 25-3536-50 50+
Trends in regional inequalities: men
010
20P
erce
nt
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012Year
Centre Inner RingOuter Ring Periphery
Trends in ethnic inequalities: men
010
2030
Per
cent
1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012Year
White BlackP/B Other
Some null findingsThe negative social effects of hard times are rarely visible if we
look at average levels of social engagement etc for the population as a whole. We find NO unambiguous negative effect of hard times in either country on
• Incidence of divorce• Level of ethnic prejudice• Protest (which if anything increases in good times)• Attitudes to redistribution, inequality and government
spendingThis is probably because the majority do not experience the
full impact of hard times – this is borne largely by the vulnerable – and because trends are driven by other secular changes
UK public attitudes to taxation and spending by unemployment rate 1983‐2011
(Source: BSA. Correlation ‐0.17, NS)
0
10
20
30
40
50
60
70
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
%
Increase taxes and spend more Unemployment rate
UK ‘sympathy for the poor’, 1987‐2006(Source: BSA)
0
10
20
30
40
50
60
1987 1989 1994 2000 2006
%
Very unsympatheticslightly unsympatheticslightly sympatheticVery sympathetic
UK public attitudes to unemployment benefit, 1983‐2011 (Source: BSA)
Source: BSA no 29, National Centre for Social Research
0
10
20
30
40
50
60
70
1983
1985
1987
1990
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
%
% agree to low and causehardship
% agree too high anddiscourage work
But hard times do have negative effects on the vulnerable
Individual experience of unemployment is still associated with some of the ‘bads’ identified by Jahoda, Bakke and later writers, eg it increases risk of divorce, reduces subjective well‐being
But in general it is displacement rather than the state of unemployment that does most damage to
• Subjective well‐being (and suicide)• Informal volunteering• Civic participation
Life satisfaction sinks with the economy,but by more for jobless (Source: Eurobarometer)
60%
65%
70%
75%
80%
85%
90%
95%
100%
1‐No
v‐03
1‐Ap
r‐04
1‐Sep‐04
1‐Feb‐05
1‐Jul‐0
5
1‐De
c‐05
1‐May‐06
1‐Oct‐06
1‐Mar‐07
1‐Au
g‐07
1‐Jan‐08
1‐Jun‐08
1‐No
v‐08
1‐Ap
r‐09
1‐Sep‐09
1‐Feb‐10
1‐Jul‐1
0
1‐De
c‐10
% satisfie
d
All
Employed
Unemployed
Life satisfaction by experience of unemployment in the UK (Source: BHPS)
Trends in organized volunteering in the UK (Source: Citizenship Survey)
56
78
Nat
iona
l une
mpl
oym
ent r
ate
3540
4550
% v
olun
teer
ed
2000 2002 2004 2006 2008 2010Year of survey
% volunteered National unemployment rate
Unorganized/Informal volunteering in the UK Source: Citizenship Survey)
56
78
Nat
iona
l une
mpl
oym
ent r
ate
5055
6065
70%
info
rmal
ly v
olun
teer
ed
2000 2002 2004 2006 2008 2010Year
% informally volunteered National unemployment rate
“Participation Careers” of displaced and non‐displaced individuals between the ages of 33 and 42 in the UK
(Source: NCDS)
Yearly average proportion of time spent workless for sons by father’s employment status, UK
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Prop
rtion of time spen
t workless
Year
unemp/pop ratio UK NCDS ‐ employed dads NCDS ‐ workless dads
BCS ‐ employed dads BCS ‐ workless dads
The impact of controlling for family background characteristics on the intergenerational correlation
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
NLSY 79 NCDS BCS NLSY 79 NCDS BCS NLSY 79 NCDS BCS NLSY 79 NCDS BCS
Fathers and sons HOH and sons Fathers and daughters HOH and daughters
Unconditional Conditional
Short and long‐term effects
Effects of hard times on subjective well‐being appear to be fairly temporary but long‐term scarring effects can be found for
• Civic engagement• Intergenerational transmission of worklessness• Political protest potentialThis may well be because the disruption caused by hard times sets people onto different life‐trajectories/life styles
GB/US differences
• Well there aren’t any at all that we can be sure about – at least in terms of effects of hard times (though general levels of divorce etc remain very different in the two countries throughout)
• This casts major doubt on theories that expected Britain’s more generous welfare state – money is not the answer (or the problem)
• Though volunteering does seem to have been harder hit in the UK than US
Some final thoughts
No especial villain of the piece – can’t blame it all on the welfare state or big government
but some potential heroes and villains have failed to come up to scratch
• Not much evidence of US having greater resilience• Flexible labour markets haven’t done much for smoothing the pain or enabling the vulnerable to adapt quicker
• The ‘squeezed middle’ are not as badly affected as the displaced – but maybe their support for helping the vulnerable is being squeezed
And a final question
What policy implications can we draw from this research?
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