The Great Recession Job losses and Consequences Presentation to

IRLE Colloquium Series

UC, Berkeley

September 27, 2010

By

Sylvia A. Allegretto, Ph.D. Economist Institute for Research on Labor and Employment University of California, Berkeley

An overview of the ‘Great Recession’

Job losses Jobless recovery Consequences Unemployment Poverty Inequality Health care

What happened & what should not be done

Allegretto IRLE 2010

-9%

-7%

-5%

-3%

-1%

1%

3%

5%

0 5 10 15 20 25 30 35 40 45 50 55 60 65

Job losses in context

Average for pre-1990 recessions

1990 2001

Current Recession/Recovery

CA 1990

Current CA

CA 2001

Allegretto IRLE 2010

Recent improvements in jobs

-6.1%

-9.2%

-7.3%

-10.8%

-5.5%

-8.9%

-6.7%

-10.4%-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

United States California United States California

TOTAL PRIVATE

Job growth since the onset of the recession

-5.5%-6.7%

0.3%

6.0%

0.4%

-0.8%

-8.9%-10.2%

-2.2%

1.9%

-0.6%

-3.2%

-15%

-10%

-5%

0%

5%

10%

Total (100 %)

Total Private (83.8 %)

Government (17.8 %)

Federal (1.8 %)

State (3.5 %)

Local (12.4 %)

United StatesCalifornia

Source: US Census data. Allegretto IRLE 2010

California: A decade of job loss and historically high unemployment rates

12,000

12,500

13,000

13,500

14,000

14,500

15,000

15,500

Jan-9

8Ju

l-98

Jan-9

9Ju

l-99

Jan-0

0Ju

l-00

Jan-0

1Ju

l-01

Jan-0

2Ju

l-02

Jan-0

3Ju

l-03

Jan-0

4Ju

l-04

Jan-0

5Ju

l-05

Jan-0

6Ju

l-06

Jan-0

7Ju

l-07

Jan-0

8Ju

l-08

Jan-0

9Ju

l-09

Jan-1

0Ju

l-10

0%

2%

4%

6%

8%

10%

12%

14%

California unemployment rate (right axis)

Job growth inCalifornia (left axis)

Allegretto IRLE 2010

Let’s talk deficits…

Jobs required to keep up with growing labor force

-11.6 million

Start of Recession

-5.5%, -7.6 million jobs

130m

July 2003

0%

2%

4%

6%

8%

10%

12%

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

CaliforniaUnited States

Unemployment woes

Allegretto IRLE 2010

Record-breaking long-term unemployment

18.4% 17.2% 18.6%

28.5%

45.7%

18.6% 17.2%

21.7%

31.8%

49.1%

0%

10%

20%

30%

40%

50%

60%

2006 2007 2008 2009 2010

Shar

e of

long

-term

une

mpl

oyed

.

United States California

Source: Allegretto’s calculations of BLS Current Population Survey, data not seasonally adjusted and are for the second quarter of every year.

Underutilized labor

8.1%9.5%

16.0% 16.5%

9.6%

12.3%

20.6%21.5%

0%

5%

10%

15%

20%

25%

2007 2008 2009 2010

Und

erem

ploy

men

t rat

e

United States California

Source: Author’s calculations of BLS Current Population Survey U6 rate, data not seasonally adjusted and for the second quarter of every year.

Poverty rates on the rise

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

1996

1997

1998

1999

2000 20

0120

0220

0320

0420

0520

0620

0720

0820

09

% P

erso

ns B

elow

Pov

erty

Lev

el

California

United States

14.3%

15.3%

Source: US Census data. Allegretto IRLE 2010

Poverty rates by race and ethnicity, 2007 – 2009 (2009 rates in parenthesis)

0.4

0.2

1.71.6

0.8

1.1

2.1

0.7

0.0

0.5

1.0

1.5

2.0

2.5

White, non-Hispanic(9.4%)

Black (25.8%) Hispanic (25.3%) Asian (12.5%)

2007 - 08 2008 - 09

Poverty rates for retirees declines while those for 18-64 year olds are highest in 50 years

0%

5%

10%

15%

20%

25%

30%

Age 65+

Age 18-64

Source: Elise Gould Economic Policy Institute

12.9%

8.9%

Income for the typical household is on the decline

$48,279

$49,777

$51,278

$55,132

$58,850

$56,134

$40,000

$42,000

$44,000

$46,000

$48,000

$50,000

$52,000

$54,000

$56,000

$58,000

$60,000

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

California

United States

Source: US Census data. Allegretto 2010

Working-age HH income down significantly

$52,388

$49,777$45,452

$55,821

$60,746

$53,307

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

$65,000

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Working-age households

All households

Source: Economic Policy Institute analysis of US Census data, 2009 dollars

Worker’s are more productive but incomes have not keep pace

50

100

150

200

250

300

350

400

450

Productivity

Median family income

Source: EPI State of Working America. Allegretto IRLE 2010

The economic pie, 2009

Source: US Census Bureau 2009 Table A-2 household income

4th quintile

2nd

Highest quintile 50.3%

3.4% 8.6%

14.7%

23.3%

Quintile Average HH Income

Lowest $10,804

Second $26,451

Third $43,500

Fourth $63,171

Highest $111,806

Allegretto IRLE 2010

Change in real income, by income percentile

-1.7%

-3.6% -3.5%

-2.1%

-0.9%-0.7%

0.1%0.4%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

20th percentile 50th percentile 80th percentile 95th percentile

2007 - 08 2008 - 09

Source: Economic Policy Institute, 2009 Allegretto IRLE 2010

Divvying up the growing pie

Bottom 90 percent

Next 5 percent

Next 4 percent

Rest of top 1 percent

Top 0.1 percent

15.9%

9.4%

19.1%

21.1%

34.5%

Top 1% 55.6%

Source: EPI analysis of Piketty and Saez 2009. Allegretto IRLE 2010

Trickle down economics seem to defy gravity

50

100

150

200

250

300

1973 1977 1981 1985 1989 1993 1997 2001 2005

1947

=10

0

Upper 1%

95-99%

90-95% Bottom 90%

Source: Social security data analysis of Kopczuk, Saez, and Song (2007)

The growing wedge of wage inequality

80

90

100

110

120

130

140

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Inde

x (1

973=

100)

90th

80th

20th

95th

50th 10th

Source: The State of Working America-EPI

Men

Allegretto IRLE 2010

Women gain ground as inequality persists

90

100

110

120

130

140

150

160

170

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Inde

x (1

973=

100)

90th

80th

20th

95th

50th

10th

Source: The State of Working America-EPI Allegretto IRLE 2010

Big decline in job-based health coverage

68.3%

67.0%

65.7%

64.4%63.9%

63.5%62.9% 62.9%

61.9%

58.9%

52.3%

56.2%57.2%

55.5%56.0%56.1%

58.2%

60.1%

58.7%

60.7%

50%

52%

54%

56%

58%

60%

62%

64%

66%

68%

70%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% p

eopl

e w

ith jo

b-ba

sed

heal

th in

s

US CA

Source: California Budget Project, 2010. Allegretto IRLE 2010

How Californian’s get their health care

56.2%

7.7%

20.1% 20.6%

52.3%

6.8%

22.6% 22.1%

0%

10%

20%

30%

40%

50%

60%

Employer-sponsored Non-group Public Uninsured

2008 2009

Source: US Census data. Allegretto IRLE 2010

Now is not the time to abandon this tenuous recovery

We must first get people back to work!

The Great Recession was 30 years in the making

Promotion of free market ideals De- or ineffective regulation Shrinking social programs Anti-labor sentiment & regulation Erosion of workers rights and the NLRA Shifting the tax, health care & retirement burden

to workers YoYo economics, rise & fall on merit or luck Changing institutions—non-regulated (shadow

banks, subprime lending, derivatives, exotic mortgages, etc.)

Spending increases provide greater bang-for-the buck over tax cuts…

Biggest bang-for-the-buck $1.00 more spent leads to at least a $1.40 increase in GDP

Temporary increase in food stamps, unemployment insurance, work-share programs

Increased infrastructure spending General aid to state governments

Worst value for the dollar $1.00 in tax cuts leads to less than $1.00 in GDP growth

Making the Bush tax-cuts permanent Extending the AMT patch Cutting the corporate tax rate

Middle ground

Job tax credits Payroll tax holidays Refundable tax rebates (lump-sum)