How the Great Recession changed American workers

The financial crisis of 2008 was the biggest economic meltdown in the U.S. since the Great Depression, lasting a little more than 18 months. From December 2007 to June 2009, the GDP contracted sharply, and then the economy began growing again.

Experts at the Wharton School argue that the financial world was completely altered.

“One in five employees lost their jobs at the beginning of the Great Recession. Many of those people never recovered; they never got real work again,” says Wharton management professor Peter Cappelli, director of the school’s Center for Human Resources. “The spike in disability claims was in part caused by the difficulty laid-off people had in securing any jobs. A generation of young people entering the job market had their careers disrupted by it. The fact that this age group continues to delay buying houses, having children, and other markers of stable, adult life is largely attributed to this.”

The Great Recession accelerated a number of trends and arrested the development of others. “The fact that so many people took temporary jobs, often as contractors, was pushed along by the downturn, in part because employers were so unsure about the future but also because workers had no choice but to take them,” says Cappelli. “Good employee-management practices took a big step back during this period because employees were willing to put up with anything as long as they had a job.”

To economic analysts, it’s still unclear whether the Federal Reserve Board’s decision to drop the interest rate in November 2018 was a direct cause of the recession. Regardless of the causation, workers are currently facing the reality of delayed retirement, or retiring while still in debt. Home ownership rates are decreasing, and there is persistently low wage growth. 

What the Great Recession did leave was a residue that Bidwell characterizes as an increased appreciation for the vulnerability of the economy.

Read more at Knowledge@Wharton.