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The financial and psychological pinch of the recession
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Tess Vigeland: So as Mitchell mentioned, the long-term unemployment situation is the really scary part of all this. And it’s a major element in a new book by our next guest. Don Peck is the author of “Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It.” Thanks for joining us.
Don Peck: Thank you Tess.
Vigeland: I’d like you to start by reading a passage in your book, where we meet Gus. And Gus is a former senior financial analyst, who lost his job and he now finds himself working as a cashier at Wal-Mart. Can you start there?
Gus Poulos’s wife was still working and that had been a blessing. But both were feeling
the strain, financial and emotional, of his situation. She commutes about a hundred miles every weekday, which makes for long days. His hours at Wal-mart were on weekends, so he didn’t see her much anymore and didn’t have much of a social life.
Some neighbors were at the Wal-Mart a couple of weeks earlier, he said, and he rang up their purchase. “Maybe they were used to seeing
me in a different setting,” he said — in a suit as he left for work in the morning, or walking the dog in the neighborhood. Or, “Maybe
they were daydreaming.” But they didn’t greet him, and he didn’t say anything. He looked down at his soup, pushing it around the bowl
with his spoon for a few seconds before looking back up at me. “I know they knew me,” he said. “I’ve been in their home.”
Vigeland: Not an uncommon story these days.
Peck: It isn’t. The average duration of unemployment now is over nine months. And millions of people have been unemployed for a year or two years or more. And I think that what Gus’s story shows is not just the financial loss that results from unemployment, but the psychological loss. Happiness researchers have shown that being out of work for six months or more is really the worst thing that can happen to you psychologically. It’s the psychological equivalent of losing a spouse. So today in the U.S. we have millions of people who are in exactly that situation, and millions more with each year that goes by before we find recovery. And one of the big questions for the U.S., I think, is not just how do we recover, but even once we recover, what are we going to do to get these people — people have become chronically unemployed, whose behaviors have changes, whose skill have eroded — what are we going to do to get them back into the workplace?
Vigeland: And I think what Gus really represents as well is folks have had to make such a tough decision to change their dreams, to change what they believed their trajectory would be.
Peck: You know, he told me that one of his very first jobs was a cashier at a supermarket. And here he was again, you know, 40-50 years later. So it certainly wasn’t something that he had ever expected. But now it is what he expects. He’s recognized that he’s probably not going to find something better and this is what he’s going to have to do until his retirement.
Vigeland: You completely recalibrate what your expectation is going to be.
Peck: Absolutely, absolutely. And that process is underway for people who are young, who are just starting out their careers. You know, when I first started the reporting for this book, I really expected that the recession would affect young people least of all. But what academic research shows is just the opposite. The first few years in the workforce is essential to establishing one’s career track. And many young people have been unable to do that. They’re in bad jobs or they’re not working at all. And when that happens, people acquire a stigma that’s hard to shed. People who graduate into recessions not only start behind, research shows that they never catch up.
Vigeland: And I guess one of the questions that you have to ask out of that, is what that means for the future. If you’ve got this younger generation that has experienced this rocking of their financial world and suddenly has this, basically, a different world view, what does that do to them down the line?
Peck: Well, in the Depression, men actually — not women — but men who experienced hardship in their 20s never really did fully recover. Not just financially, but emotionally and psychologically. Even in their 60s, they retained a sense of fatalism, of lack of agency, a sense of helplessness. It stuck with them through their whole career, through booms and busts.
Vigeland: So how does this play out in the long term? What lessons do you think we have learned or not learned from being pinched? What do we need to do?
Peck: You know, what’s interesting, we just saw the raising of the debt ceiling and saw some measures to reduce the deficit. And I understand that sentiment, but interestingly what you see is psychologically, whenever we have a big bust, people become extremely concerned about government spending and government deficits. We do need to address the debt in the long term, but reducing the deficit today is really just about the worst step that we can take. One of the main reasons we’re still in such a weak period is that consumers are extremely indebted and are slowly rebuilding their personal finances. That process is nowhere near complete. And we really need government spending to pick up the slack of the next couple of years, to create demand and to get people back to work.
Vigeland: Don Peck is the author of “Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It.” Thanks so much for coming in.
Peck: Thank you Tess.