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Recessions and people

The effects of the Great Recession in the late 2000s are still evident in labor markets around the world: a significant proportion of workers across Europe are unemployed; global growth remains tentative; and in Europe the “Brexit” decision threatens a prolonged period of economic uncertainty. But what effects do recessions have on economies and people? Increases in unemployment (particularly among youth) and the use of temporary/fixed-term contracts during recessions may lead to persistent reductions in an entire generation’s future earnings. There is also evidence that job insecurity has impaired workers’ health and increased mental distress. What can governments do to counteract these negative trends?

Read more about what governments can do to manage their economies during recessions.

  • Do youths graduating in a recession incur permanent losses?

    Penalties may last ten years or more, especially for high-educated youth and in rigid labor markets

    Bart Cockx, August 2016
    The Great Recession that began in 2008–2009 dramatically increased youth unemployment. But did it have long-lasting, adverse effects on the careers of youths? Are cohorts that graduate during a recession doomed to fall permanently behind those that graduate at other times? Are the impacts different for low- and high-educated individuals? If recessions impose penalties that persist over time, then more government outlays are justified to stabilize economic activity. Scientific evidence from a variety of countries shows that rigid labor markets can reinforce the persistence of these setbacks, which has important policy implications.
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  • The relationship between recessions and health

    Economic recessions seem to reduce overall mortality rates, but increase suicides and mental health problems

    Nick Drydakis, August 2016
    Recessions are complex events that affect personal health and behavior via various potentially opposing mechanisms. While recessions are known to have negative effects on mental health and lead to an increase in suicides, it has been proven that they reduce mortality rates. A general health policy agenda in relation to recessions remains ambiguous due to the lack of consistency between different individual- and country-level approaches. However, aggregate regional patterns provide valuable information, and local social planners could use them to design region-specific policy responses to mitigate the negative health effects cause by recessions.
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  • Effects of entering adulthood during a recession

    Recent declines in youth employment, net worth, and family formation could permanently affect financial well-being

    Lisa Dettling, April 2016
    Current cohorts of young adults entered adulthood during an international labor and housing market crisis of a severity not experienced since the Great Depression. Concerns have arisen over the impacts on young adults’ employment, income, wealth, and living arrangements, and about whether these young adults constitute a “scarred generation” that will suffer permanent contractions in financial well-being. If true, knowing the mechanisms through which young adults’ finances have been affected has important implications for policy measures that could improve the financial well-being of today’s young adults in the present and future.
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  • The effects of recessions on family formation

    Fertility and marriage rates are pro-cyclical in many countries, but the longer-term consequences are inconclusive

    Ayako Kondo, March 2016
    Low fertility rates are a cause of social concern in many developed countries, with growing youth unemployment often being considered a primary cause. However, economic theory is not conclusive about whether deterioration in youth employment prospects actually discourages family formation or for how long the effect might persist. In addition, recessions can affect the divorce rate. Therefore, understanding the relationship between labor market conditions and family formation can provide important insights into the type of policies that would be most effective in promoting fertility.
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  • Health effects of job insecurity

    Job insecurity adversely affects health, but fair workplace practices and employee participation can mitigate the effects

    Francis Green, December 2015
    Research has shown that job insecurity affects both mental and physical health, though the effects are lower when employees are easily re-employable. The detrimental effects of job insecurity can also be partly mitigated by employers allowing greater employee participation in workplace decision-making in order to ensure fair procedures. But as job insecurity is felt by many more people than just the unemployed, the negative health effects during recessions are multiplied and extend through the majority of the population. This reinforces the need for more effective, stabilising macroeconomic policies.
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