Recession brought equal-opportunity pain but hit high-poverty neighborhoods hardest, says study
This article first appeared in the St. Louis Beacon, Nov. 14, 2012 - While the Great Recession touched American families on every rung of the economic ladder, it piled on the pain in high-poverty neighborhoods, which had already been experiencing hard times, according to a new report from Pew’s Economic Mobility Project.
The report, released today, says that about 10 percent of the heads of all U.S. households experienced a wage loss of more than 20 percent and nearly one-fourth of all families lost more than 20 percent of their incomes -- a percentage that held true in both low- and high-poverty neighborhoods. But the impact of those losses was harsher for families in high-poverty neighborhoods because they started with less wealth.
According to the study, median family wealth in the U.S. dropped by nearly 40 percent between 2007 and 2010. About 62 percent of families in low-poverty areas and 50 percent of families in high-poverty neighborhoods lost wealth during the recession. Families in high-poverty neighborhoods experienced smaller absolute dollar losses in wealth but higher percentage losses than those in low-poverty communities: a 91 percent decline in overall wealth for families in high-poverty neighborhoods compared to a 47 percent decline for families in low-poverty neighborhoods.
High-poverty neighborhoods are defined as those with 30 percent or more of the population living in poverty; low-poverty neighborhoods are those with less than 10 percent in poverty. (The federal poverty level is $23,050 for a family of four.)
The report concludes that although the recession took an equal shot at all American communities, low-income neighborhoods were already at risk: “While residents of high-poverty neighborhoods did not experience different rates of change in employment, wages or home equity losses than residents of low-poverty neighborhoods between 2007 and 2009, their position prior to the onset of the Great Recession exposed them to much higher absolute levels of economic insecurity. Further, the recession severely diminished their wealth holdings and put them at an increased risk of foreclosure.”
Here are some other key findings from ''Weathering the Great Recession: Did High-Poverty Neighborhoods Fare Worse?”:
- The absolute dollar loss in median wealth for families in low-poverty areas during the recession was $135,281 compared to $29,778 in high-poverty neighborhoods.
- Families in low-poverty neighborhoods were the most likely to own their own homes and the most likely to have lost home equity during the recession. Losses in home equity ranged from declines of 26 percent in low-poverty neighborhoods to 34 percent in high-poverty neighborhoods but were not statistically different by neighborhood type. A greater percentage of homeowners in low-poverty neighborhoods were likely to experience a loss in home equity (70 percent) compared to 56 percent in high-poverty neighborhoods. However, families in high-poverty neighborhoods were more likely to be behind on mortgage payments.
- Those in high-poverty neighborhoods were the least likely to be employed and most likely to be unemployed during the recession. About half (53 percent) of people in high-poverty neighborhoods were employed in both 2007 and 2009, compared to the 7-in-10 ratio found in low-poverty neighborhoods.
- Women in high-poverty neighborhoods were twice as likely to be unemployed in both 2007 and 2009, as were 20 percent of men in high-poverty areas (compared to an 8 percent jobless rate among men in low-poverty neighborhoods).
- The likelihood of losing a job during the recession was the same in all neighborhoods except for individuals ages 50-59 in low-poverty neighborhoods who were three times as likely as those in the poorest neighborhoods to retire during 2007-2009. The report notes that this could be due to the fact that 50-somethings in low-poverty neighborhoods had the financial security to stop working in the down economy or they had been offered incentives for early retirement.