Newswise — April 12, 2011 – According to a new US2010 research brief, two factors distinguish the median income declines and inequality increases in the first two years of the Great Recession (2007- 2009) from earlier recessions: (1) the decline in the employment of women and especially of men, rather than the decline in their wage earnings and (2) the importance of increases in public transfers in offsetting these negative impacts.
“The drop in median income and growing income inequality during the first two years of the Great Recession are well documented,” said co-author Richard V. Burkhauser of Cornell University. “But now we can document the factors accounting for these changes.”
The full report can be downloaded here: http://www.s4.brown.edu/us2010/Projects/Reports.htm
Using shift-share analysis, Burkhauser and Jeff Larrimore of the Joint Committee on Taxation analyzed data from the Public Use March Current Population Survey (1980-2010).
They compared changes in median income and income inequality and the factors that account for them with those from the first two years of the previous three recessions (1979-1981, 1989- 1991, and 2000-2002).
Employment losses accounted for substantially more of the median income declines in the Great Recession than in earlier recessions while declining wages played a much smaller role, the researchers found.
Additionally, they observed that the direct effect of expanded public transfers programs was much more important in offsetting median income declines during the Great Recession than in previous recessions.
“How median income and income inequality will change over the remainder of the current business cycle and beyond will depend on our ability to return individuals to the labor market via a growing economy, while we scale back the temporary public-transfer programs which limited the recession’s impacts over the past two years,” the report said.
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