The Effects of the Recession and the American Recovery and Reinvestment Act of 2009 on Workers and Families: A Panel Study in Southeast Michigan, 2009-2013
University of Michigan researchers are conducting a panel study to better understand how the severe recession that began in 2009 and continued into 2010, and the collapse of stock and housing prices has reduced the financial wealth and economic security of a significant portion of the entire population. An additional goal is to understand how increased federal spending through the American Reinvestment and Recovery Act (ARRA) may help cushion the negative effects of these economic shocks.
The economic crisis has led to declines in the gross domestic product and increases in the unemployment rate that are greater than in any recession since that of 1981-1982. And the collapse of stock prices and housing prices has reduced the financial wealth and economic security of a significant portion of the entire population. Many low- and middle-income families have experienced layoffs, reductions in hours, difficulty finding jobs, mortgage defaults, disruptions of retirement plans, and related labor market insecurities and financial troubles.
Just as the recession and the housing crisis are severe by historical standards, the ARRA is a dramatic policy response--it represents the largest two-year increase in federal spending on low-income families in decades and has the potential to offset some of the negative consequences of the economic crisis. For example, the ARRA increases unemployment insurance benefits (UI) and Supplemental Nutrition Assistance Program (formerly Food Stamps) benefits and provides increased tax credits to the working poor in an attempt to reduce market-induced declines in consumption and prevent serious material hardships. The ARRA provides additional funds to states and local governments to prevent additional layoffs and to support projects that attempt to stabilize communities and neighborhoods.
In this project, researchers will:
- Collect panel data to explore how the severe recession and the collapse of stock and housing prices are influencing the economic and non-economic well-being (e.g., health, mental health) of workers and families;
- Assess the extent to which social welfare programs and ARRA spending can offset some of the negative effects of the economic crisis;
- Explore how changes in exposure to economic hardship and use of social programs affect health and socio-economic disparities between African Americans and non-Hispanic whites.
The research team will conduct a panel study of a stratified random sample of approximately 850 households in Southeast Michigan (Wayne, Oakland, and Macomb counties), through telephone and in-person interviews. Interviews will be conducted by the Survey Research Operations (SRO) at the Institute for Social Research (ISR), at the University of Michigan. Wave 1 data collection began in fall 2009 and were completed in spring 2010. Wave 2 data collection began in spring 2011 and ended in summer 2011. Wave 3 data collection is scheduled to begin in summer 2013.
The Southeast Michigan region, long affected by deindustrialization and the loss of well-paid middle class jobs, has been hit especially hard by the current economic crisis, making it an ideal place to carry out this study for several reasons. First, the region has suffered extensively during the current recession; foreclosure rates are very high and unemployment rates are among the highest in the nation. In addition to job losses, the automobile industry and its subsidiaries are undergoing major restructuring that has resulted in a permanent and significant downsizing of the industry that was once the major regional employer. A combination of ARRA funding to the State of Michigan, other ARRA funding for the disadvantaged and the unemployed, and significant federal funding provided to the automobile industry make this an excellent environment in which to analyze how the severe recession, the housing crisis and increased federal spending are affecting workers and families.
The negative effects of the severe recession and collapse in stock and housing prices and the local impact of the ARRA policy changes are likely to be larger than any we have seen in the past quarter century. However, we are not aware of any other new panel studies like this one that are explicitly designed to examine their effects.
The comprehensive survey instrument we have developed covers many domains: demographics, employment and the labor market, income and assets (including net housing worth), health and mental health, material hardships, credit and debt, and public program use. This longitudinal study will provide timely information that addresses important research and public policy questions.
Findings will be of interest to researchers, policy makers, community organizations and the public and will be widely disseminated to multiple audiences through journal articles, policy briefs and conference presentations.
The University of Michigan research team is led by Sheldon Danziger and Kristin Seefeldt, with Sarah Burgard, Sandra Danziger, Helen Levy and Robert Schoeni.
The first wave of the survey is being funded by the Office of the Assistant Secretary of Planning and Evaluation, U. S. Department of Health and Human Services, the Office of the Vice President for Research at the University of Michigan, and the Ford Foundation. Additional funding from the Ford Foundation and MacArthur Foundation will continue to help support data collection and analyses.