Recession Psychology
In the May edition of New York Magazine, Jennifer Senior wrote that
Kathleen Vohs, a consumer psychologist at the University of Minnesota’s Carlson School of Management, is preeminent among them, and for the sake of better understanding both the past and the future of our city, it’s useful to start by looking at what she’s found. Just thinking about money made her subjects less likely to help strangers struggling with their belongings. Just handling money made her subjects less sensitive to physical pain. My favorite experiment of hers, though, was one in which she divided her subjects into groups, one of which stared at a screensaver of floating dollar bills and another at a screensaver of exotic fish. Subjects were then asked whether they’d like to work on a task alone or with a partner. Eighty percent of those who’d been staring at the dollar bills chose to work alone. Eighty percent of those who’d been staring at the fish wanted to collaborate. . .
Recently, Vohs has been looking at what happens when her subjects spend time reflecting on money they’ve lost. She believes it’s a fairly good proxy for a recession mentality. What she’s found so far, she says, is that they’re more sensitive to physical pain—and social rejection. . .
Enrollments at divinity schools are up: The number of Ph.D. applicants to the Jewish Theological Seminary has doubled; almost twice as many students are set to matriculate at Union Theological Seminary. . .
“The stronger a man’s attachment to breadwinning,” says Stephanie Coontz, author of Marriage, a History, “the more likely he is to salvage his male pride by refusing to do ‘women’s work.’ ” As a rule, able-bodied, unemployed men spend an average of just three and a half extra minutes per day actively caring for their kids, according to Jay Stewart, an economist at the Bureau of Labor Statistics. Most spend their extra time on sleep and “leisure activities” (including almost two extra hours of TV). . .
Most recent studies on the subject suggest that the psychological effect of unemployment is even greater than the loss of income that accompanies it. Andrew Oswald, an economist at the University of Warwick, has collected happiness data from hundreds of thousands of people both here and in the United Kingdom, and what he’s consistently seen is that people recover more quickly from becoming disabled, even widowed, than from the long-term loss of a job. . . Sustained unemployment is one of life’s few upsets that seems to permanently depress it. Even if this recession is shorter than pessimists predict, those who are laid off in this period will still pay a concrete, long-term price. “It’s what economists call ‘scarring,’ ” explains Oswald. “If I lose my job today, the evidence is that my wages will be 10 percent lower, even a decade from now. Your bad luck follows you.” . . .
Those who graduate from college during a recession make less money than those who do not, and these disparities don’t seem to completely erode with time. After looking at hundreds of white men who graduated from college between 1979 and 1989, Lisa Kahn, an assistant professor at the Yale School of Management, came up with an elegant and depressing formula: Each point on the unemployment rate at the time of graduation translates into a 6 percent decrease in starting salary. Specifically: Kids who graduated in 1988, when the unemployment rate was 5.5 percent, made 24 percent more their first year out of school than those who graduated in 1982 (even adjusted for inflation) because the unemployment rate was four points higher, at 9.5 percent. Fifteen years later, there was still a 10 percent differential between them. . .
John Sexton, the president of NYU, is fond of pointing out that the finance, insurance, and real-estate sectors in New York City—collectively known by the acronym FIRE—were shedding jobs before the new millennium, just as they are now, while the city’s intellectual capital only continues to grow: New York has more college students per capita than any other American city; it has the highest concentration of postdocs in both arts and science. So the transformation he hopes for—and this is his nifty coinage—is an economy where FIRE counts for a bit less, and ICE (intellectual, cultural, and educational capital) counts for a bit more.
“How do you magnetize talent in a world where propinquity matters less?” asks Sexton. “Universities. World-class universities.” He acknowledges that our city and state budgets aren’t exactly skewed toward helping them; Fordham is not getting tax breaks like Bear Stearns. But one of the few new line items in this year’s state budget is the Higher Education Loan Program. “We should at least begin to use this as a social moment,” says Sexton, “to reunderstand what we once knew: that education is the ultimate public good.”