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The ripple effect of the U.S. economic crisis


Amid this week’s financial crisis, I am concerned about the long-term consequences for not only businesses and workers, but for communities. My recent research finds that even a single involuntary job displacement has a lasting impact on a worker’s inclination to volunteer and participate in a range of social and community groups and organizations — from participating in the PTA to supporting charities.

Social participation is important to participatory democracy, to healthy neighborhoods and to effective schools, and Americans’ commitment to social participation has been a defining feature of the cultural fabric of the United States. In addition to the broad societal cost lies the individual worker cost. Individuals who withdraw from society may be disadvantaged in the labor market: Social and economic resources are embedded in social networks, networks that may be formed by way of involvement in various social organizations and associations. Thus, a lower likelihood of social involvement may impede displaced workers’ ability to secure agreeable reemployment and prolong spells of unemployment.

In the first study to look at the long-term impact of job displacement on social participation, we found that workers who had experienced just one involuntary disruption in their employment status were 35 percent less likely to be involved in their communities than their counterparts who had never experienced a job loss due to layoff, downsizing or restructuring, or a business closing or relocating.

Moreover, the exodus from community involvement continued not just through the spate of involuntary unemployment, but for the rest of the workers’ lives. We used data from the Wisconsin Longitudinal Study, which has tracked a group of 1957 Wisconsin high school graduates for more than 45 years, gathering detailed information on their I.Q., education, careers, psychological well-being, family and social lives.

We found that youth and community groups experienced the strongest exodus, followed by church and church groups, charitable organizations and leisurely activities, including country club attendance. For workers who were displaced during their peak earning years — between 35 and 53 years of age — the effects were the strongest. We found that non-displaced workers were 1.2 to 1.5 times more likely to participate across all forms of social and community activities than workers who had been displaced.

This was the case for both ages — 53 as well as at 64 years of age. Workers can be displaced early in their career, and they are still less likely to be participating at age 60 than their counterparts who have never been displaced. In other words, it is not as if displaced workers rebound and return to involvement; displacement seems to change their whole trajectory of participation.Economic decline, psychological distress, and the erosion of norms of reciprocity and social trust result from job insecurity and displacements, and explain some of the decline in social involvement.

Of course, workers are likely to feel some shame and embarrassment as a result of downward social mobility and thus feel less inclined to socialize. But social engagement also involves an element of social trust and a sense that things are reciprocal — that you give some support if you get some support, and that you benefit from society if society benefits from you.

When workers are displaced, the tendency is to feel as though the social contract has been violated, and we found that they are less likely to reciprocate. Other factors may include geographic mobility and family disruption, effects of job displacement and potential causes of social withdrawal.

Employees who experienced the disruption during the tail end of their careers were less likely to withdraw than workers who were displaced earlier in their careers. In fact, we found no significant difference in social and community participation between workers who were displaced between 53 and 64 years of age and their non-displaced counterparts. Being laid off does not appear to be as socially damaging for older workers as younger ones.

Because one’s peers may be downsizing as well and because the older worker can play off a displacement as an early retirement — even though it may be forced retirement — the shame factor of downsizing one’s lifestyle is not the same as for workers displaced in the early career.

Most prior studies have focused on career disorder characterized by substantial job movement and lack of orderly progression. We find, however, that a single displacement event is associated with a substantially lower probability of subsequent social involvement. Given the public apprehension over the possibility of even a single displacement event, this is an important result.

The group of workers who experience multiple displacements has the lowest level of job stability; for such workers, we reason that displacements may be more normalized and thus less likely to lead to declines in their already lower levels of social involvement. The earlier research also did not compare the participation records over time of workers who had actually experienced involuntary displacement with those who had not. Neither did it look at the community involvement records of workers before and after displacement, as we did. From past research, it was not clear whether you participated less because you were in a disorderly career, or you were in a disorderly career because you were the kind of person unlikely to participate anyway. We were able to better untangle the causal direction.

The presumption of comparatively modest starting salaries, coupled with steady increases until midlife, were defining characteristics that distinguished a career for much of the past century. The expectation of a lifetime job has diminished for growing segments of the workforce, and workers are increasingly seen by employers as costs that need to be minimized in order to increase profits.

Job displacement is affecting long-term steady employment, hindering workers’ ability to sustain a successful career characterized by upward mobility. We find that job displacement also exerts a significant negative effect on the probability that an individual will choose to participate in his or her social surroundings.

Thus, while prior studies have found significant economic and psychological consequences of displacement, we find significant social consequences of displacement. With unemployment on the rise amidst our recent economic havoc, charities and community groups might need to do a better job of reaching out to displaced workers to make sure they stay involved.

Brand is assistant professor of sociology and a faculty affiliate of the California Center for Population Research. This research has been the subject of stories in several publications, including Social Forces and BusinessWeek, and online in Forbes, U.S. News & World Report, The Washington Post and Yahoo! News.

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