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How the Great Recession Helps Working Low-Income People

By David Henderson | Aug 12, 2010

The Great Recession, as the recent economic downturn has been called, has had tremendous consequences for the country. National unemployment remains high (9.5%) and the average number of weeks of unemployment for unemployed persons is 24 weeks, the highest average number of weeks of unemployment since the Great Depression.

Amidst all this bad economic news, there is a small silver lining for low-income families lucky enough to have jobs – zero inflation. A recent article in the New York Times explains that “inflation has fallen to zero, which helps the purchasing power of everyone fortunate enough to have a job.”

While jobs are scarcer, wages have not receded. Even if they did, they could not fall past minimum wage. The increased purchase power of every dollar in the poor economic climate is effectively a raise to the minimum wage, meaning more consumption, or a possibility of savings, for working low-income families.

Of course, for unemployed persons looking for work, there is nothing celebratory about the recession. Service sector jobs, usually the lowest paying jobs in our economy, are always the first to go in a recession. For those low-income individuals left jobless in the wake of the current recession, dropping prices and zero inflation is likely no consolation.

However, for low-income families who are working, the Great Recession can actually be an opportunity. Social sector organizations engaged with such households should take advantage of the momentary relative increase in purchasing power, encouraging savings where practicable. We have not yet seen the full consequence of the present recession, but if there is any good we can glean from it, it is imperative we do so.

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