Recessions are especially bad for the poor.
The past few recessions in the U.S. have led to so-called jobless recoveries, where the labor market struggles for years even after GDP starts growing. This may be because companies use recessions to accelerate their adoption of “labor saving”—that is, human-replacing—technology. To understand how this might work, imagine that CVS, having dabbled with checkout machines for the past few years, uses the occasion of the next downturn to fire many of its cashiers and more fully automate the customer-checkout process.
Because low-skill, routine-based jobs are particularly vulnerable to automation, the ensuing pain of long-term unemployment could be concentrated among the poorest workers. And that would have a ricochet effect on their wages. One of the unsung triumphs of the economy in the past few years is that, due to a tight labor market, wage growth has been highest for the poor—a remarkable reversal of the past few decades. That progress would be utterly undone with rising unemployment for low-skill workers, who would lose their leverage with employers.