The nation is still recovering from the Great Recession, the most significant recession that many of us have experienced. The recession’s reach was far and wide; a study from Rutgers University revealed that 73 percent of Americans were personally affected by the Great Recession, either through a personal job loss or knowing someone who lost their job. The Pew Charitable Trusts just released the results of a study that examines the impact of unemployment, even short-term periods of job loss, on upward mobility.

The report, Navigating the Economic Shock of Unemployment, goes beyond the Great Recession years and examined job losses over a 10-year period beginning in 1999.

“The research shows that families at every rung of the economic ladder experienced unemployment and other financial setbacks, but families at the bottom of the income ladder, Latinos, and blacks had the greatest risk of job loss and the least access to resources to buffer negative impacts. For example, when comparing households that experienced unemployment, the median wealth of white households was at least seven times that of black households in each year of the study.”

Researchers followed up with 51 families to obtain more detailed data and the findings were not surprising. To help make ends meet, families reported that they had to tap into retirement or college savings, take out high-interest rate loans like payday loans and even deplete assets to meet the qualifications for public assistance.

The last issue, asset depletion, can have significant long-term impact on upward mobility because some families will never be able to rebuild their assets. A small savings account can mean the difference between putting food on the table during periods of job loss and having to take out a high-risk loan.

But if that small savings account means that a family no longer qualifies for income-based health insurance, then some families are forced to choose: liquidate the assets or go without health insurance. This is an evil cycle that promotes poverty.

"The evidence in this report provides insight into the actions that policymakers can take to help people who have experienced unemployment," said Janet Boguslaw, researcher at Brandeis' Institute on Assets and Social Policy. "There is no question that providing mechanisms for Americans to hold and secure assets in good times and in bad will help them and the economy as a whole over the long run."

One way to stop this cycle is to remove what study researchers called, “disincentives to savings and work in government safety-net programs.”

There is a big push in Washington for entitlement reform, but I have a feeling that most of the legislators demanding this reform won’t buy into the idea that allowing people receiving government assistance to keep assets is a good thing for the economy, and that's rather unfortunate.

Short-term unemployment can have long-term consequences
A new study from The Pew Charitable Trusts examines the association between unemployment and upward mobility.