Will the Recession Have A Lasting Impact On Spending?
Tuesday, November 23, 2010
While retailers are crossing their fingers hoping for a boost in sales this Holiday season, economists are trying to figure out if the great recession will have a lasting impact on spending in America. Joining me to talk about the recession's impact is my guest, KPBS reporter Kyla Calvert.
While retailers are crossing their fingers hoping for a boost in sales this Holiday season, economists are trying to figure out if the great recession will have a lasting impact on spending in America.
KPBS Reporter Kyla Calvert
MAUREEN CAVANAUGH: I'm Maureen Cavanaugh and you're listening to These Days on KPBS. While realisters are crossing their fingers hoping for I boost in sales this holiday season, economists are trying to figure out if the great recession will have a lasting impact on spending in America. COming up we'll explore forecasts for this holiday season, but first, some thoughts on whether the recent hard times have put a lock on America's free spending ways. Joining me to talk about the recession's impact is my guest, KPBS reporter Kyla Calvert. Good morning, Kyla.
KYLA CALVERT: Good morning.
MAUREEN CAVANAUGH: Now you recently did a feature report exploring if the financial meltdown, the real estate bust, the forclosure crisis, the high unemployment, basically the terrible economic times we've been living through the past couple of years will have a lasting effect. So have hard times in America ever had a lasting effect on generation past?
KYLA CALVERT: Well, sure, I think all of us probably can think of our grandparents or an older relative who lived through the great depression, who before this recession we would feel like their attitudes about saving money and being of very conservative were a little eccentric because they were so different because of the great depression. So --
MAUREEN CAVANAUGH: Exactly like I knew people who never had a credit card their whole lives, never had a credit card. And can that be -- do economists trace that back to that huge disruption in America's economy in the 1930s? The great depression?
KYLA CALVERT: Well, basically what one person I spoke with Ona Mier, who's a professor at the Rainey School of Management, and who lived through the great depression, basically what he said to me was that generations that lived through times that teach them to be conservative with their money remain conservative with their money. You know, and then because of the way sort of children are and we are and we rebel against our parents, so it doesn't necessarily go -- you know, last beyond that generation. But it does have a life Hong effect on those people.
MAUREEN CAVANAUGH: Now you spoke with a gentleman in this report whose name is Robert Paris. And he shared some of the memories, I guess it was of his childhood.
KYLA CALVERT: Uh-huh. Robert is just an amazing man, he was born in 1922, so he was very young when the great depression started. But he started working as a migrant farm laborer with his family with his, i believe his four brothers and sisters and his parents in the field, and he said he started working around when he was 5 or 6. And he would travel around the state following the various harvests and everything, and you know, he told me about when they were younger, they'd be working near bean fields and after sort of the machines went through to thresh the beans and they did that harvesting, the kids would go out into the fields to sort of pick up what was last behind. And those beans were something that his family would store and eat. And he knew families that would make sure they cooked their beans with a lot of water left over, and then he was telling me that they would put that water in baby bottles and feed them to babies because the families didn't have enough money for milk.
MAUREEN CAVANAUGH: Oh, my goodness.
KYLA CALVERT: Yeah, and so one story that -- yeah, and the story that he told me that sort of illustrated for me how different his childhood was from anything that I had ever known was this story about when they lived in LA, and he and his brother had to scrounge up food for his family.
(AUDIO RECORDING PLAYED) NEW SPEAKER: My brother and I each took a gunny sack and a pocket knife, and we would walk quite a ways to the central market, and we would go through the garbage cans and underneath the trucks where stuff would fall, like, we'd find a garbage can that had thrown the potatoes that were rotten, so we'd just take and cut the half off. Two rotten potatoes makes one. And that's what we did, and take them home.
MAUREEN CAVANAUGH: So Robert Paris shared these stories with you about his childhood growing up in the depression, and did he also tell you that these experiences shaped his view about jobs and money for his spire life.
KYLA CALVERT: Sure, yeah, I think one he really likes to tell is -- well, he started saving his money when he was 12. He had a belt that he split open, and then when he earned a full dollar, he would slide it into the belt, and when he earned $5, he'd go to the bank and buy a bond with it, when he was 12 or 13, because he already had this sense that he wanted to have savings. So even when he was older, and had steady work in construction, he take on sometimes two or three part time jobs just so that he always he always had that extra money to save. And he says that he sort of shopping around for deals on Kleenex, and just everything, because that's the way he learned to be.
MAUREEN CAVANAUGH: That's really amazing, now here we are, this is not the great depression, this is what people are calling the great recession, and some economists are saying that the recession is over. We've only experienced it for two and a half, possibly three years, but is there any evidence that this economic downturn has changed in saving habits in the United States?
KYLA CALVERT: Oh, sure. I mean, nationally there's a trend of savings rates have increased. Household debt rates have decreased over the last couple of years, and that's a trend that we're seeing nationally. So people have change there'd habits.
MAUREEN CAVANAUGH: When we talk about long term effects though, I guess we have to see a change in attitude about money, even with what our priorities are in life. How would we begin to track something like that.
KYLA CALVERT: Well, I think that's definitely more difficult to sort of quantify. So you see sort of surveys, the Pew Center had a survey that came out over the summer. That sort of interview -- people filled out surveys about their changing attitudes about money now. But the thing is it's hard to compare if you weren't doing a survey before, so a professor here at SDSU, Doctor Jean Twenge, she sort studies generational difference, behaviors and things like that, and one of the things that she looks at is a study called monitoring the future. And it's been going on since the mid-1970s, and every year they survey sort of a nationally representative selection of high school students and she sort of -- she points to that in a lot of her work, and he was interviewing her, she sort of pointed to it as evidence that attitudes really aren't changing that much because of the recession, and here's what she had to say about that.
NEW SPEAKER: Asked a lot of questions about working so things like do you think work is just making a living, do you expect work to be I central part of your life, what kind of job do you want to have, and some of the items are things like do you want a job or do you want a lot of vacation time. And the trends in those have continued through the recession, toward more people saying I want a job with a lot of vacation time, and work is just making a living, and it's not really a central part of my life compared to people in the 1970s, and the 1980s.
MAUREEN CAVANAUGH: That's interesting, doctor Jean Twenge has been a guest on this program several times and she's talked about how perhaps this newest generation is more narcicisstic than generations in the past. I word however as she continues to conduct that's surveys as time goes on, she might not see some sort of residual effect in the years to come. Is she gonna be looking for that?
KYLA CALVERT: Oh, definitely. When we spoke, she was saying that we might not be seeing it in people in high school now, they're sort of more in that stage where they're becoming more independent from their parents anyway, but more sort of children who are 8 to 12 now, who are more in their homes, and seeing the way their patients are having to scrimp and save, they might have their attitudes change because of that. So --
MAUREEN CAVANAUGH: That's phosphating. If you see mom and dad having discussions about [CHECK AUDIO] being leaner and leaner and leaner as time goes on, that indeed may make an impression as people get older. I'm wondering issue Kyla, if people are scaling back, and they're paying their debt [CHECK AUDIO] is there a chance that that's how they'll continue because they've --
KYLA CALVERT: Well, that's exactly, you know, the professor I mentioned earlier, owna mere, that's exactly what he said to me. That if people change their habits, they're likely to keep those changes. And then we have a clip of that as well. What he had to say about that.
NEW SPEAKER: We are very habitual. If people change their behavior, even theoretical temporarily, what you'll find is a lasting change. So somebody now because of their situation has decided to check out Wal-mart and they get used to buying stuff from Wal-Mart, they're likely to continue doing that.
MAUREEN CAVANAUGH: So this habitual process of this, is the idea that if somebody would never have gone to the Wal-Mart because it was mentioned before, and now they're going there regularly because they can get lower prices, then the idea is idea, like Mr. Perez, 50 years from now, they may still be pricing for Kleenex at Wal-Mart.
KYLA CALVERT: Exactly. He also said, if you're never been in the habit of shopping in the sales section, but now you do -- the first place you go is the sales section. Then unless some other really dramatic change takes place in your life to change those habits again, you're gonna keep going to the sales section, every time you go to the store 50, because that's what you've gotten used to doing.
MAUREEN CAVANAUGH: Because that's what you've gotten used to doing, where's before it was just sort of like, put it on the card and we'll worry about it later. Now, we are, and I'm a little bit afraid of this, almost talking as if the economy has recovered at this point. Isn't there a chance that there are lessons that are still being leadershiped right now in these hard times.
KYLA CALVERT: I think there's more than a chance of it, even though economists have said the national economy is growing, the recession is over, that that isn't something that is part of the everday reality for most people. In San Diego, the unemployment rate is over 10 percent, in the state, it's over 12 percent. That's not something that's going to change any time soon. And so there are a significant number of families who are feeling very tough times right now. And you know, that's -- definitely there are a lot of people learning how to cope with that, and who will continue 206 to cope with that for a while to come.
MAUREEN CAVANAUGH: And I can see that. Of you know, after the attacks on 911, we started to you can that about the new normal, and how we viewed [CHECK AUDIO] and now with this great recession, there comes another new normal perhaps, for the next generations looking at how they're going to be spending their money, and how importantly they're going to be taking their finances and their jobs. As people continue to track this, I'm wondering, when do you think we might see some -- might know whether or not there's some real change or that we have gone back to our free spending ways.
KYLA CALVERT: Well, I think that -- you know, there are those sort of regular reports we get about holiday spending.
MAUREEN CAVANAUGH: Right.
DEFENDANT: Or -- so those kinds of things come out all the time, and you can see whether spending is increasing or whether people are putting more money into their retirement savings. Which, actually, that's a flat, that hadn't changed at all. [CHECK AUDIO]. So maybe that's an indication that he woo aren't that changed 678 but -- so I think those are the sort of things that you can look to regularly, and say, you know, are we -- do we have coon super spending that's going way back up? I mean, I think people would be shocked to see that happen.
MAUREEN CAVANAUGH: Well, that's exactly what we're gonna talk about, coming up next, we're gonna talk with George way land, who's a retail expert here in San Diego. Kyla, thank you so much.
KYLA CALVERT: Thank you.
MAUREEN CAVANAUGH: I've been speaking with KPBS reporter Kyla Calvert. And if you'd like to comment, please go on-line, KPBS.org,/These Days.
To view PDF documents, Download Acrobat Reader.