Wednesday, May 28, 2014

Who hurts most from recessions? Its the extremes that suffer most

With all the talk of the budget's effect on the poor, I was curious what sort of impact another recession might cause to incomes, based on the affect of the recession in 2008/2009 and income growth before that vs income growth after.

If you look at the 13 years before (and including 2007-2008) we had the below income growth (compounding) per year for the following quintiles

Lowest quintile : 3.95%
Second quintile : 3.75%
Third quintile : 3.62%
Fourth quintile : 3.08%
Highest quintile : 4.71%

After the recession and including the 17 years before (and including 2011-2012) we had the below income growth (compounding)

Lowest quintile : 2.51%
Second quintile : 2.77%
Third quintile : 2.69%
Fourth quintile : 2.67%
Highest quintile : 3.10%

So as a result of the recession, we have the following drop in the growth of incomes

1.61% Highest quintile
1.44% Lowest quintile
0.98% Second quintile
0.93% Third quintile
0.41% Fourth quintile

So if the rich can afford the income growth drop, surely a recession is most especially bad for the poor, who really need the increased income growth for wealth creation.
Maybe for those who are so concerned about the needy in society, it's time to get onto the Hockey plan, especially if it help prevent recessions in the future which will again curtail the poor's ability to improve their prosperity.

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