The Great Depression vs. The Great Recession – Impact On A Generation

I went to a mall for the first time in years the other day, and it got me to thinking – could the Great Recession have the kind of impact on people as the Great Depression did for those that lived through the 1930’s?

As the traditional media wrings their hands about the death of retail, and occasionally blaming millenials (like here, here, and here), very few people are talking about what I think is a key cause of this trend. It’s not technology, although that obviously plays a role  (things you could once only get at a mall or store can be more easily bought online). And it’s not millennials (P.S. stop blaming them for everything, media).

I have a theory – that the death of retail is due to The Great Recession (the GFC, or Global Financial Crisis, for my overseas readers).

The Great Recession was the worst economic crisis since The Great Depression. Millions lost their jobs, and their homes. People born when I was had to deal with the dot-bomb recession of the early 2000’s, and then just a few years later were kicked again by the economic crisis. I was 28/29 when it happened, and I can tell you that it had a direct impact on how I view debt and spending. It’s very similar in many ways to my Great Depression era relatives perspective.

Comparing The Great Recession To The Great Depression

Despite everything you read about The Great Recession being the worst crisis since The Great Depression (which it was), the two were very, very different. Check out this cool infographic I made to compare the two for you:


As you can see, the Great Depression was much, much worse than the Great Recession. We have in place today a lot of social safety nets put in place during the Great Depression that we may take for granted – Social Security (and Social Security disability) for those unable to work due to old age or disability; unemployment payments for those unable to find work; and FDIC insurance to prevent a run on the banks.

The other key is that the government, banks, and others learned from the Great Depression. Those that run the economy are acutely aware of what happened in the 1920’s and 1930’s, and took many quick steps to prevent the same thing from happening again. Ben Bernanke, the gentleman in charge of the Federal Reserve in the late 2000’s, was actually a scholar of the Great Depression – he studied it the way other people study the Civil War, or WWII.

During a college lecture in 2012, Bernanke had this to say about the Great Recession:

Obviously, based on the crisis and what happened and the effects that we’re still feeling, it’s now clear that maintaining financial stability is just as an important a responsibility as monetary and economic stability. And indeed, this is, you know, very much a return to the—where the Fed came from in the beginning. Remember the reason that Fed was created was to try to reduce the incidents of financial panics, so financial stability was the original goal of creation of the Fed. So now we sort of come full circle. ~ Ben Bernanke

Generational Impacts

If you have or had a Great Depression era relative, you’ll know that many of them were extremely adverse to spending. They stockpiled food, didn’t spend money even decades after the crisis was over, and generally lived frugally and avoided debt. Why?

They saw the impact that debt had when things go wrong. They had seen breadwinners lose their jobs and be unable to find work. They watched people lose their homes, and need to stand in bread lines. They avoided investing because their parents, grandparents, friends and neighbors lost 90% in the market.

I remember my father talking about a friend of my grandfathers, who only got back to even in the stock market decades later. The NY Times published an article that talks about it taking only a few years to get “back to even” when you account for dividends, deflation, and the distinction between the DOW and the overall market.

I think the Great Recession has had a similar impact on some people, and that’s why we’re seeing such drastic changes in spending habits. Yes, technology and online shopping are playing a big role as well – if I can get what I need online, why would I go to the store? But it’s also true that if you spent your late teens and early adulthood struggling, and seeing all your friends struggle, you become more averse to spending frivolously.


Where can we see this today? Of course, there’s the death of the retail sector as I mentioned at the start of the article. I also saw that apparently going out for lunch is a dying tradition, with Americans making 433 million fewer lunch trips last year, resulting in a $3.2 billion loss for the restaurant industry. These things taken together make me wonder if we’ve entered a new age of somewhat-austerity-at least in parts of the economy.

But Isn’t The Great Recession Over?

Kind of.

The official Great Recession ended relatively soon after it started – in June 2009, in fact. But if you asked most Americans whether or not the recession was over, even years later they would tell you it’s still going on. Why? Because that’s what they feel in their day-to-day lives.

A recession, and a recovery from  recession, is defined academically. It is “two consecutive quarters of negative GDP growth as measured by a country’s gross domestic product.” By that academic measurement, the recession started in December 2007 and ended in June 2009. But that doesn’t tell the full story.

In June 2009, the economy started growing again, but it wasn’t yet at the same place it was before the crisis. It took at least another year for the economy to grow back to that point. After June 2009 nearly another million people lost their jobs. That same article I just linked in this paragraph said that in 2010, 15 million people were unemployed and another 9 million were unwillingly working part-time.

Feelings and perception of economic strength are not related to academic definitions. Real GDP might be growing, but if you’re stuck in a part-time job while looking for a full time one, or living off unemployment and unable to find work, to you the economy is doing poorly.  In fact, if you read through this Bloomberg article about how people feel about the economy, you’ll notice there’s a pretty consistent trend of about half of people not being very optimistic-in all measurements.

As the saying goes, “It’s a recession when your neighbor loses his job. It’s a depression when you lose yours.”

Generational Impacts – They’re Personal

If you’re someone who stayed employed through the Great Recession, you may have noticed no real change in your standard of living, perception of debt, or perspective on savings. But if instead you’re someone who:

  • Lost their job, or had a family member lose their job
  • Watched your company go under, or nearly so
  • Lost a home to foreclosure or short sale
  • Had to file bankruptcy after a medical event, job loss, or other unexpected financial turn
  • Watched the economy in your town decline and never recover
  • Were or are underemployed, or stayed in/started school in an effort to get a job-any job
  • Struggled to find a job once you completed college
  • Saw the stock in your company go from $100 per share down to $4 – and even now about a decade later it has not returned to the high

Your perspective on the importance of debt freedom and savings may have changed drastically.

I know mine have changed over time. I’ve always been a good saver and investor (I like to say I’ve been working toward FI for 20 years), but life knocked my family around a lot over that time. My husband’s factory closed in 2009, and he lost his job. Then a few years later he had a medical crisis that hugely raised expenses while lowering our income. He’s never been able to return to full time work, meaning that I continue to support our family of five – as I have for eight years now.


Fortunately, I was able to increase my income during that time by completing an MBA and getting better jobs. Today I make more by myself than we used to make combined. But all those events completely shifted the way I view debt, and the importance of savings. I’m much more conservative than others my age when it comes to savings, and striving to be completely debt free (including my mortgage, which I want to have paid before I’m 40).

So I can imagine there are many families in a similar situation. One spouse may be disabled, or in a line of work that no longer pays well at all. Perhaps someone was forced into early retirement by their company and has never been able to find a comparable job. Or you might be a millennial who couldn’t find work in your field, and you’re still struggling to get out of lower wage jobs (once you get in, it can be hard to get out). And if you didn’t drastically increase one income to make up for the loss in another, you could be at a much lower standard of living than you once were.

Not every member of a generation will be impacted the same way, even if they experienced the same kinds of hardship. Even during the Great Depression, there were people who never lost their jobs or homes, and cruised right through without changes in lifestyle. But there was a subset of the population who was scared forever. And I believe that is also the case with the Great Recession.

I Want To Hear From You!

Tell me all about how the Great Recession impacted you – a bit, a lot, or not at all? Have you noticed the same patterns I have – that many people who were heavily impacted continue to live more frugally today than they used to? Let me know in the comments!

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22 thoughts on “The Great Depression vs. The Great Recession – Impact On A Generation”

  1. The Great Recession definitely impacted our family. Mr. ThreeYear was laid off twice in one year–2008. It was the worst thing, and also the best thing, that’s ever happened to our family. The worst, because, well, obviously… it was extremely stressful, we had few cash reserves, were just starting out, and didn’t know how we’d make it. The best because he found new jobs very quickly both times, with raises, we saw we could make it, and we discovered Dave Ramsey and later, the FIRE community and started to get on solid financial footing. But the reason we live in NH today is because of the Great Recession. Mr. ThreeYear took a job with his current company because they have a no-layoff policy. And having that security was so important for him (and us) after 2008.

    1. Glad to hear he was able to find jobs quickly after being laid off. And a “no layoff” policy is very rare and generous- he’s fortunate to have found a company like that!

  2. Interesting research Liz. I was very fortunate to be only slightly impacted by the Great Recession. My company did lay off employees and those of us that were lucky to keep our positions did take a cut in pay. However, we did see raises again within two years. I’ve since moved on from that company and have increased my income a good deal. I’m more conservative now though for sure.

    Regarding the retail industry and lunch restaurant business declining, I wonder if some of this is people being too darn busy to shop and too involved at work to go out on their lunch hour?
    I see that a lot around my office and in speaking with others.

    1. I agree, I know that myself and almost all my coworkers eat lunch at our desks every day. There doesn’t seem to be time to leave the building, have lunch, and come back before the next meeting

  3. The company I worked for at the time was relatively sound but they did issue an across the board pay cut of ten percent. I was already frugal at that point. Still I see a direct correlation in my pay negotiations. My pay is heavily company stock based, it’s also on the lower side. I find myself pushing now for a raise with them even more then normal because I realize even with a moderate pull back it could impact my company. Things would be tight if my stock pay and my pay were reduced.

  4. High Income Parents

    I’m one of those that wasn’t affected. Being in medicine insulated me from a lot of the concerns facing the economy.
    Since I was starting my career shortly before the Great Recession I was very fortunate to get some great deals on stocks when I could put my saving into overdrive.
    I just need to remember that medicine isn’t always going to be insulated from economic downturn and keep the savings rate high.

    Tom @ HIP

    1. It’s interesting to me how all the doctors weren’t impacted. There wasn’t a downturn in elective procedures, or the unemployed not going to the doctor because they couldn’t afford it?

      1. High Income Parents

        I could see that happening for someone with a boutique plastics practice but for a general anesthesiologist that does a fair amount of anesthesia for cancer related surgeries, it didn’t affect me. Texas probably didn’t get impacted as much as other states as well so I probably had a few things going for me that were just luck.

  5. I finished graduate school at the beginning of the recession and took the first job I could get because it was clear jobs were scarce. During school I had a random encounter with a former dotcom millionaire now starving startup programmer, who said point blank “save half of anything you ever make, you don’t know if it’ll be gone the next day” – great advice. After experiencing pay cuts across the board, seeing entire departments get laid off, we took a calculated risk starting our own firm which has helped us get to financial Independence faster. There is no such thing as job security anymore, so work hard and save half.

  6. Being in medicine I have a secure job. My portfolio took a big hit but it recovered. I did decide not to retire at 55. I am glad of that now since health insurance in the individual market is in free fall

  7. Ms. Raggedly Rich

    I was a teenager (in Canada) when the Great Recession happened – but my parents lived through the Cold War in Communist Poland before they came to Canada. I think any sort of immediate exposure to crisis’ really shapes people’s viewpoints and perspectives. I know the Cold War really had an impact on the way they view money and finances, and the things they’ve passed down to me.

  8. We were only minimally impacted during the Great Recession. My company had minimal layoffs and that year (early 2009 I think) there were no merit increases. It was hard to watch our 401(k) balances drop like a rock, but we stayed strong and continued our contributions.

    Regarding retail, I have to imagine that Amazon has a significant impact on brick-and-mortar stores like malls. Also, the younger generations just don’t seem interested in going to the mall. When I was growing up in the 80s, it was a ‘cool’ thing to go to the mall.

  9. At the time it happened, I was just beginning to write the Smart Spending blog for MSN Money. I was delighted to be able to write articles that helped others, but hearing their stories and reading increasingly gloomy articles from elsewhere left me feeling anxious.

    I remember fearing that a depression would follow the recession. Having had hard times of my own already (first as a single mom and then as a broke-while-getting-divorced-midlife-college-student), I stocked my cupboards with essentials bought at the lowest possible prices and focused on building both my emergency fund and a “cash cache” at home.

    It’s left me very wary of people who think that the recession ever really ended, and irritated by those who think that the only reason anyone in America would be poor is out of some private perversity. You know, the ones who say stuff like “there’s plenty of work out there if you want it” or “young people today just buy avocado toast instead of saving, the way we did.”

    And I can’t help thinking a new recession is waiting tiptoe in the wings. I hope I’m wrong.

    1. Yes that flippant attitude to the struggle of other people who are stuck in a hard situation annoys me. I know first hand from watching my husband and friends that some people are just dealt a bad hand at life. Yes, you need to play the hand you’re dealt the best you can, but it can mean constant struggle.

  10. In 2009, I was graduating… from art school… in Cleveland. After moving home, and facing months of rejection from all jobs including McDonalds, I landed a part time gig as a telemarketer and worked my way up to debt collector. It was my first job related to finance. I will never forget those years and the hopelessness I felt, which played a big part in my future mission to help others understand money and avoid that despair. Things got better once I moved to New York, and I’m finally on my feet, paid off my student loans and saving much more than I spend… but holy cow, those years shaped me. Sometimes I still think about the people who told me that any college degree would guarantee me some kind of job… and I still feel betrayed and misled, like a grizzled war veteran who imagined glory as a young recruit. I’m a naturally optimistic person, but those years left me with financial commitment phobia and some weird poverty habits.

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