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Tilly: How to measure loss

BY ZACH TILLY | JULY 15, 2013 5:00 AM

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An article in Sunday’s Des Moines Register claimed that "the recession slammed Iowa’s wealthiest residents the hardest of any income group."

In a way, that’s true. The Register’s data says that Iowans making more than $500,000 a year lost about 34 percent of their wealth in the recession, more than any other group.

But the Register’s claim is true only in the sense that trading in a Lexus for a Toyota is a bigger jump than trading a junker for a bus pass.

That substantial reduction in wealth, mostly the product of investments gone bad during the financial crisis, was undeniably bad. The rich lost a lot of money. But was that fate worse than the fate suffered by less well-to-do Iowans?

I’d say no. Less educated, lower-income Iowans suffered more job losses during the recession. Many lost their health insurance, and thousands of people fell below the poverty line.

According to a study from the Georgetown Public Policy Institute, people with a high-school diploma or less, who tend to be less well off than those with a college degree, lost almost four out five jobs lost in the recession. Those jobs requiring comparatively little education have also been the slowest to return.

During the height of the recession, from 2008 to 2010, the proportion of Iowans without health insurance rose from 8.7 percent to 9.3 percent. The state’s poverty rate rose from 11.6 percent to 12.6 percent.

Iowa’s top earners certainly felt the wrath of collapsing financial markets and falling real-estate prices, but they were insulated from the decline into poverty suffered by many lower-income Iowans.

The notion that the wealthy were hit harder than the less well off is a product not so much of reality but of a failure to properly quantify success and failure, hardship and well-being. The story offered by the Register is one in which every dollar is equal, whether it pays for food, a Rolex, or a mortgage-backed security.

The Register’s interpretation of the data becomes problematic when coupled with the fact that the wealthiest Iowans have also recovered from the recession more quickly than any other group. This narrative implies some kind of heroic turnaround from the group hit hardest by the recession.

But actually, much of the money lost by wealthy Iowans returned when the stock market bounced back and housing prices began to creep upward once again. Many jobs lost by lower income Iowans, by contrast, stayed lost.

And in many ways, the top-heavy economic recovery simply represents a continuation of demographic trajectories that predate the recession. The Register article demonstrates the diverging paths of the rich and poor in Iowa. Between 2000 and 2010, the average income of Iowa’s top earners rose by 82 percent. Over the same period, Iowan’s making less than $50,000 a year saw their income fall by about 8 percent.

The truth is that Iowa’s richest residents weren’t the most affected by the recession by any stretch of the imagination. Their loss was large, but it was ultimately temporary. And, most importantly, that loss was an aberration for a group that has become consistently better off over the past three decades while nearly everyone else has stagnated.


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