The stress caused by the 2008 financial crisis had a lasting impact on kids and families

In the red
In the red
Image: REUTERS / Yuriko Nakao
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The 2008 collapse of the investment bank Lehman Brothers marked the beginning of a global financial crisis. The recession had a far-reaching impact, as people around the world lost their homes, their jobs, their retirement savings, and, in some cases, their sense of safety and stability.

Research suggests that the financial crisis also had a far-reaching impact on people who were too young to understand the events of the time. When parents experience extreme stress, their children inevitably feel the effects. And while the economic outlook has improved for many families in the 10 years since the crisis, the children who experienced major upheavals during their formative years will likely live with the consequences their whole lives.

The long-lasting effects of toxic stress

According to the United Nations Children’s Fund (UNICEF), accurate data on the social impact of economic crises is rare. That said, we do know that sustained stress can affect a child’s immune system, heart health, and metabolism—and even alter the physical structure of a child’s brain. Studies from Harvard University’s Center for the Developing Child have shown that toxic stress “can have a cumulative toll on an individual’s physical and mental health—for a lifetime.”

For children, the best buffer against toxic stress is a supportive, responsive relationship with caring adults. When a child grows up in an environment where they feel supported and loved, the stress they face has less of a long-term impact on their physical or mental health. But when the adults involved are themselves exposed to toxic levels of stress, it becomes difficult to provide the care and sense of safety that children need to grow and be happy.

Several studies on the effects of the financial crisis illustrate this point. One study of babies in Iceland conducted by Geir Gunnlaugsson, a professor of social and human sciences at the University of Iceland, showed that the rate of newborns with low birth weights rose from 2% before the financial crisis (between 2003 and 2008) to 3.4% between 2009 and 2013. That’s a serious problem, because birth weight is an important predictor of the survival of a newborn, and children born with very low birth weight are at particularly high risk of developmental delays.

A mother’s stress level during pregnancy is known to be a major factor leading to low birth weight. The study showed that more babies who were small for their size were born among lower-income families, who were in turn more likely to have experienced toxic stress because of the financial crash. This led the authors to conclude that the study “the insidious impact chronic stress and economic difficulties may have on the growing fetus with potential negative consequences on later child health.”

Other forms of parental stress as a result of the crisis had a big impact on kids, too. The 2008 financial crisis made it harder for millions of parents to provide for their kids’ basic needs. In the US, between October 2008 and March 2009 alone, 712,000 jobs were lost every month. And so it’s no surprise that a 2017 University of Oxford study found a significant link between the rise in unemployment caused by the financial crisis and rates of child neglect in the US. Parents who lose their jobs have more limited access to the resources required to provide for a child’s basic needs, like clothing, food, and medical care. Kids, in turn, suffer from that neglect, in ways that can cause them to have mental-health problems, lower chances of employment, and higher rates of substance abuse down the line. Moreover, a 2013 study published in the scientific journal Child Abuse & Neglect found that the crash was actually associated with worse parenting behavior. Using the Consumer Sentiment Index, the authors showed that lower levels of consumer confidence were associated with increased self-reported levels of spanking.

In addition, in the aftermath of the financial crisis, family homeless shelters in almost every state began turning away families because of lack of space. Homelessness is a major cause of stress for both parents and children, and leaves children vulnerable to disease, abuse, and malnutrition, as well as the negative impact of missed schooling. Studies show that children are particularly vulnerable to poor socioeconomic living conditions. Long-term exposure to poverty during childhood can have a strong and irreversible impact on children’s physical, cognitive and social health.

Protecting kids from economic vacillations

Despite these grim findings, some of the anticipated effects of the 2008 financial crisis on kids and families didn’t materialize. In his study of Icelandic birth rates after 2008, Gunnlaugsson found “little or no impact … on a myriad of commonly used child health indicators, including infant mortality, nine poverty-related morbidities, health and wellbeing of adolescents and access to preventive and curative maternal and child healthcare services that continued to be free of charge.”

The main reason why some children fared better than others after the crash seems to be the availability and quality of welfare programs that helped buffer its impact on vulnerable populations. In fact, a working paper (pdf) published by the Institute for Research on Labor and Employment found that “the safety net as a whole provides significant protection [for children]” after the Great Recession, and that “on average, the safety net is effective at mitigating the cyclicality of child poverty.” In other words, although the 2008 crisis was unusual in its breadth and scope, we know that recessions are a reality of modern economies. But there are public policies governments can put in place to shelter vulnerable populations from the worse vacillations of the financial system. As Gunnlaugsson wrote in his study, “In the end, protection of children and families is a conscious political decision.”

Read more from our series on Rewiring Childhood. This reporting is part of a series supported by a grant from the Bernard van Leer Foundation. The author’s views are not necessarily those of the Bernard van Leer Foundation.