New Orleans households saw wages and overall income levels bounce back remarkably quickly in the years after Hurricane Katrina, according to a study published this week by a trio of economists.
Using data from tax returns filed between 1999 and 2010, the researchers compared wage and employment trends among New Orleanians with a control group of households in similar cities. They said they found only a “small and transitory” impact on wages and overall income among victims of the 2005 storm.
In fact, by 2007, the wage gap between storm victims and the control group had disappeared, according to their analysis, which was released Monday by the National Bureau of Economic Research, a nonprofit group. By 2008, storm victims had even begun to pull ahead, though an increase in housing costs in New Orleans largely offset the gain.
Other indicators of overall well-being mentioned by the study, including divorce and fertility rates, appear to have remained relatively steady over the long term as well.
“It is not surprising that the immediate economic experiences of the storm victims were negative,” the study’s authors wrote. “What is remarkable, however, is the rapidity with which their economic situation recovered.”
While the resilience of post-Katrina New Orleans has become a point of pride for many locals, some of the authors’ conclusions may sit uneasily with the advocates and officials who have spent the past nine years pushing for increases in federal aid and sounding the alarm about factors such as climate change that could exacerbate the effects of future storms.
Noting the various aid programs that helped the area after the storm — including unemployment insurance, tax credits, charitable donations and other sources — they concluded that the response “appears to have been adequate to avert harmful long-run economic effects.”
The authors also suggested that their results have implications for policy makers considering the trade-offs involved in dealing with climate change.
The costs of imposing measures such as a carbon tax or investing in technology to protect cities from rising oceans must be weighed against the costs “associated with relocating,” they argue, and “the absence of long-run economic losses from Hurricane Katrina suggests that this component of the costs of climate change is unlikely to be large, at least in developed countries.”
The authors — Tatyana Deryugina, of the University of Illinois, Urbana-Champaign; Steven Levitt, of the University of Chicago; and Laura Kawano, of the U.S. Treasury Department — did nod briefly in the report to the “nonpecuniary” costs of the disruption caused by Katrina.
The fact that people tend to stay put in the absence of “exogenous shocks” like the one that struck New Orleans in 2005 “suggests those costs are high,” they wrote, even if they failed to mention the outcry that resulted from suggestions about abandoning certain neighborhoods after the storm.
Their analysis sticks mainly with the more narrow question of financial costs, suggesting that data from tax returns provide a previously untapped means of analyzing the storm’s long-term costs.
The study found that wage and salary income for the average New Orleans household did drop after the storm by about $2,200, compared with similar households in other cities. But that trend apparently reversed itself by 2008.
“Even those who lived in the most damaged areas do not have lower earnings in the long run, although they are slightly more likely to report no wage income,” the authors noted.
Similarly, the study found that unemployment receipts and “non-employment” among storm victims did spike after Katrina, but that they had subsided by 2009.
The authors speculate that some of the rebound could be the result of some New Orleanians dispersing to other areas of the country with better economic opportunities. But they largely dismiss that conclusion, noting that “the increase in wage earnings was concentrated among those who eventually returned to New Orleans.”
They also point out what has become increasingly obvious to many locals: a steep rise in housing costs. In fact, the study found those costs have entirely canceled out the rise in wages and income that storm victims have experienced in relation to households in other cities.
Nor did relatively low-income households fare quite as well as wealthier ones did. The study found that households earning below the city’s median income saw about the same drop in wages that those earning above the median income did, meaning the relative decline was worse for those with smaller incomes.
And while low-income households saw their wages surpass the control group in other cities in subsequent years, they did not do so by as much as high-income households did, lagging by more than $2,000 on average.