Sunday, December 14, 2008

Are people more likely to attend church during a recession?

The NY Times has an article on this subject today, namely how Evangelical churches are booming during this recession. They are examining the work of David Beckworth, a macroeconomist whose blog I've been following for a while. Here is a pretty clear explanation of his published work in his own words. He writes about the income vs. substitution vs. wealth effects.

Several studies have been done on church attendance, I've mentioned a few on this blog over the years. Beckworth's conclusions conform with many others, namely that church attendance is a function of income.

Evangelicals tend to be found in the lower-income quintiles moreso than mainline protestants (Lutheran, Episcopalian, etc.). Hence, evangelicals' opportunity cost of attending church is lower, and their church services longer, than their mainstream brethren. As Beckworth illustrates, whether they attend church at all also depends on the opportunity cost of foregone income.

Substitution, to work or to attend church:
The opportunity cost for you to attend church is your foregone wages-- you could be earning $X.XX working instead of sitting in church for 2 hours. The higher those possible wages, the higher the opportunity cost of going to church and the less likely you are to attend. Beckworth finds that economic expansions mean more opportunities to earn income, so Evangelical church attendance falls during expansions. The opposite occurs during a recession-- the opportunity cost of attending church is much smaller today than a year ago.

Mainline protestants, however, are wealthier and the substitution effect is smaller for them-- an economic expansion may not lead to that much more marginal income from working a couple additional hours on Sunday to make it worth it, so they'd rather be in church. Beckworth found that mainline protestant attendance rises slightly during economic expansions.

However, there is also an income effect that countervails against the substitution effect:
If you're used to the benefits of making $XX,XXX per year and suddenly you're making less because your boss cut your hours, you might want to find a second job on weekends to keep your income level constant, and hence you'd skip church.

It appears that for Evangelicals, however, the income effect is outweighed by the substitution effect.

Similar to the desire to keep their income stream constant, people also like to be able to consume the same amounts of goods/services at all times. During an economic contraction, many will turn to churches for (cheaper) daycare, food items, entertainment, clothing, etc. Wealthier mainline protestants may not need to substitute for cheaper services, so they are less likely to turn to the church during an economic downturn.

Beckworth also notes something else of interest:
Individuals may also turn to churches for less tangible consumption needs such as a sense of certainty and divine guidance in a job search...In addition, mainline Protestant denominations often place less emphasis on absolute truths than evangelical ones and, as a result, are not able to create the same sense of certainty or appeal to an all powerful, job-providing God. Individuals, therefore, may choose to join an evangelical Protestant denomination rather a mainline one during a recession.[1] Consequently, the consumption smoothing ability of churches also points to a stronger countercyclical component for evangelical Protestants.

[1] Conversely, these same individuals may find a mainline Protestant denomination more appealing than an evangelical one during an economic upturn when the need for certainty and employment are less pressing concerns.

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