Wealth as Security: Growth Curve Analyses of Household Income and Net Worth During a Recession
- 365 Downloads
Building on evidence of increasing inequality with the 2008–2009 recession, we asked whether households experienced different financial trajectories through the recession depending on initial income and net worth. Using growth curve models of households headed by young adults in the Panel Study of Income Dynamics, we compared the relationship between initial income and net worth and the rate of change of income and net worth from 1989 to 2011 among households with income above and below $50,000. We found different patterns of income change and different relationships among income, net worth, and their rates of change between high- and low-income categories. Results suggest initial wealth helped to stabilize income and wealth changes among higher income households, reducing financial insecurity.
KeywordsIncome Inequality Recession Wealth
- Acs, G., & Zimmerman, S. (2008). US Intragenerational economic mobility from 1984 to 2004: Trends and implications. Washington, DC: The Economic Mobility Project.Google Scholar
- Becker, G. S. (1964). Human capital: A theoretical and empirical analysis, with special reference to education. New York: Columbia University Press.Google Scholar
- Browne, M. W., & Cudeck, R. (1993). Alternative ways of assessing model fit. In K. A. Bollen & J. S. Long (Eds.), Testing structural equation models (pp. 136–162). Newbury Park, CA: Sage.Google Scholar
- Center on Budget and Policy Priorities. (2015). Chart book: The legacy of the Great Recession. Washington, DC: Center on Budget and Policy Priorities. Retrieved Feb 19, 2015 from http://www.cbpp.org/cms/index.cfm?fa=view&id=3252.
- Duncan, G. J., & Murnane, R. J. (Eds.). (2011). Whither opportunity? Rising inequality, schools, and children’s life chances. New York: Russell Sage Foundation.Google Scholar
- Emmons, W. R., & Noeth, B. J. (2012). Household financial stability: Who suffered the most from the crisis? The Regional Economist, 20, 11–17.Google Scholar
- Ermisch, J., Jantti, M., & Smeeding, T. M. (Eds.). (2012). From parents to children: The intergenerational transmission of advantage. New York: Russell Sage Foundation.Google Scholar
- Featherman, D. L., & Hauser, R. M. (1978). Opportunity and change. New York: Academic Press.Google Scholar
- Fletcher, M. A. (2008, April 10). Can’t get ahead, hard to keep up: A new poll finds Americans feeling a lot more squeezed. Washington Post, p. D01.Google Scholar
- Frank, R. H. (2013). Falling behind: How rising inequality harms the middle class. Berkeley, CA: University of California Press.Google Scholar
- Grusky, D. B., Western, B., & Wimer, C. (2011). Consequences of the Great Recession. In D. B. Grusky, B. Western, & C. Wimer (Eds.), The Great Recession (pp. 3–20). New York: Russell Sage Foundation.Google Scholar
- Hacker, J. S., Huber, G. A., Nichols, A., Rehm, P., & Craig, S. (2011). Economic insecurity and the Great Recession: Findings from the economic security index. New Haven, CT: Economic Security Project. Retrieved Feb 19, 2015 from http://economicsecurityindex.org/assets/ESI%20Full%20Report%202011.pdf.
- Harrison, B., & Bluestone, B. (1988). The great U-turn: Corporate restructuring and the polarizing of America. New York: Basic Books.Google Scholar
- Heckman, J. J., Lochner, L. J., & Todd, P. E. (2006). Earnings functions, rates of return and treatment effects: The Mincer equation and beyond. In E. Hanushek & H. Welch (Eds.), Handbook of the economics of education (Vol. 1, pp. 307–458). Amsterdam: North-Holland.Google Scholar
- Hughes, J. W., & Seneca, J. J. (2010). Post-recession America: A new economic geography? Advance & Rutgers Report, 3, 1–19. Retrieved Feb 19, 2015 from http://www.policy.rutgers.edu/reports/arr/A&RR3july10.pdf.
- Klontz, B. T., & Britt, S. L. (2012). How clients’ money scripts predict their financial behaviors. Journal of Financial Planning, 25(11), 33–43.Google Scholar
- Mincer, J. (1974). Schooling, experience and earnings. New York: Columbia University Press for National Bureau of Economic Research.Google Scholar
- Mishel, L., Bivens, J., Gould, E., & Shierholz, H. (2013). The state of working America (12th ed.). Ithaca, NY: Economic Policy Institute Book, Cornell University Press.Google Scholar
- Mishel, L., & Shierholz, H. (2013). A decade of flat wages: The key barrier to shared prosperity and a rising middle class. Washington, DC: Economic Policy Institute. Retrieved Feb 19, 2015 from http://www.epi.org/publication/a-decade-of-flat-wages-the-key-barrier-to-shared-prosperity-and-a-rising-middle-class/.
- Pew Research Center. (2010). A balance sheet at 30 months: How the Great Recession has changed life in America. Washington, DC: Pew Research Center. Retireved from http://www.pewsocialtrends.org/files/2010/11/759-recession.pdf.
- Shapiro, T. M. (2004). The hidden cost of being African American: How wealth perpetuates inequalities. New York: Oxford University Press.Google Scholar
- Shapiro, T., Meschede, T., & Osoro, S. (2013). The roots of the widening racial wealth gap: Explaining the black-white economic divide. Waltham, MA: Brandeis University, Institute on Assets and Social Policy. Retrieved Feb 19, 2015 from http://iasp.brandeis.edu/pdfs/Author/shapiro-thomas-m/racialwealthgapbrief.pdf.
- Sherman, A., & Stone, C. (2010). Income gaps between very rich and everyone else more than tripled in last three decades, new data show. Washington, DC: Center on Budget and Policy Priorities. www.cbpp.org/files/6-25-10inc.pdf.
- Stein, C. H., Hoffmann, E., Bonar, E. E., Leith, J. E., Abraham, K. M., Hamill, A. C., et al. (2013). The United States economic crisis: Young adults’ reports of economic pressures, financial and religious coping and psychological well-being. Journal of Family and Economic Issues, 34, 200–210. doi: 10.1007/s10834-012-9328-x.CrossRefGoogle Scholar
- Trumbull, M. (2013, November 13). Businesses cut full-time workers to meet Obamacare mandate, study says. Christian Science Monitor. Retrieved Feb 19, 2015 from http://www.csmonitor.com/USA/Politics/2013/1113/Businesses-cut-full-time-workers-to-meet-Obamacare-mandate-study-says-video.
- US Bureau of Labor Statistics. (2012). The recession of 2007-2009. BLS spotlight on statistics of the recession of 2007-2009. Washington, DC: Bureau of Labor Statistics. Retrieved Feb 19, 2015 from http://www.bls.gov/spotlight/2012/recession/pdf/recession_bls_spotlight.pdf.
- Wolff, E. N. (1995). Top heavy: A study of the increasing inequality of wealth in America. New York: Twentieth Century Fund Press.Google Scholar
- Wolff, E. N., Owens, L. A., & Burak, E. (2011). How much wealth was destroyed in the Great Recession? In D. B. Grusky, B. Western, & C. Wimer (Eds.), The Great Recession (pp. 127–160). New York: Russell Sage Foundation.Google Scholar
- Woodward, M. C. (2013, December 19). The US economy in 2022: Setting into a new normal. Monthly Labor Review. Washington, DC: US Bureau of Labor Statistics. Retrieved Feb 19, 2015 from http://www.bls.gov/opub/mlr/2013.