Wealth as Security: Growth Curve Analyses of Household Income and Net Worth During a Recession

Abstract

Building on evidence of increasing inequality with the 2008-9 recession, we ask 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 compare 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 find 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.

Food Insecurity, Financial Shocks, and Financial Coping Strategies among Households with Elementary School Children in Wisconsin

“…Beyond income levels, other research points to income shocks and unemployment, captured by observed changes in income and/or employment across survey periods (see Gundersen and Gruber 2001;Heflin 2016;Jacknowitz, Morrissey, and Brannegan 2015;Leete and Bania 2010). Income volatility is an increasing focus of research attention in the broader literature on economic well-being (e.g., Dynan, Elmendorf, and Sichel 2012;Morduch and Schneider 2017;Rauscher and Elliott 2016), and qualitative research suggests that this volatility is associated with considerable challenges in meeting household food needs (Edin et al 2013).…”

Families’ Financial Stress & Well-Being: The Importance of the Economy and Economic Environments

“…At the same time, we contend that recent published literature on families' financial stress places too little emphasis on economic environments and, by extension, the economy (Friedline, Nam et al 2014;Lai 2011;Rauscher and Elliott 2016;Thorne 2010;Vesely et al 2015), and often focuses on explanations rooted within individuals and families (Deidda 2015;Gjertson 2016;Park and Kim 2018;Romo 2014;Stein et al 2013;Tobe et al 2016;Valentino et al 2014). This lopsided emphasis is common for articles in journals whose scope is similar to that of JFEI, such as journals focused on family or household finance, counseling, and planning.…”

“… Methods : Logit regression Data set : survey of consumer finances Longitudinal : 2007–2009 N = 3875 Outcome variable(s) : savings account ownership Black and Latinx families were less likely to possess a savings account, 5% of lower-income Black families had other liquid assets while 23% of lower-income white families held other liquid assets Families had to experience a large wealth or income loss (over 50%) before they were less likely to own or open a savings account 6. Rauscher and Elliott ( 2016 ) Income, wealth, and debt How did income and wealth changes among higher and lower income households? Methods : multivariate growth model Data set : panel study of income dynamics Longitudinal : 1989–2011 N = 3189 households Outcome variable(s) : rate of change income; rate of change net worth Initial income was associated with more rapid wealth change among high- but not low-income households Initial wealth was associated with slower changes in wealth in high-income households than in low-income households Initial wealth buffered higher income households more from income changes than in low-income households 7.…”

“…The Great Recession weakened the financial well-being of many families, placing them at risk by destabilizing income-producing and wealth-generating mechanisms (Friedline et al 2014 ; Lee and Kim 2018 ; Rauscher and Elliott 2016 ; Rhine et al 2016 ). Families experienced significant changes or disruptions to their income, wealth, and debt during and after the economic downturn (Federal Reserve Bank of New York 2019 ).…”

Possible Extension of Regional Statistics – Households' Wealth – Methods and Preliminary Results

“…Time series are analyzed, especially with respect to last big economic and financial crisis after the year 2009 (e.g. Rauscher and Elliott, 2016). Another type of analyses refers to distribution of total national household wealth according to age or social group (e.g.…”