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

Building on evidence of increasing inequality with the 2008–2009 recession, Drs. Emily Rauscher and William Elliott 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. These findings provide further evidence of the importance of an asset foundation for household economic security, with implications for public policy in the post-recession economy.

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January 2015

 

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