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.