Wealth Loss during the Great Recession: Facts, Impacts and Policy Remedies

According to recent estimates, over 60 percent of U.S. households experienced a decline in wealth during the Great Recession. High rates of unemployment meant that many families could not make mortgage payments and lost their homes, and even those able to keep their homes saw their value plummet. Other families lost assets in the stock market decline, and still others were forced to make early withdrawals from retirement accounts or rely on credit cards to pay day-to-day expenses. While the general picture of financial decline is clear, much less is known about who has been most affected by the recession or how this might compare to prior recessions.

Using data from the Survey of Consumer Finance (SCF) from 1983-2010, Signe-Mary McKernan and Caroline Ratcliffe of the Urban Institute will analyze wealth trends over the last three decades and household responses to changes in wealth as a result of the Great Recession. They will assess changes in families’ net worth and its components from 1983-2010, and examine differential patterns of wealth accumulation by families’ race, education, income level, and stage in lifecycle. They plan to address the magnitude of wealth loss as a result of the Great Recession and prior recessions, which groups have lost the most, and to what extent families have been protected by previous wealth accumulation. Finally, they will also examine whether the Great Recession has caused any fundamental changes in financial behavior.