Date Published: April 4, 2019
Publisher: Public Library of Science
Author(s): Dana A. Glei, Noreen Goldman, Maxine Weinstein, M. Harvey Brenner.
We demonstrate widening socioeconomic disparities in perceived economic distress among Americans, characterized by increasing distress at the bottom and improved perceptions at the top of the socioeconomic ladder. We then assess the extent to which hardships related to the Great Recession account for the growing social disparity in economic distress. Based on the concept of loss aversion, we also test whether the psychological pain associated with a financial loss is greater than the perceived benefit of an equivalent gain. Analyses are based on longitudinal survey data from the Midlife Development in the US study. Results suggest that widening social disparities in perceived economic distress between the mid-2000s and mid-2010s are explained in part by differential exposure to hardships related to the Great Recession, the effects of which have lingered even four to five years after the recession officially ended. Yet, auxiliary analyses show that the socioeconomic disparities in economic distress widened by nearly as much (if not more) during the period from 1995–96 to 2004–05 as they did during the period in which the recession occurred, which suggests that the factors driving these trends may have already been in motion prior to the recession. Consistent with the loss aversion hypothesis, perceptions of financial strain appear to be somewhat more strongly affected by losses in income/assets than by gains, but the magnitude of the differentials are small and the results are not robust. Our findings paint a dismal portrait of a growing socioeconomic divide in economic distress throughout the period from the mid-1990s to the mid-2010s, although we cannot say whether these trends afflict all regions of the US equally. Spatial analysis of aggregate-level mortality and objective economic indicators could provide indirect evidence, but ultimately economic “despair” must be measured subjectively by asking people how they perceive their financial situations.
The Great Recession (December 2007 to June 2009) undoubtedly contributed to the growing socioeconomic divide in the United States; the evidence suggests that those with lower levels of socioeconomic status (SES) were hit harder than their more advantaged counterparts [1–4]. Taylor, Morin & Wang  found that 55% of Americans “lost ground” during the Great Recession (based on cluster analysis of various hardships including unemployment, missed rent/mortgage payments, and reduced income), whereas the remaining 45% remained largely unscathed; the fraction suffering multiple recession-related hardships declined with education, income, and wealth. Similarly, Bricker et al.  reported that, during 2007–09, more than 60% of families experienced a decline in wealth and one-quarter lost more half their wealth, but another quarter of Americans gained more than 25% in terms of wealth; those with higher income and more wealth in 2007 were less likely to experience a subsequent decline in wealth.
Table 1 shows descriptive statistics for all of the analysis variables. On average, inflation-adjusted household income declined by just over $3,200 between M2 (2004–05) and M3 (2013–14) among this sample, but net assets of the respondent and spouse combined increased by an average of $31,300 over the same period. Yet, the mean change in assets is deceptive because the distribution of assets is so skewed. For example, the percentage who reported no net assets actually increased from 18% at M2 to 20% at M3, and the median change in net assets was zero (see S4 Text for more details regarding changes in assets).
Widening social disparities in perceived economic distress between the mid-2000s and mid-2010s in the U.S. can be explained in part by differential exposure to hardships related to the Great Recession, the effects of which have lingered even four to five years after the recession officially ended. Our results, which suggest that individuals with less education were much harder hit by the Great Recession, are consistent with other findings based on MIDUS  and other data [1–3]. Although the final wave in the MIDUS survey was fielded three to four years after the start of an economic boom that followed the Great Recession, we find a growing socioeconomic divide.
Our findings paint a dismal portrait of a growing socioeconomic divide in economic distress throughout the period from the mid-1990s to the mid-2010s, one that mirrors recent increases in psychological distress and decreases in well-being among those with lower relative SES . These two trends are almost certainly linked and may relate to increasing economic and psychological “despair” that have been hypothesized to be a root cause of increases in the deaths of despair. Researchers have been struggling to understand these rising deaths rates and have deemed simple explanations such as easier access to opioids and short-term declines in employment and wages as insufficient. Deaton (p. 3, ) described deaths of despair “as suicides in one form or another …that respond more to prolonged economic conditions than to short-term fluctuations, and especially social dysfunctions, such as loss of meaning in the interconnected worlds of work and family life, that come with prolonged economic distress”.