July 11, 2011
A recent Gallup Poll captured the social zeitgeist of an America attempting to emerge from the 2008 Great Recession. The nationally representative survey showed that feelings of psychological distress such as worry, anger, and depression increased with the duration of joblessness. Less than 40 percent of those who had been searching for a job for at least 11 weeks rated their lives as ‘thriving’, while most unemployed Americans expected that they would have to settle for a job that they did not want. These feelings are pervasive in the country with the unemployment rate having reached 9.6 percent in 2010, the highest annual rate since 9.7 percent in 1982. Well beyond its onset, it is clear that the Great Recession has taken a severe and extensive toll on American families. This toll is likely to be especially hard felt for families who already scrape-by on limited earnings and are more likely to work in temporary, part-time, and unstable jobs.
It is important for policymakers to understand how families experience and interpret economic strain at a time when many are struggling to respond to and cope with negative financial events. Strain brought about by economic conditions is considered a type of psycho-social stress experienced both at the individual level and the family (collective) level. Economic strain is defined as the psychological pressure felt when family economic resources are not sufficient to continue established patterns of family functioning and norms. In the following, we highlight how asset holdings (savings, checking, homes, vehicles, and retirement accounts), as distinctly separate from household income, matter for families as they manage economic strain. This research brief has three objectives. First, we review the evidence on the direct and indirect stresses that are placed on individuals and families during times of economic downturn. Second, we summarize recent research findings by Rothwell and Han showing how assets function as a stress-suppressor (i.e., they directly and indirectly reduce economic strain as measured by nine items assessing the extent to which families felt they could make ends meet financially). Third, we emphasize the importance of short-term discretionary savings (SDS) and underscore two policies that show promise for building asset security among families traditionally left out from mainstream asset building opportunities.
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