The financial crisis of 2007 to 2009 took a tremendous toll on household wealth and shattered the sense of financial security for millions of American families. American households lost more than $20 trillion in wealth (in 2012 dollars) in the Great Recession, and households still had $10 trillion less in wealth at the end of 2012 than they had before the crisis. This massive wealth decline contributed to a widespread loss of economic security, particularly among lower-income and moderate-income families, single women, and communities of color.
This economic insecurity can have long-ranging adverse effects on U.S. economic growth as American families:
- Invest less in new businesses, which slows productivity growth and innovation
- Save less for large long-term expenses such as retirement and their children’s college tuitions, which leads to less-stable financing for capital investments
- Become less likely than they would with more wealth to switch jobs and careers when better opportunities arise, which slows employees’ productivity
The bottom line: Economic insecurity from decimated household wealth today could potentially reverberate through our nation’s economy for a long time through slower growth, fewer jobs, and lower living standards. Helping households rebuild their wealth should therefore be a top policy priority.
Weller, Christian and Ungar, Sam, "The Universal Savings Credit" (2013). Public Policy and Public Affairs Faculty Publication Series. 48.
Center for American Progress