Many people lost their life savings after the markets crashed in 2008, and the global recession that followed saw millions losing their jobs as well as their nest eggs. Adult children returned home to live with their parents in order to rebuild their income and savings. For some, the drop to even more precipitous, they lost significant portions of their total net worth. The concept of “Negative Wealth Shock” was addressed in a recent article in the Journal of the American Medical Association by Lindsay Pool from Northwestern University, Feinberg School of Medicine.
What is Negative Wealth Shock?
Pool looked at the sudden loss of wealth and its impact on mortality in 8174 adults aged 51-61 who were assessed in 1994, with follow-ups biennially through 2014. Pool defines negative wealth shock as losing over 75% of one’s total net worth in a 2-year period; adults who had asset poverty, or zero or negative total net worth were also included. The authors then looked at mortality data from the National Death Index to examine the relationship between wealth loss and risk of dying.
More than 25% of the participants experienced negative wealth shock over the 20-year study period; this was associated with a 50% increase in mortality even when statistically controlling for initial levels of wealth. The authors suggest that negative wealth shock could be a potential risk factor for mortality across the socio-economic spectrum. Results also indicate that those who lost their homes had higher mortality rates than those who kept their homes. This downward financial spiral has additional consequences: less money also results in fewer means to pay for needed medical care or medications, which in turn can also contribute to a decline in health status.
Downshift in Income Mobility
Income disparity and impact on health status are not a new concept. In 2013, Fabien Pfeffer from the University of Michigan published a paper in the Annals of American Academy of Political Social Science examining the trends before and after the “Great Recession.” Between 2007-2011, over 25% of Americans lost at least 75% of their wealth, and more than 50% lost at least 25%. Significant changes in the labor, housing, and stock markets drastically reshaped the US economy and the lives of many Americans. These dramatic shifts were felt more keenly by low income, less educated, and minority households. Pfeffer’s analysis showed that for the lowest income quintile, median wealth in 2011 fell to 26% of their 2003 level, as compared to 81% of the 2003 level for the highest income quintile. Over the eight years of the study, the relative wealth losses were far higher for the less advantaged, and over 30% of middle-income quintile households saw a downward shift in their wealth mobility.
Wealth and Health
Does the relationship between health and wealth also hold if the changes are more gradual and not brought about by global recessions or drastic drops in total net worth? Anjum Hajat and colleagues from the University of Michigan published a paper to ask and answer this very question in the American Journal of Epidemiology. In addition to looking at wealth and mortality, the authors also looked at self-rated general health status. They differentiate between wealth, i.e. assets accumulated over a lifetime, versus income, i.e. the flow of money into a household. Overall, Hajat and colleagues found a robust wealth-health association: less wealthy men and women had poorer self-reported health status when compared to their more affluent counterparts, and less wealthy men and women also had higher mortality rates (62% increased risk, and four excess deaths per 1000/persons). In general, women reported poorer health compared to men.
The common thread through all these studies is that there is a transparent gradient of wealth and health, more wealth seems to lead to better health and longer life. Lessons from the recent recession and the impact on the health of large populations should inform not just fiscal policy but also the allocation of spending to mitigate the negative health impact of income disparity.
Tailoring approaches will also be necessary to meet people where they are in regards to managing their health and chronic conditions. Women seem to be more at risk for poorer health over the course of the Hajat study, but poorer men had higher mortality. Developing approaches to address these differences will be necessary. The impact of the recent recession are further pressing on the fulcrum of inequity to shape a new equilibrium – one which, if not managed well, can have significant negative consequences for the health of Americans.
Thanks for reading—Trina
(Opinions are my own)
Negative Wealth Shock
Wealth Disparities and the Great Recession
Long-Term Effects of Wealth on Mortality