Wealth. Yuval Elmelech
effort, and relative contributions to the well-being of society—has been drastically eroded and is no longer tenable.
These sentiments are further complicated by a seeming paradox in the rise in wealth inequality. Namely, while the unequal distribution of wealth in many rich countries has increased over the past 40 years—reaching, in some cases, levels similar to those in the early twentieth century (Piketty 2014)—this period has also witnessed the emergence of a property-owning middle class. This new propertied class includes an increasing number of households in the middle ranks of the wealth distribution that have a greater stake in the financial and real estate markets. A running theme in this book is that wealth matters more today than ever before, not simply because wealth has become disproportionately concentrated, but precisely because it is a principal source of financial security (and anxiety) for a growing number of families.
In this new economic landscape, the meaning of wealth varies considerably depending on one’s location on the wealth ladder. For the affluent elite, accumulated wealth represents economic, social, and political capital that is transferred across generations. Members of the propertied middle class, meanwhile, have come to a realization that their near-exclusive reliance on the labor market as a source of economic remuneration is no longer sufficient to maintain an adequate standard of living and that their, and their children’s, socioeconomic status is increasingly dependent on access to tangible and financial assets. Yet, while for these families wealth has become a key source of economic security and an important determinant of standard of living, the new wealth landscape has also brought mounting financial risks and liabilities in the form of rising debt driven by student loan, auto loan, mortgage, and credit card balances. Finally, for an increasing number of households, even a modest amount of wealth remains unattainable. In both absolute and relative terms, millions of households in the bottom ranks of the wealth distribution have seen their economic conditions worsening and their debt levels growing. Some segments of the population—children, students, certain ethnic and racial groups, recent immigrants, and women—are particularly vulnerable to this changing wealth terrain. These economic and social disparities are often a product of the life-course processes of cumulative advantage or disadvantage (CA/D) (Mills 1956; Merton 1995; DiPrete and Eirich 2006; Crystal et al. 2017).
An overview of the book
To explore the trends mentioned here, this book unfolds in the following manner. The next chapter, “The Tenets of Wealth,” covers three themes. The first section identifies the three defining properties of wealth—assets, portfolios, and net worth—and explains how wealth differs from conventional measures of socioeconomic well-being such as employment, occupational attainment, income, and poverty and why it is in some respects superior to these other measures. The second section provides an overview of the early sociological perspectives on private property, wealth, and class divisions, highlighting the social origin of wealth as a product of exclusion, exchange, and transfers. The chapter then clarifies why the study of wealth is critical not only to our understanding of economic status but also as a significant determinant of other measures of quality of life. Following a brief explanation of the renewed interest in wealth accumulation and stratification since the mid-1980s, the third section presents the theoretical framework that guides the book. The model merges life-course wealth trajectories with CA/D processes that are embedded in macro- and meso-level structures. Each of the components of the model—from a macro-level analysis of markets to micro-level explanations that focus on family life-course trajectories—is covered in depth in at least one of the subsequent chapters.
While empirical research on wealth mobility typically focuses on the micro-level characteristics of individuals and households, the big picture, and specifically the role of markets in shaping these family trajectories, are often overlooked. Chapter 3, “The Evolution of Wealth,” provides a historical overview of the emergence of net worth as a key measure of socioeconomic well-being and household financial security. After a brief review of the global distribution of wealth, I examine historical trends in accumulation, composition, and inequality within industrialized nations. One of the key arguments presented in this chapter is that, following the end of what is known as “the golden age of capitalism” in the 1970s, the decline in labor market remuneration and social insurance programs has coincided with the increasing importance of private property and personal wealth as key pillars of financial security. Changes in the structure and function of labor, housing, and financial markets, moreover, have created new connections between markets, solidified existing ones, and established innovative and more direct ties between households and markets. Examples range from the rise of precarious work and the shift to defined-contribution pension plans, to securitization, to the democratization of credit, and to the financialization of housing. Representing some of the most important transformations in the stratification system since the early twentieth century, these developments have provided novel opportunities for wealth buildup and upward mobility, but they have also exposed an increasing number of households to unprecedented levels of risk, high debt, and negative wealth. The economic and social mechanisms responsible for these increasing economic disparities, which resemble CA/D processes, culminated in the financial crisis of 2007–2008 and its aftermath.
Moving away from these macro-level historical trends, which provide the context for wealth accumulation processes, the fourth chapter, “Individuals, Families, and Generations,” studies families as economic units. The chapter provides an overview of the more established theoretical models of socioeconomic attainment, which treat the individual as the unit of analysis. It evaluates the circumstances under which these theories are useful in explaining variations in wealth holding, while also incorporating recent findings on the role of individual traits in social mobility. This assessment of the literature stresses that the family is the more appropriate unit of analysis in wealth studies and, additionally, that the scope of family exchanges extends beyond the boundaries of the nuclear family. Demographic trends associated with the second demographic transition—in particular, changes in marriage patterns and in adult living arrangements, the decline in fertility rates, and the remarkable increase in life expectancy, which has added a generation to intergenerational ties—have had a profound effect on wealth mobility within and across generations. The family life-course perspective is used in this chapter to explain wealth mobility and to illuminate the extent to which cumulative advantages and disadvantages over the life course are responsible for the replication of wealth inequality. Specifically, the chapter examines intragenerational exchanges associated with family formation (e.g. cohabitation, marital history, mate selection, fertility) and intergenerational transfers (e.g. inter vivos gifts and bequests) and their influence on wealth mobility and inequality.
Chapter 5 focuses on meso-level processes of wealth buildup and inequality that are associated with social group membership. Adopting an analysis of the extremes approach, the chapter first looks at the wealth trajectories of the so-called one percent alongside those of the asset-poor, presenting explanations for upward and downward wealth mobility in the new wealth terrain. The chapter also explores what role, if any, luck (“being in the right place at the right time”) plays in wealth mobility. The remainder of the chapter draws on the changing social and demographic makeup of many rich countries in order to study the social demography of wealth inequality. The aim is to assess the extent to which inequalities at the group level mediate the effects of macro-level processes on household wealth accumulation. Special attention is paid to effects of the interaction between economic status and features pertaining to social group membership such as ethnicity, race, gender, and religious affiliation. Explanations for this interactive form of CA/D processes vary from discriminatory practices in multiple markets to group differences in socioeconomic attributes and to the direct and indirect effects of cultural orientation.
Relying on the tentative CA/D model presented in the first chapter, the concluding chapter presents the main findings of the book. It then integrates the various processes of wealth buildup—macro-level institutional arrangements, changing demographic structures, group membership, and the role of family