American Life in Debt

• In Event: 2350 - Economic Sociology and New Mechanisms for the Production of Inequality

Abstract

Household debt has grown tremendously in the era of financialization. The debt of the average American family increased from 65 percent of their disposable income before 1980 to 132 percent at the onset of the Great Recession. We examine how financialization exacerbates inequality through the expansion of household debt. We find that both debt and debt burden are unequally distributed among American families. Importantly, those with high debt are rarely those with high debt burden. Among affluent households, having a large sum of outstanding debt reflects their advantageous access to credit and position to build wealth. Meanwhile, we find that low-income households have not benefited much from the expansion of credit. Most of these families have little access to credit from mainstream lenders. For those who are able to borrow, credit tends to come with an expensive price tag, which puts a destructive burden on their financial health. Consequently, the expansion of credit has made the majority of American families economically vulnerable, except for those already with abundant resources.

Authors

• Ken-Hou Lin, University of Texas-Austin

• Megan Tobias Neely, Stanford University