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The Journals of Gerontology Series B: Psychological Sciences and Social Sciences logoLink to The Journals of Gerontology Series B: Psychological Sciences and Social Sciences
. 2015 Aug 25;71(4):734–744. doi: 10.1093/geronb/gbv054

Responses to Financial Loss During the Great Recession: An Examination of Sense of Control in Late Midlife

Shannon T Mejía 1,✉, Richard A Settersten Jr 1, Michelle C Odden 2, Karen Hooker 1
PMCID: PMC5013892  PMID: 26307482

Abstract

Objectives:

The “Great Recession” shocked the primary institutions that help individuals and families meet their needs and plan for the future. This study examines middle-aged adults’ experiences of financial loss and considers how socioeconomic and interpersonal resources facilitate or hinder maintaining a sense of control in the face of economic uncertainty.

Method:

Using the 2006 and 2010 waves of the Health and Retirement Study, change in income and wealth, giving help to and receiving help from others, household complexity, and sense of control were measured among middle-aged adults (n = 3,850; age = 51–60 years).

Results:

Socioeconomic resources predicted both the level of and change in the engagement of interpersonal resources prior to and during the Great Recession. Experiences of financial loss were associated with increased engagement of interpersonal resources and decreased sense of control. The effect of financial loss was dampened by education. Sense of control increased with giving help and decreased with household complexity.

Discussion:

Findings suggest that, across socioeconomic strata, proportional loss in financial resources resulted in a loss in sense of control. However, responses to financial loss differed by socioeconomic status, which differentiated the ability to maintain a sense of control following financial loss.

Keywords: Agency, Financial loss, Great recession, Household complexity, Intergenerational transfers, Interpersonal resources, Sense of control, Structure

Between January 2008 and February 2010, 8.8 million people lost their jobs (Goodman & Mance, 2011), real personal income declined by 6%, and net household wealth fell by 15% (Moore & Palumbo, 2010). The “Great Recession” brought simultaneous shocks to employment, housing, and stock markets (Farber, 2011). These shocks created significant instability in the primary institutions that help individuals and families meet their current needs and plan for the future.

In this study, we examine middle-aged adults’ experiences of financial loss during the recession and investigate how socioeconomic and interpersonal resources facilitate or hinder maintaining a sense of control in the face of economic uncertainty. Although immediate effects of the recession were felt most profoundly by young and unskilled workers (Goodman & Mance, 2011), those in later middle age, with concern for their present and future selves, children, and parents, were affected in ways that reverberated throughout society. Midlife is arguably the most advantaged, but also the most strained, period of life. At the peak of their careers, adults at midlife have accumulated social and financial capital. As a group, middle-aged people hold considerable political power and fulfill primary roles in socializing younger generations (Lachman, 2001). However, midlife is also strained by the nearness of retirement and ongoing responsibilities for others across family generations, which also make it difficult to recover from financial losses (Damman, Henkens, & Kalmijn, 2013; Lachman, 2001; Remle, 2011).

A Life Course Examination of Agency within Structure

Models of “human agency within social structure” probe how individuals make decisions and take actions to exert control over their lives amid the constraints of their current and cumulative social circumstances (Heckhausen, Wrosch, & Schulz, 2010; Settersten & Gannon, 2005). In the present study, financial losses are measures of exogenous shock to individuals’ lives. “Agency” is conceptualized as change in the engagement of interpersonal resources in response to financial loss, which we conceptualize as occurring within the “structure” of unequally distributed socioeconomic resources. We measure the efficacy of these efforts by examining change and stability in individuals’ sense of control during the study period. Figure 1 presents our conceptual model of how responses to financial loss are structured through socioeconomic resources.

Figure 1.

Figure 1.

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Conceptual model of how responses to financial loss are structured by socioeconomic resources.

Is All Financial Loss the Same?

Although the effects of the recession were broad in reach, we focus on losses in income and wealth. Economic structures of income and wealth exist in distinct temporal frames (Mankiw, 2014). Although conditioned by earlier phases of the life course, income is present oriented in its relevance to current needs such as housing, food, and daily expenses. Losing income therefore requires immediate adaptation (Baek & DeVaney, 2010). Saving, on the other hand, exists in a future-oriented sphere (Modigliani, 1988) and requires diverting present resources toward future needs. Losing wealth may therefore reduce the number of options available to adapt to financial loss in late midlife and foreclose opportunities such as retirement (Chakrabarti, Lee, van der Klaauw, & Zafar, 2011; Szinovacz, Martin, & Davey, 2014).

Socioeconomic resources may also shape individuals’ experiences of and responses to financial loss. At midlife, available socioeconomic resources reflect the accumulation of advantage and disadvantage (Dannefer, 2003). We focus on income and education as key socioeconomic resources. Income, as a “proximal” social resource that helps meet immediate needs, not only contributes to reserves that buffer the effect of difficult experiences (Conger, Conger, & Martin, 2010) but also shapes the form and the function of social networks (Litwin & Shiovitz-Ezra, 2011). Education, as a more “distal” social resource in contrast, facilitates the development of self-efficacy and control and also shapes the distribution of opportunities and constraints over time (Dannefer, 2003; Mirowsky & Ross, 2007). Although education is rarely studied as a moderator of individuals’ responses to financial strain (see Conger et al., 2010), it is associated with broader social networks and a wider employment opportunities (Damman et al., 2013). As a result, middle-aged workers with lower education are less likely to benefit from flexible career paths and are more likely to be displaced. In contrast, workers with higher education may experience the loss of employment as an opportunity to expand professional experiences (Elman, 2011). Education may therefore channel adaptive pathways and dampen the impact of financial loss.

Engagement of Interpersonal Resources and Financial Loss

Relationships with others provide resources that individuals actively build and nurture in an effort to meet their changing needs across the life course (Antonucci, Fiori, Birditt, & Jackey, 2010). Research has shown that individuals engage interpersonal resources in an effort to adjust to social change and that the resulting interdependence of social partners also guides life decisions (Conger et al., 2010; Remle, 2011). The form and function of interpersonal resources are also conditioned by broader aspects of social structure (e.g., the population’s age structure, or social policies that reinforce or release interdependence in relationships) in a particular historical time and place (Hagestad, 2003). The two forms of interpersonal resources examined in this study—household complexity and giving help to and receiving help from others—occurred in the context of extended life expectancy, smaller families, prolonged dependence of adult children, and the privatization of pensions (Connidis, 2014).

Households become more complex as individuals beyond the primary family (parents and dependent children) coalesce to share housing resources in an effort to reduce the cost of living and support others’ needs. Although modern households are more nuclear (Cherlin, 2010; Merchant, Gratton, & Gutmann, 2012), families today house adult children, other family members, and occasionally boarders (Keene & Batson, 2010). Nevertheless, the nature of household complexity varies across socioeconomic strata. Households with fewer socioeconomic resources are generally more complex in composition as they assist multiple adult members in meeting their financial needs. For those with greater resources, in contrast, household complexity often relates to launching young adult children into adulthood (Igarashi, Hooker, Coehlo, & Manoogian, 2013; Keene & Batson, 2010).

Of course, families extend far beyond the confines of a single household, with individuals collaborating across extended kin networks to attend to the present and plan for the future (Cherlin, 2010). Giving and receiving help includes financial and in-kind exchanges (such as childcare, running errands, and home maintenance), and the form of exchanges differs depending on the socioeconomic resources available within the extended kin network (Connidis, 2014; Swartz, 2009). Individuals modulate the strength of ties with others by increasing or decreasing help given and received and also through relaxing or tightening definitions of kin and role responsibilities (Allen, Blieszner, & Roberto, 2011). Giving and receiving help increases the strength of ties within kin networks (Hagestad, 2003) and can influence important family decisions, such as geographic relocation (Deluca & Dayton, 2009) and career choices (Mattingly & Smith, 2010).

Maintenance of Sense of Control

Although individuals and families are known to actively engage their resources in response to external assaults (Conger et al., 2010), less is known about whether activating interpersonal resources facilitates or hinders the perceived capacity to exert influence over one’s life. The ability to create and maintain a sense of control is essential to health and well-being across the life span (Heckhausen et al., 2010), and the import of sense of control is accentuated in uncertain times (Diewald, Goedicke, & Mayer, 2006). It is also not equally distributed across the population but is highest among those who are afforded greater opportunities and have fewer life constraints (Mirowsky & Ross, 2007) and (at least the perception of) stable environments (Diewald et al., 2006). Mirowsky and Ross (2007) liken sense of control to wealth—a resource that accumulates slowly over time and reflects a balance of actual experiences with hopes for the future. Longitudinal studies have found sense of control to remain relatively stable in midlife and to decline significantly in late life (Slagsvold & Sørensen, 2013; Wolinsky, Wyrwich, Babu, Kroenke, & Tierney, 2003).

In this study, we focus on two general (rather than domain-specific) dimensions of control: perceived mastery and perceived constraints. Perceived constraints reflect barriers to obtaining goals that individuals believe to be beyond their control. In contrast, perceived mastery represents individuals’ perceptions of efficacy or capacity to work toward and achieve goals (Lachman & Weaver, 1998).

Research Aims

The impact of the Great Recession crossed socioeconomic boundaries and brought unexpected financial loss to many individuals and their families. We use this exogenous shock to examine the following aims:

  • 1. How socioeconomic resources predict the level of engagement in interpersonal resources prior to the recession and subsequent change in engagement into the recession. We expect the level of and change in engagement of interpersonal resources to differ across income and education levels. Giving help to others should be more prevalent among those with more resources, whereas household complexity and receiving help from others should be more common among those with fewer socioeconomic resources.

  • 2. How financial losses in income and/or wealth are associated with changes in the engagement of interpersonal resources and sense of control. Financial loss is expected to be broadly associated with increased engagement of interpersonal resources and decreased sense of control.

  • 3. How increased engagement of interpersonal resources following financial loss is associated with change in individuals’ sense of control. We expect that increased engagement of interpersonal resources will be associated with the maintenance of or an increase in sense of control.

Method

We used data from waves 8 and 10 (2006 and 2010) of the Health and Retirement Study (HRS), a nationally representative biennial panel study of approximately 22,000 Americans age 50 and older. The HRS is sponsored by the National Institute on Aging (NIA U01AG009740) and is conducted by the University of Michigan. Participants, including coresiding partners, were recruited through a probability design that oversampled Black and Hispanic minorities and Florida residents. Partners remained in the study, even if their partnership with the primary respondent was terminated. The present study includes 3,850 individuals between ages 51 and 60 years in 2006 who also completed the 2010 wave.

Measures of Financial Loss

Substantial Drop in Income

Household income was self-reported and imputed by RAND and included income from earnings, pensions and annuities, social security insurance and social security disability, social security retirement, unemployment and workers’ compensation, other government transfers, household capital income, and other income. Household income did not include financial contributions from others also residing in the household (Moldoff et al., 2013). To adjust for inflation and household size, income was divided by the annual federal poverty guidelines to calculate the Income:Need ratio for each household. Proportional change in Income:Need ratio was calculated using the proportional arc of change: ChangeT1,T2 = 100 × (Income:Need2010 − Income:Need2006) / [(Income:Need2010 + Income:Need2006) / 2] (Dahl, DeLeire, & Schwabish, 2011). Following research on annual household income volatility (Dahl et al., 2011), we defined 50 points on the proportional arc of change as substantial and unique from nonrecession circumstances.

Substantial Drop in Wealth

Household wealth was self-reported and then imputed by RAND to include the sum of all assets, minus all debt. Drawing on prior research, a 50% drop in wealth [(T1 − T2) / T1] was defined as substantial and unique from nonrecession circumstances (Chakrabarti et al., 2011). Experiences of stability and loss in income and wealth between the 2006 and 2010 waves were categorized to simultaneously consider loss in income and wealth and reduce the influence of extreme values: (0) stability/gain in income (arc of change > −50) and wealth (percent loss < 50%) was the referent group; (1) income loss (arc of change < −50) and wealth stability/gain (percent loss < 50%); (2) income stability/gain (arc of change > −50) and wealth loss (percent loss > 50%); and (3) loss in both income (arc of change < −50) and wealth (percent loss > 50%).

Effect Modifiers

Income, education, partnered status, and gender were considered separately as potential modifiers of the experience of financial loss. To avoid overspecifying the model, nonsignificant interactions were not included in the final analysis, except for partnered status because income and wealth were measured at the household level. Financial resources preceding the recession were quantified as quintiles of the 2006 income to need ratio. Education was classified as completion of the college degree (n = 1,317) or not. Respondents were coded as partnered (1,394 couples), if there were two respondents in the household in 2006.

Outcome Variables

Household Complexity

Household complexity was measured as the count of residents in the household above and beyond the primary family. Following the U.S. Census definition of shared housing, the following household members were included in the count: (a) adults who were 19 years or older and neither the householder nor the householder’s spouse or cohabiting partner and (b) children (younger than 19 years) if they were not the respondent’s biological, step, or adopted child.

Giving Help to and Receiving Help from Others

Giving help to others included counts of the number of (a) children (younger than 18 years and neither biological nor adopted) respondents were raising at the time of response; (b) grandchildren respondents gave care in the form of time to (defined in the survey as at least 100 hours of care in the last year); (c) children respondents gave money to (exchanges of at least $50 were counted); and (d) parents (or parents in law) respondents gave money to (defined in the survey as $500 or more over 2 years). An additional point was added when respondents reported giving money to other relatives (defined in the survey as help given vs no help given) and also when respondents provided help in the form of time to friends or relatives (defined in the survey as at least 50 hours in the last year).

Receiving help from others included counts of the number of (a) children respondents received money from (exchanges of at least $25 were counted); (b) parents respondents received money from (defined in the survey as an amount of $500 or more); and (c) other household members who contributed financially to the respondent’s household. An additional point was added when respondents reported receiving help from relatives (defined in the survey as help received vs no help received).

Sense of Control

Perceived constraints and perceived mastery were measured using the sense of control scale in the self-administered questionnaire (SAQ) (Lachman & Weaver, 1998). Perceived constraints (e.g., “I have little control over the things that happen to me”) and perceived mastery (e.g., “When I really want to do something, I usually find a way to succeed at it”) were each measured using five items on a Likert scale ranging from 1 (strongly disagree) to 6 (strongly agree). A higher score indicated higher perceptions of control in the respective domain. The inter-item reliabilities (Cronbach’s alpha) in 2006 and 2010 were high for both perceived constraints (.87, .88) and perceived mastery (.90, .90). Confirmatory factor analysis showed two factors to fit the data better than a single factor in this sample.

Covariates

Measures of functional health, race, and retirement were also included to adjust for other factors expected to be associated with the engagement of interpersonal resources and sense of control. Functional health was measured as change in a 12-item index of functional limitations, which included items such as being able to walk several blocks, lift heavy objects, and walk up the stairs. Race was self-reported and included three categories: White (n = 2,685), Black (n = 581), and Hispanic/other (n = 584). Retirement was self-reported and measured in 2010 (n = 701).

Analytic Plan

Descriptive comparisons of study covariates across experiences of financial loss were estimated simultaneously using multivariate regression. Multinomial logistic regression was used to estimate differences in the likelihood of experiencing financial loss compared with stability. For aim 1, using negative binomial regression, education, income, and study covariates predicted differences in the 2006 level of household complexity, giving help to others, and receiving help from others. For aims 2 and 3, the effects of financial loss on changes in the engagement of interpersonal resources and sense of control were estimated using conditional change generalized path models. By estimating the 2010 value conditional on baseline, conditional change models estimate change in the dependent variables across the two measurement periods. For aim 2, the effect of financial loss on change in the engagement of interpersonal resources was estimated using the full sample of HRS respondents who were 51–60 years old in 2006. For aim 3, a second model estimated the effects of financial loss on change in sense of control (and engagement of interpersonal resources) among the subset of respondents who were randomly assigned to and completed the SAQ in 2006 and 2010 (and therefore have data for the sense of control measure). This model also estimated the effect of change in the engagement of interpersonal resources on change in sense of control.

Missing Values

To identify systematic bias of missing variables, missingness was identified and then predicted against the study covariates using logistic regression. Missingness was accounted for using the robust maximum likelihood estimator, which uses all information from partial and complete observations and reduces bias presented by missing data, assuming values are missing at random (Acock, 2005).

Of the 4,457 respondents who met the age criteria and completed the 2006 wave, 504 did not participate in the 2010 survey. Higher income, identifying as Black, and functional limitations were associated with nonresponse in 2010. A total of 103 respondents reported neither income nor wealth in 2010; nonreporters were more likely to identify as Hispanic/other. The effect of financial loss on change in the engagement of interpersonal resources was estimated in the remaining sample of 3,850 middle-aged adults. The effect of loss on change in sense of control was estimated among a subset randomly assigned to the SAQ in 2006 and 2010 (n = 2,147). Respondents who completed at least one dimension of sense of control in both waves (n = 1,891) more likely identify as White and have fewer functional limitations.

Results

Table 1 summarizes the distribution of covariates across experiences of financial loss. In the sample of 3,850 middle-aged adults, 2,108 (55%) experienced relative stability in income and wealth, 646 (17%) lost income, 756 (20%) lost wealth, and 340 (9%) lost both income and wealth. The likelihood of experiencing financial loss compared with relative stability was not evenly distributed across the population. Women were more likely than men to lose income. Higher income in 2006 and retiring by 2010 increased the likelihood of losing either income or income and wealth. Respondents who identified as Black or Hispanic/other or with functional limitations were more likely to experience all forms of financial loss.

Table 1.

Summary of Study Covariates Across Stability and Loss in Income and Assets

Income: Stable Income: Loss Income: Stable Income: Loss
Wealth: Stable Wealth: Stable Wealth: Loss Wealth: Loss
n = 2,108 (ref) n = 646 n = 756 n = 340
M SD M SD M SD M SD
Δ Complexity −0.07 (0.98) 0.06* (1.04) −0.09 (1.37) 0.31* 1.41
Complexity 2006 0.57 (1.01) 0.56 (1.01) 0.88* (1.33) 0.62 (1.20)
Δ Receiving 0.03 (0.71) 0.06 (0.69) 0.11* (0.96) 0.24* (0.96)
Receiving 2006 0.26 (0.61) 0.29 (0.65) 0.44* (0.82) 0.42* (0.84)
Δ Giving −0.10 (1.81) −0.27* (2.02) −0.33* (2.17) −0.27 (2.09)
Giving 2006 2.34 (1.85) 2.36 (1.71) 2.49 (2.15) 2.25 (1.79)
Δ Constraints −0.01 (1.07) 0.08 (1.11) 0.05 (1.14) 0.13 (1.24)
Constraints 2006 2.12 (1.17) 2.09 (1.15) 2.43* (1.27) 2.18 (1.27)
Δ Mastery 0.01 (1.14) −0.03 (1.26) −0.16* (1.02) −.13 (1.10)
Mastery 2006 4.82 (1.13) 4.82 (1.14) 4.73 (1.14) 4.98* (1.02)
Female 58% 62% 60% 61%
Partnered 74% 77% 64% 75%
Bachelor’s degree 33% 32% 24% 20%
Income:Need 2006 5.61 (5.23) 9.49* (13.98) 3.96* (4.72) 7.81* (13.81)
Race
 White (ref) 76% 68% 59% 54%
 Black 12% 14% 24% 19%
 Hispanic/other 12% 18%* 16% 27%
Δ Mobility 0.08 (0.99) 0.14 (1.05) 0.20* (1.21) 0.19 (1.22)
Mobility 2006 0.73 (1.26) 0.72 (1.19) 1.11* (1.47) 0.97* (1.44)
Retired 16.87 28.74* 13.61* 19.00
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Notes: Unadjusted means (or proportions) and standard deviations of study covariates. Δ = Difference score (2010–2006). Differences across experiences of financial loss assessed using multivariate normal regression. Differences in count variables (household complexity, giving help, and receiving help) estimated using negative binomial regression.

*p < .05.

Socioeconomic Resources and Engagement of Interpersonal Resources

For aim 1, we estimated the association of income and education on the level of engagement of interpersonal resources in 2006. These data are presented in Table 2. Those with higher than average income had less complex households, gave more help to others, and received less help from others in 2006. Those with a college degree gave more help to others and received more help from others in 2006 compared with those without a college degree.

Table 2.

Negative Binomial Logistic Regressions of Sociodemographic Characteristics on Engagement of Interpersonal Resources in 2006 (n = 3,850)

Household complexity Giving help Receiving help
b (SE) b (SE) b (SE)
Intercept −1.20*** (0.17) 0.35*** (0.03) −1.92*** (0.23)
Education −0.10 (0.07) 0.12*** (0.03) 0.20* (0.09)
2006 Income:Need −0.14*** (0.03) 0.07*** (0.01) −0.29*** (0.04)
Age −0.03** (0.01) −0.02*** (0.01) −0.03* (0.01)
Race
 Black 0.41*** (0.08) 0.20*** (0.04) 0.26* (0.12)
 Hispanic/Other 0.66*** (0.07) 0.01 (0.04) 0.73*** (0.09)
Female 0.11** (0.04) 0.00 (0.02) 0.12* (0.05)
Partnered 0.01 (0.06) 0.13*** (0.03) −0.03* (0.02)
Functional limitations 0.04*** (0.02) −0.02 (0.01) 0.05* (0.02)
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Notes: N = 1,891. Education: college degree = 1; Race: White = reference group; Gender: female = 1; Partnership status: partnered = 1.

*p ≤ .05. **p ≤ .01. ***p ≤ .001.

As shown in Table 3, income and education in 2006 were also associated with change in the engagement of interpersonal resources, independent of financial loss. Those with higher than average income in 2006 were more likely to decrease the complexity of their households, increase the amount of help they gave to others, and decrease the amount of help they received from others. Together, differences in socioeconomic resources in 2006 predicted the level of and change in engagement of interpersonal resources.

Table 3.

Conditional Change Models of Engagement of Interpersonal Resources and Sense of Control Across Loss in Income and Wealth During the Great Recession

Household complexity Giving help Receiving help Perceived constraints Perceived mastery
b (SE) b (SE) b (SE) b (SE) b (SE)
Intercept −1.44*** (0.17) 0.75*** (0.08) −1.68*** (0.17) 0.05 (0.16) −0.13 (0.16)
2006 (baseline) 0.47*** (0.02) 0.19*** (0.01) 0.52*** (0.04) 0.48*** (0.03) 0.36*** (0.03)
Race (ref = White)
 Black 0.22** (0.08) 0.14** (0.05) 0.32*** (0.08) −0.17* (0.08) 0.22** (0.08)
 Hispanic 0.38*** (0.09) 0.03 (0.05) 0.35*** (0.08) −0.20* (0.10) 0.12 (0.09)
Δ Income:Wealth (ref = stable)
 i:loss w:stable 0.49*** (0.14) −0.02 (0.08) 0.40** (0.16) 0.43* (0.19) −0.00 (0.15)
 i:stable w:loss 0.41*** (0.12) −0.16* (0.07) 0.59*** (0.15) 0.44** (0.15) −0.39** (0.13)
 i:loss w:loss 1.01*** (0.19) 0.04 (0.11) 0.91*** (0.17) 0.03 (0.14) 0.23 (0.15)
Partnered 0.33*** (0.10) 0.04 (0.11) −0.08 (0.10) 0.10 (0.08) −0.01 (0.08)
 X Δ Income:Wealth
  i:loss w:stable −0.35* (0.18) −0.09 (0.09) −0.16 (0.20) −0.23 (0.19) −0.16 (0.16)
  i:stable w:loss −0.39** (0.16) 0.15 (0.09) −0.21 (0.17) −0.37* (0.17) 0.14 (0.15)
  i:loss w:loss −0.80*** (0.23) −0.21 (0.13) −0.29 (0.20) 0.45* (0.21) −0.41* (0.18)
2006 Income:Need −0.13*** (0.03) 0.07*** (0.01) −0.30*** (0.04) −0.09*** (0.02) 0.08*** (0.02)
 X Δ Income:Wealth
  i:loss w:stable 0.11 (0.07)
  i:stable w:loss 0.20** (0.07)
  i:loss w:loss 0.19** (0.07)
College degree −0.29*** (0.07) 0.00 (0.03) −0.09 (0.08) −0.03 (0.07) −0.03 (0.07)
 X Δ Income:Wealth
  i:loss w:stable −0.35** (0.14) 0.17 (0.15)
  i:stable w:loss −0.12 (0.16) 0.43** (0.15)
  i:loss w:loss −0.51* (0.22) −0.03 (0.18)
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Notes: Estimates are unstandardized and adjusted for age, change in functional limitations, gender, and retirement. i = income; w = wealth; College degree: 1 = college degree; Partnered: 1 = partnered. Change in household complexity, giving help, and receiving help estimated using full sample of respondents aged 50–61 years in 2006 (n = 3,850). Change in perceived constraints and mastery restricted to self-administered questionnaire (n = 1,891).

*p ≤ .05. **p ≤ .01. ***p ≤ .001.

Experiences of Financial Loss and Engagement of Interpersonal Resources

For aim 2, we examined the effect of financial loss on change in the engagement of interpersonal resources. As shown in Table 3, both household complexity and receiving help from others decreased among those who experienced relative financial stability. All forms of financial loss were associated with increased household complexity (range b = .41–1.01, p < .001) and receiving help from others (range b = .40–.91, p < .01). The experience of loss on household complexity was lessened among those who were partnered. Although receiving help decreased in general among those with higher income, this effect was lessened in the context of losing wealth or both income and wealth. Giving increased in general during the study period but decreased among those who experienced a substantial loss in wealth.

Change in Sense of Control

For aim 3, we examined the association of financial loss on change in sense of control for the subset of 1,891 respondents for whom those data were available (Table 3). Loss in income and loss in wealth were associated with increased perceived constraints. In contrast, only decreased wealth was associated with decreased perceived mastery. Education consistently dampened the effect of financial loss on sense of control. For those with a college degree, a substantial loss in income and wealth was associated with decreased, rather than increased, perceived constraints. Similarly, for those with a college degree, the effect of a substantial loss in wealth on perceived mastery was entirely diminished.

Engaging interpersonal resources was also associated, to an extent, with change in perceptions of mastery and constraints (Figure 2). Increased household complexity was associated with increased perceived constraints and decreased perceived mastery, above and beyond the effect of financial loss. Increased giving help to others was associated with increased perceived mastery. It should be noted, however, that adjusting for the 2006 level of functional limitations rendered the effect of giving on mastery nonsignificant.

Figure 2.

Figure 2.

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Generalized path model of experiences of financial loss on change in engagement of interpersonal resources and sense of control. Paths from financial loss to engagement of interpersonal resources (giving help, receiving help, and household complexity) estimated using sample of Health and Retirement Study participants aged 51–60 years in 2006 (N = 3,850). Paths to sense of control (perceived mastery and perceived constraints) estimated with subsample randomly assigned to sense of control measures in 2006 and 2010 (n = 1,891). + = moderation effect is positive; − = moderation effect is negative; e = effect moderated by education (1 = has college degree); i = effect moderated by quintiles of income to need ratio; m = effect moderated by partner status (1 = partnered in 2006). *p < .05. **p < .01. ***p < .001. † p < .07.

Discussion

We examined middle-aged adults’ experiences of financial loss during the Great Recession to understand how socioeconomic resources pattern the engagement of interpersonal resources and the ability to maintain a sense of control in the face of financial uncertainty. This analysis of agency—the engagement of interpersonal resources within a structure of unequally distributed opportunities and constraints—focused on financial loss in late midlife. We chose this life period because it embodies simultaneous attention to the needs of one’s self and others, as well as limited time to recover from financial losses (Damman et al., 2013; Lachman, 2001; Remle, 2011). We found socioeconomic resources to predict differences in both the level of and change in the engagement of interpersonal resources prior to and during the Great Recession. Experiences of financial loss were associated with increased engagement of interpersonal resources and decreased sense of control. The form of financial loss, whether in income, wealth, or both, patterned these responses. How individuals engaged their interpersonal resources within the context of financial loss was then associated with differences in the ability to maintain a sense of control.

Enragement of Interpersonal Resources Prior to the Great Recession

To understand how socioeconomic resources structure the use of interpersonal resources prior to the recession, we examined the contribution of differences in income and education to the level of and change in engagement of interpersonal resources. Consistent with research on intergenerational exchanges, we found income and education to differentiate how individuals engaged their interpersonal resources (Swartz, 2009). Prior to the recession and similar to other studies, we found those with less income to have the most complex households and receive the most help (Keene & Batson, 2010; Merchant et al., 2012). Holding income equal, those with a college degree were both giving more help to and receiving more help from others, which is consistent with reciprocal interactions found in social networks that are supportive of well-being (Litwin & Shiovitz-Ezra, 2011).

Income and education were also associated with change in the engagement of interpersonal resources, independent of financial loss. Consistent with research on financial transfers during times of high unemployment (Gottlieb, Pilkauskas, & Garfinkel, 2014), across experiences of financial loss and stability, household complexity and receipt of help from others increased among those with lower income. Similarly, household complexity decreased among those with a college degree. Our findings illustrate how differences in income and education may condition responses to financial loss during the Great Recession. Those with fewer socioeconomic resources entered the recession with networks already taxed by complex households and receiving help from others—both of which further increased, across experiences of financial loss, during the Great Recession. Meanwhile, those with more socioeconomic resources gave more help to others and were therefore potentially able to strengthen their interpersonal resources.

The Form of Financial Loss

The recession affected the lives of many people and households. But we found that what was lost—income to meet immediate needs, wealth necessary to retire, or both—shaped responses to financial loss, above and beyond differences in socioeconomic resources. Drawing from previous research, we expected the engagement of interpersonal resources to increase the most substantially among those who lost income (Conger et al., 2010). We found household complexity and receiving help from others to increase across all forms of financial loss. Because families adapt to hard times by withdrawing savings and taking on debt (Baek & DeVaney, 2010), it is important to note that the increase in receiving help from others and household complexity was most severe among those who lost both income and wealth.

Consistent with expectations of responsibility for others in midlife (Connidis, 2014; Igarashi et al., 2013), giving help to others increased during the study period, but less so among those who lost wealth. Wealth is future oriented in that middle-aged adults save in an effort to bequest or meet future needs (Modigliani, 1988). That a loss in wealth would result in an immediate decrease in giving help to others is informative, especially in late midlife as individuals attempt to balance planning for their own future with responsibility for others (Remle, 2011).

Experiences of financial loss were also associated with decreased sense of control. Consistent with its future orientation, a substantial loss in wealth was the only form of financial loss to be associated with decreases in perceptions of mastery, a facet of control that taps beliefs about one’s personal capacity (Lachman & Weaver, 1998). This finding extends research that has linked wealth to psychological well-being (Hamoudi & Dowd, 2014; Zurlo, Yoon, & Kim, 2014) and plans for the retirement (Szinovacz et al., 2014) by suggesting that losing future-oriented resources such as wealth may also decrease the perceived ability to achieve goals.

Although income and education defined the extent to which interpersonal resources were engaged prior to the recession, they did not differentiate engagement in response to financial loss. An exception was receiving help from others—where the general decrease in receiving help observed among those with higher income was lessened in the context of financial loss. Otherwise, consistent with the classic work of Elder (1974) on the Great Depression, the engagement of interpersonal resources following proportional financial loss was consistent across levels of income.

The effect of financial loss on sense of control, however, was dampened considerably by education. The Great Recession may illustrate a snapshot of how, over extended periods of time, education is associated with maintaining a sense of control following midlife (Mirowsky & Ross, 2007; Slagsvold & Sørensen, 2013; Wolinsky et al., 2003). Individuals with higher education have broader networks and access to a more diverse set of opportunities (Damman et al., 2013; Elman, 2011; Hyllegard & Lavin, 1992; Litwin & Shiovitz-Ezra, 2011). This may make it possible to frame financial loss as a challenge rather than an insurmountable obstacle (Mirowsky & Ross, 2007).

The Potentials and Limitations of Interpersonal Resources

Across the life course, individuals engage and invest in a multitude of resources in an effort to maintain a sense of control (Heckhausen et al., 2010). We examined whether adapting to financial loss by engaging interpersonal resources facilitated or hindered the perceived capacity to exert influence over one’s environment. We found when household complexity increased, so did perceived constraints, whereas when giving help to others increased, so did perceived mastery. Our findings extend previous research on adjusting to financial loss (Conger et al., 2010) by suggesting that the psychological cost of engaging interpersonal resources depends on how social partners are engaged.

The act of engaging interpersonal resources has the potential to strengthen or further strain social ties (Connidis, 2014). Household complexity brings individuals of potentially varying roles and ages together within a single household (Hagestad, 2003). This may expand boundaries of responsibility and also increase potential exposure to external assaults. The act of giving, on the other hand, provides a pathway to contribute to the well-being of others, and in this study, it was associated with increased perceived mastery. Beyond themes of intergenerational exchanges, filial obligations and available resources that structure social exchanges (Remle, 2011; Swartz, 2009), our findings suggest that helping others could be a strategy for maintaining a sense of control in the face of uncertainty. Whether this potential continues into older adulthood, in the context of other sources of strain such as health, is an important avenue for future research.

Limitations and Future Directions

Although this study linked actual loss in income and wealth to changes in the engagement of interpersonal resources and sense of control, it is not without its limitations. First, the positive selection of individuals’ willing to participate in research may underestimate the costs of engaging interpersonal resources. Second, with only two waves of measurement, we cannot establish empirically whether the change observed in this study is unique to the period or embedded in a larger trajectory. Research on volatility of household income and wealth over the last 20 years suggest that financial loss, as defined in this study, was unique from nonrecession periods. Because household complexity has been found to fluctuate across months and be level on average (Merchant et al., 2012), the change in household complexity observed across 4 years is also notable. Similarly, sense of control, known to change slowly over time, was found to vary in this study only among those who experienced financial loss. Third, we acknowledge that subjective measures of control are limited by measurement error and selection and that the meaning and benefit of control may vary across levels of disadvantage. Fourth, this study was not designed to disambiguate the source of income loss, which is also an important direction for future research. Fifth, the causal directions implied in this study cannot be fully established. Our model is grounded in action perspectives on the life course, which assumes that individuals regulate resources to maintain a sense of health, well-being, and control (Heckhausen et al., 2010). Finally, our decision to focus on late midlife limited our ability to examine how the experience of and response to the Great Recession varied by age. Although beyond the scope of the present study, inquiry into how older adults’ responses to financial loss occur within the context of change in other domains, such as health, is an important direction for future research.

Conclusion

This study explored the potential of adults in late midlife to adapt to unexpected financial loss by engaging their interpersonal resources. We found this engagement of resources to increase among those who experienced significant loss. But our findings also suggest that doing so increases the potential to be exposed to risk as the consequences and benefits of actions ripple across the social network. Therefore, in social environments that are becoming more individualized or unstable, we can expect the engagement of interpersonal resources within networks to increase and planning to be more difficult. Special attention should be paid to how individuals and groups negotiate their lives and to the sacrifices they make in attending to their own needs and the needs of others, as these actions will contribute to their future experiences. The repercussions of the Great Recession will not be fully understood for decades, but the evidence from this study suggests that the lives of today’s middle-aged adults have been greatly affected by it.

Funding

This research was supported by a National Science Foundation Integrative Graduate Research and Education Traineeship (IGERT) Grant #DGE 0965820.

Acknowledgments

This manuscript is based on work from the first author’s doctoral dissertation in Human Development and Family Studies at Oregon State University. Some of the findings from this study were previously presented at the 109th American Sociological Association annual meeting. S. T. Mejía was responsible for study design, data analysis, interpretation of results, and manuscript composition. R. A. Settersten Jr. and K. Hooker provided guidance with conceptualization and study design, interpretation of results, and feedback and editing of manuscript drafts. M. C. Odden provided feedback and suggestions in study design, execution of the analytic plan, and presentation of results.

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