Wealth inequality is on the rise in many affluent societies. A significant share of the world’s population owns no or negative wealth. But how much of this is due to the luck of being born into a wealthy family? And how does wealth change over an individual’s lifetime? For the first time, WEALTHTRAJECT will shed light on the role of individual wealth accumulation trajectories and lay the foundations for a new and different understanding of wealth inequality and relevant social policies. The project promises breakthrough insights into the emergence of inequality and rigidity in wealth, helping to understand how biographical processes and macro-level changes such as housing market dynamics generate unequal outcomes critical for individuals’ life chances today.
Individuals’ net wealth, which includes the total of their privately-owned assets, such as homes and life insurance, minus liabilities and debts, is fundamental for a comfortable life, providing a safety net, opportunities in the current and next generation, and societal and political influence. Thus, the complex challenge of documenting and explaining why some individuals have more wealth than others is a top priority for researchers and policymakers. Documenting who has what wealth has made substantial progress in recent years, but two significant shortcomings remain. First, the documentation is primarily limited to point-in-time snapshots of the haves and have-nots, ignoring how representative this snapshot is of individuals’ wealth over their lives. Second, the documentation of inequality between individuals is mainly limited to examining average wealth, ignoring how representative this average is. It is crucial to go beyond such narrow snapshots of averages to study when and why individuals gain and lose wealth in their lifetimes and how diverse the resulting trajectories of wealth accumulation are. Thus, the general aim of the WEALTHTRAJECT project is to explicate the diverse patterns of gains and losses of wealth in individuals’ lives. These patterns create point-in-time inequality between individuals.
To address the shortcomings of established research, a ground-breaking perspective on trajectory variability for wealth is necessary, building on recent research on income and prestige. Wealth trajectories refer to the age-graded, individual-specific growth paths of wealth over people’s lives. The trajectory variability perspective stresses the central role of wealth gains and losses, i.e., intragenerational mobility, over the life course for our understanding of inequality while, at the same time, acknowledging that people inherently differ from each other, for instance, because some had a head start in life. A central proposition of the trajectory variability perspective is that trajectories are distinguished by substantial differences in when and how much wealth typically grows and how variable trajectories are across social groups. Trajectory variability describes how much individual trajectories differ from typical, average trajectories within social groups, reflecting that even group-specific averages hide relevant diversity and that the “average individual” is fictive.
WEALTHTRAJECT challenges the dominant idea of a uniform hump-shaped life cycle accumulation pattern in wealth. Instead, the central working hypothesis of WEALTHTRAJECT contends that wealth trajectories are characterised by substantial variability linked to social processes. Building on novel theory and recent empirical findings from sociological and economic research, new data, and cutting-edge methods, the following central research question is addressed: What shapes variable wealth accumulation trajectories? The project has four main innovative objectives in response to this question:
- To document variability in wealth trajectories over individuals’ life courses;
- To identify intragenerational drivers of variability in wealth trajectories;
- To establish the intergenerational relationships between family background and wealth trajectories;
- To collect novel life history data on wealth accumulation trajectories.
WEALTHTRAJECT can make critical progress by addressing these objectives now. The first steps in developing the trajectory variability perspective, jointly with unprecedented data availability and advancements in quantitative modelling, create a unique opportunity window for generating timely knowledge regarding a defining challenge of our time: economic inequality. The project breaks new ground by combining longitudinal data from surveys and registers from Australia, Germany, Norway, and the United States and original life history data on wealth that, for the first time, allow mapping wealth trajectories over extended periods of individuals’ life courses. While country coverage varies by data availability, the data allows for covering a diverse selection of countries contributing to the generalizability of results to other rich democracies.