The Rich are Different From You and Me: They're Old
Old people are rich. Young people are poor. Simple as that.
From the Pew Research Center, via the WSJ:
The old have gotten wealthier, while the young have become poorer. That’s the conclusion of “The Old Prosper Relative to the Young,” a recent report by economists and researchers at the Pew Research Center.
• From 1984 to 2009, the median net worth of older households rose 42%. For younger households, it declined by 68%.
• The gap in wealth between older and younger households widened over time. In 1984, the median net worth of older households was $108,000 higher than that of younger households. But by 2009, the median net worth of older households was $166,832 higher than that of younger households, the “largest (gap) in the 25 years that the government has been collecting this data.” (All figures are expressed in 2010 dollars.)
• In younger households, median adjusted annual income rose 27%, from $38,555 in 1967 to $49,145 in 2010. (Again, the figures are in 2010 dollars.) At the same time, income for older households rose 109%, from $20,804 to $43,401.
• From 2005 to 2009, median net worth for older households declined 6%, versus a 55% decline for younger households. Meanwhile, the adjusted median income of the oldest households rose 8%, while the youngest households experienced a 4% drop.
In a way, this is a victory of sorts. Social Security, when it was enacted, was designed to alleviate poverty among older Americans. Demographics being what they are, though, it has more recently entailed taking money from the paychecks of working -- ie, younger -- Americans and sending it to unexpectedly still alive-and-kicking non-working Americans, whose numbers are increasing just as the wage-earning youngster numbers are decreasing.
It's a version of the Law of Unintended Consequences. Sort of like the food stamp programs, which were designed to eliminate hunger among America's poor, with the result that, today, America's poor aren't even close to hungry. On the contrary: they're obese.
We hear a lot about one kind of income gap, but not a lot about this kind. I wonder why?
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Comments:
Re: The Rich are Different From You and Me: They're Old
Interesting, Rob. That means the old better get out and vote while the young stay home, or we are slipping on a skateboard on our way to a socialist state.
May '10
Re: The Rich are Different From You and Me: They're Old
What about us old poor people?
Re: The Rich are Different From You and Me: They're Old
Some of this may be an optical illusion. In real money, the $166,832 gap found in 2009 may be less than the $108,000 gap found in 1984. Or did they correct for inflation?
Also, 2009 is a poor year to pick -- it marks the height of a recession in which seniority may provide protection to some of those employed and cause those junior to be dismissed. The statistics for 2007 might be more telling.
Apr '11
Re: The Rich are Different From You and Me: They're Old
The Old vote. No one has the guts to tell them to get out of the way and die already. But, one day soon, the young will cast of the shackles off our Geriatric overlords.
Edited on March 12, 2012 at 11:28pmApr '11
Re: The Rich are Different From You and Me: They're Old
Paul A. Rahe: Some of this may be an optical illusion. In real money, the $166,832 gap found in 2009 may be less than the $108,000 gap found in 1984. Or did they correct for inflation?
Also, 2009 is a poor year to pick -- it marks the height of a recession in which seniority may provide protection to some of those employed and cause those junior to be dismissed. The statistics for 2007 might be more telling. · 13 minutes ago
They say it's in 2010 dollars. They do acknowledge that the recession exaggerate it, but claim it is a long term trend. They have charts that show a moderately steady increase in the disparity, with the '90s and late '80s seeing mild counter-trends. It's worth following the link; lots of interesting stuff.
May '10
Re: The Rich are Different From You and Me: They're Old
But "old" is over 50.
Now, how many of us besides me are old?
Mar '12
Re: The Rich are Different From You and Me: They're Old
How much of this rise in wealth among the aged is due to a decline in defined benefit private sector employee pensions and a rise of 401ks and similar savings vehicles? A defined benefit pension of $1000/month wouldn't show up in net worth calculations, but assuming a 4% withdrawal rate, one would need a nest egg of $300,000 to yield a similar monthly income. An employee with the pension is as "rich," if not more so, than the one with the savings.
Edited on March 12, 2012 at 6:04pmJan '11
Re: The Rich are Different From You and Me: They're Old
I was thinking about this the other day, which also brought to mind - recent immigrants are generally not as wealthy as those whose families have been established here for a while. That's OK though, isn't it? Shouldn't people work their life to accumulate wealth, and then not only be wealthy when they are older, but if families are established, keep that wealth? Of course, there are issues if upward mobility is impeded because of extended economic restrictions (no jobs, no opportunities), and "oppression by the plutocracy" - in other words, using a "progressive agenda" to protect and insulate a certain class.
Dec '11
Re: The Rich are Different From You and Me: They're Old
This has got to be related to the increase in the amount of schooling people are getting. A typical grad student's income is $8,000 working as a TA, plus scholarships. That's why Palo Alto shows up as, I believe, the second poorest neighborhood in California. It's all the grad students.
People are sacrificing income when they are young so they can invest in education so they can have more income when they are old. I said as much on my blog a few months ago, only to be lambasted by ignorant liberal commenters. Looks like I was right.
May '10
Re: The Rich are Different From You and Me: They're Old
It uses household income rather than personal income, and we know households have become smaller during that time span. Although I assume the decrease in average household size has mainly affected young families, since households of retirees are still generally one or two people.
It also compares "old" and"young" over a long period, where many of the old die and many of the young become old. The study says "Housing has been the main driver of these divergent wealth trends." I have many older coworkers who bought a house in the San Francisco Bay Area in the 80's for $35,000 and saw it appreciate to $700,000 in 2007. The same period coincides with consistent growth in the stock market.
On the other hand, the people were old in the 80's were in the middle of their lives in during the Depression and WW2, and lost their prime saving years.
So young, rich people at the beginning of the study might have become old, rich people at the end, without any actual transfer of wealth from the young to the old.
Edited on March 12, 2012 at 6:55pmNov '10
Re: The Rich are Different From You and Me: They're Old
I don't think it is hard to understand what is going on if one ties this into increasing levels of government indebtedness. People elect governments that borrow to provide themselves services (including social peace) they don't wish to pay for on their own either through taxes, or charity, doing on their own, or doing without. So in general one accumulates capital while passing the cost on to future generations, and the longer one is in the game, the better one does. (This first struck me a number of years ago when I noticed the total Canadian government debt was roughly the same as the total amount put away in retirement plans.)
I don't think that robbing one's children in such a manner is generally a good idea, those debts eventually do come due.
May '10
Re: The Rich are Different From You and Me: They're Old
The economics of this are pretty simple, pretty straight-forward, and pretty much what should be expected .... and far beyond 200 words to elucidate. But, in a word, I found the story totally unremarkable for anything except its propaganda value in adding another dimension to liberals' class warfare.
Jan '12
Re: The Rich are Different From You and Me: They're Old
Mark made a point of this as well but I would guess that these numbers are greatly influenced by the decrease in average household size in part from people putting off marriage until later in life. Would be interesting to see the data "normalized" for this.
Aug '10
Re: The Rich are Different From You and Me: They're Old
The left maintains that income classes are immutable. Therefore, it's sad to think that these youngsters will continue suffer poverty for the next 50 years, while the old folks selfishly refuse to share the wealth. What's that? Today's poor young people are tomorrow's wealthy old people? Well, that's very different. Nevermind.