Friday, May 25, 2007

Income Inequality: Generation Gap

A previous post discusses how the "marriage gap" might contribute to increasing income inequality. Another explanation of income inequality is offered by USA Today - it's a "generation gap":

The growing divide between the rich and poor in America is more of a generation gap than class conflict, according to an analysis of federal government data. The rich are getting richer, but what's received little attention is who these rich people are. Overwhelmingly, they're older folks. The graying of wealth and income may be the most important twist in the new inequality.

Nearly all additional wealth created in the USA since 1989 has gone to people 55 and older, according to Federal Reserve data. Wealth has doubled since 1989 in households headed by older Americans, and people 35 to 50 actually have lost wealth since 1989 after adjusting for inflation.

The net worth of households headed by a college-educated person ages 55-59 rose to $526,300 in 2004, up from $271,515 in 1989, adjusted for inflation. This group has enjoyed enormous income gains, too, and had a median annual income of $100,634 in 2004.

Bottom Line: Income typically peaks at age 57 and wealth at age 63, according to the Federal Reserve. Therefore it may not be so much that "the rich are getting richer and the poor are getting poorer," as much as it is that as the older baby boom generation enters their peak years of earnings and wealth, the older baby boom generation (especially the college graduates) is getting richer. Ergo a generation gap contributes to income inequality.

1 Comments:

At 11/17/2008 1:32 PM, Blogger Grace said...

My second husband and I are in our early 70's. We both worked for the same companies for over 30 years, and are now comfortably retired. But our kids, all in their 40's now, are still looking to us for financial help. We have a beautiful custom home, and an income that allows us to decorate, travel, entertain our friends in our home, and to live a little of that good life we worked so hard for. But how can we enjoy our vacation knowing our 50 year old daughter cannot afford to pay for necessary dentistry. She is a public school teacher, has a good job, but she does not know how to budget, and then she makes us feel guilty for enjoying what we worked our whole lives for. When are we free of the guilt?

 

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