2011-11-08 06:49:58
AP By HOPE YEN - Associated Press
WASHINGTON (AP) The wealth gap between younger and older Americans has
stretched to the widest on record, worsened by a prolonged economic downturn
that has wiped out job opportunities for young adults and saddled them with
housing and college debt.
The typical U.S. household headed by a person age 65 or older has a net worth
47 times greater than a household headed by someone under 35, according to an
analysis of census data released Monday.
While people typically accumulate assets as they age, this wealth gap is now
more than double what it was in 2005 and nearly five times the 10-to-1
disparity a quarter-century ago, after adjusting for inflation.
The analysis reflects the impact of the economic downturn, which has hit young
adults particularly hard. More are pursuing college or advanced degrees, taking
on debt as they wait for the job market to recover. Others are struggling to
pay mortgage costs on homes now worth less than when they were bought in the
housing boom.
The report, coming out before the Nov. 23 deadline for a special congressional
committee to propose $1.2 trillion in budget cuts over 10 years, casts a
spotlight on a government safety net that has buoyed older Americans on Social
Security and Medicare amid wider cuts to education and other programs,
including cash assistance for poor families.
"It makes us wonder whether the extraordinary amount of resources we spend on
retirees and their health care should be at least partially reallocated to
those who are hurting worse than them," said Harry Holzer, a labor economist
and public policy professor at Georgetown University who called the magnitude
of the wealth gap "striking."
The median net worth of households headed by someone 65 or older was $170,494.
That is 42 percent more than in 1984, when the Census Bureau first began
measuring wealth broken down by age. The median net worth for the younger-age
households was $3,662, down by 68 percent from a quarter-century ago, according
to the analysis by the Pew Research Center.
Net worth includes the value of a person's home, possessions and savings
accumulated over the years, including stocks, bank accounts, real estate, cars,
boats or other property, minus any debt such as mortgages, college loans and
credit card bills. Older Americans tend to hold more net worth because they are
more likely to have paid off their mortgages and built up more savings from
salary, stocks and other investments over time. The median is the midpoint, and
thus refers to a typical household.
The 47-to-1 wealth gap between old and young is believed by demographers to be
the highest ever, even predating government records.
In all, 37 percent of younger-age households have a net worth of zero or less,
nearly double the share in 1984. But among households headed by a person 65 or
older, the percentage in that category has been largely unchanged at 8 percent.
While the wealth gap has been widening gradually due to delayed marriage and
increases in single parenting among young adults, the housing bust and
recession have made it significantly worse.
For young adults, the main asset is their home. Their housing wealth dropped 31
percent from 1984, the result of increased debt and falling home values. In
contrast, Americans 65 or older were more likely to have bought homes long
before the housing boom and thus saw a 57 percent gain in housing wealth even
after the bust.
Older Americans are staying in jobs longer, while young adults now face the
highest unemployment since World War II. As a result, the median income of
older-age households since 1967 has grown at four times the rate of those
headed by the under-35 age group.
Social Security benefits account for 55 percent of the annual income for
older-age households, unchanged since 1984. The retirement benefits, which are
indexed for inflation, have been a consistent source of income even as
safety-net benefits for other groups such as low-income students have failed to
keep up with rising costs or begun to fray. The congressional supercommittee
that is proposing budget cuts has been reviewing whether to trim college aid
programs, such as by restricting eligibility or charging students interest on
loans while they are still in school.
Sheldon Danziger, a University of Michigan public policy professor who
specializes in poverty, noted skyrocketing college tuition costs, which come as
many strapped state governments cut support for public universities. Federal
spending on Pell Grants to low-income students has risen somewhat, but covers a
diminishing share of the actual cost of attending college.
"The elderly have a comprehensive safety net that most adults, especially young
adults, lack," Danziger said.
Paul Taylor, director of Pew Social & Demographic Trends and co-author of the
analysis, said the report shows that today's young adults are starting out in
life in a very tough economic position. "If this pattern continues, it will
call into question one of the most basic tenets of the American Dream the
idea that each generation does better than the one that came before," he said.
Other findings:
Households headed by someone under age 35 had their median net worth reduced
by 27 percent in 2009 as a result of unsecured liabilities, mostly a
combination of credit card debt and student loans. No other age group had
anywhere near that level of unsecured liability acting as a drag on net worth;
the next closest was the 35-44 age group, at 10 percent.
Wealth inequality is increasing within all age groups. Among the younger-age
households, those living in debt have grown the fastest while the share of
households with net worth of at least $250,000 edged up slightly to 2 percent.
Among the older-age households, the share of households worth at least $250,000
rose to 20 percent from 8 percent in 1984; those living in debt were largely
unchanged at 8 percent.
On Monday, the Census Bureau planned to release new 2010 figures that will show
a big increase in poverty for Americans 65 or older due to rising out-of-pocket
medical expenses. Currently, about 9 percent of older Americans fall below the
poverty line, based on the official definition put out in September, but that
number did not factor in everyday costs such as health care and commuting.
The new supplemental figures will show poverty to be higher than previously
known for several groups, although they may not fully reflect longer-term
changes. For instance, a recent working paper by the National Bureau of
Economic Research found that U.S. spending on the safety net from 1984 to 2004
shifted notably toward programs benefiting the near-poor rather than the
extreme poor and to the elderly rather than younger adults. That trend, which
has continued since 2004, has led to faster increases in poverty over time for
some of the underserved groups.
Robert Moffitt, a professor of economics at Johns Hopkins University and
co-author the paper, cited a series of cuts in government programs since 1984
for the neediest, including welfare payments to single parents and the
unemployed under the Temporary Assistance for Needy Families program, while
Social Security and Medicare have either been expanded or remained constant.
"Over time, even under a revised poverty measure, the elderly have done
better," he said.
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Online:
Census Bureau: www.census.gov
Pew: http://pewsocialtrends.org