U.S. wealth gap between young and old is widest ever

Monday, November 7, 2011 | 10:13 a.m. CST

WASHINGTON — 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 by the Pew Research Center 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. Complaints about wealth inequality, high unemployment and student debt also have been front and center at Occupy Wall Street protests around the country.

"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 68 percent from a quarter-century ago, according to the Pew analysis.

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 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.

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Mary Schaeffer November 7, 2011 | 10:29 a.m.

College tuition rising faster than inflation rates could be looked at, along with waiving interest on college loans. After all, the banks are getting nearly free money from the fed.

(Report Comment)
Ellis Smith November 7, 2011 | 11:05 a.m.

Now there's a choice: If you're tired of waging "class warfare" you have the option of waging "age warfare." Or, you can engage in both.

Let's have a haiku to that. :)

(Report Comment)
Michael Williams November 7, 2011 | 11:12 a.m.

Several points:

(1) The article says your house is an asset. No, it isn't. Anything that costs you 2.78X what you paid for it given a 30 year mortgage and 7% interest is decidedly NOT a financial asset. To say nothing about upkeep and property taxes.

Quit saying your home is an asset. It AIN'T! Indeed, it's the biggest financial liability you probably have.

(2) A median net worth of household for 65 y/o and older of 170K is really, really bad. It is a reflection of 40+ years of poor decisions and money management. Draw 20K per year from that 170K and see how many years you can keep going. This is very simple math, folks.

(3) I am in complete agreement with the article that there are few jobs for younger folks to fill....especially with older folks remaining in their jobs and not retiring plus soldiers coming home. Younger folks also have to compete with those former jobholders who lost their jobs 3 years ago and are still looking. There's a glut out there. This is like trying to work through a housing glut...nothing good happens until the demand goes up, houses get sold, and the glut gets reduced. This is also why anyone who touts 150K new US jobs in a month should be laughed at and taunted. Only when you start seeing 300K new jobs/month should your optimism turn up.

(4) For now, inroads into this problem for young folks will be on an individual scale, not a national scale. Choose your profession VERY wisely. Choose something that's in demand but considered too hard by other folks; the fewer competitors, the better your opportunities and pay. And for heaven's sake, change your consumer habits...stop buying crap and start accumulating 4 months of readily available cash-equivalents. Pay yourself first each month, even if it's only 5 bucks. Also, choose your tools wisely...for most folks, a nice car and an IPhone are NOT good tools because they do not make you money. Rather, they drain it away. Emotional rewards are only temporary.

And figure out what the hell a REAL asset is.......

(5) Finally, the gov't will NOT be your savior. It will provide only temporary help that, with no attitudinal change on your part, will have no lasting effect. Truth's all up to you and the personal financial decisions you make over the next decade.

(Report Comment)
Jimmy Bearfield November 7, 2011 | 11:32 a.m.

Good advice, Michael. The catch is that if you save too much, it's highly likely that some day -- probably soon -- the feds will begin taking that money to support those who didn't save. For example, if you've saved over a certain amount, your Roth IRA distributions will be taxed, and your Social Security benefits will be reduced. Then the people who wasted their money on iPhones, Sunday NFL Ticket and three-car garages will laugh at the savers and say, "Not only did I get all of those toys over the years, but now I'm getting your savings, too!" And if the thrifty protest, they'll be labeled selfish and greedy, especially if the government markets its confiscation and reneged agreements partly as necessary to fund better schools and opportunities for 20-somethings.

(Report Comment)
Michael Williams November 7, 2011 | 12:09 p.m.


Wish I could disagree with you, but I can't.

Nonetheless, my Sympathy-O-Meter for fellow baby-boomer grasshoppers who screwed around for the last 40 years reads rather low.

And it's not very high for 20/30-somethings stuck in the consumerism mode. As least with them a hard economic reset button may give room for hope. I ain't holdin' my breath, tho.

"Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference."

------------------Robert Frost

For gawd's sake, you 20/30-somethings! Do something different! The road less-traveled gives YOU the freedom YOU say YOU want. You are your own best asset! Or liability. You choose.

(Report Comment)
Gregg Bush November 7, 2011 | 2:13 p.m.

There's no need to choose
Between the two since they're, in
Fact, one and the same.

After reading your
Posts, what registers on your

"Do something?" If you
Mean, "Be like you", no thanks. I'll
Look out for others.

My bounty belongs
Not only to me. The End
Finds the selfish, too.

No better reason
To have estate taxes and
End the feudal trend.

(Report Comment)
Gregg Bush November 7, 2011 | 2:21 p.m.

To be dry in the
Rain and be warm in winter -
Yep, that's an asset.

Food and water don't
Make money, but no hunger,
Thirst is an asset.

An investment is
A stable. Tough sell when one
Doesn't own a horse.

(Report Comment)
Gregg Bush November 7, 2011 | 2:34 p.m.

Every day is a
Gift. I will never begrudge
Your celebration.

(Report Comment)
Jimmy Bearfield November 7, 2011 | 2:55 p.m.

Michael, I was amused when I saw the head of China Investment Corp. saying today:

"If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack. Why should, for instance, within [the] eurozone some member's people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard."

(The interview was part of the Talk to Al Jazeera program and is still available on Al Jazeera's website.)

Our government speaks out of both sides of its mouth: work hard, save and live responsibly, but if you don't, don't worry because we'll take from those who did and give it to you.

(Report Comment)
frank christian November 7, 2011 | 4:39 p.m.

Mike W.- Is this what you are writing about? Fm Yahoo Answers:

Well I am a 25 year old who has been unemployed for almost the past 2 years. I have a B.S. in Business and been trying to find a job. Of course the economy is very bad and its hard for me to get a job. Anyways I applied to Marshalls that is soon to be open near my area (the clothing store) and they called me for an interview. Should I even go there? A guy working at Marshalls? If I do go is it even necessary to wear slacks and a shirt? I think that I shouldn't since its a job that usually high school students get.. I may be wrong though so everyone who has an opinion would be great..
What do you think of a 25 year old graduate working at marshalls? Is it a mostly girls job??

(Report Comment)
Michael Williams November 7, 2011 | 4:40 p.m.

Jimmy: I would say the head of the China Investment Corporation pretty much nailed things right on the head. I especially like the "...a welfare society should not induce people not to work hard" part.

"Sloth" and "indolence" are rather unused words. Kinda like "shame".

And to think many in the US wish we were like Europe.

Not me. I musta got a double dose of genetics from ancestors who migrated here.

(Report Comment)
Michael Williams November 7, 2011 | 4:46 p.m.

Frank asks (via Yahoo), "What do you think of a 25 year old graduate working at marshalls? Is it a mostly girls job??"

I respond to that the same way I responded to my 14 y/o grandson who complained there were only 10 guys in the school play....and 50 girls.

"Grandson...that's what's called a target-rich environment."

When one of my daughters was in high school, she dated a very nice guy who was also a cheerleader....with all the girls. I was sooooo envious of his extracurricular activity that I wanted to hit him with a baseball bat.

(Report Comment)
Jimmy Bearfield November 7, 2011 | 4:49 p.m.

Frank, regarding the person who posted at Yahoo Answers, I would tell him/her, "Hell, yes!" For one, it's a job. I took a job unrelated to my B.A. degree and used the money to fund my M.A. For another, Marshalls' parent company, TJX, probably promotes from within, so an entry-level gig could be a step toward management. Lots of former and current top executives (e.g., Herman Cain) started out on the bottom rung.

(Report Comment)
Tony Robertson November 7, 2011 | 9:29 p.m.

"U.S. wealth gap between young and old is widest ever"

Wow, and we are nearly three years deep into The Era of Hope and Change. I'd say the gap between rhetorical flourish and disillusionment is nearly as wide.

(Report Comment)
Michael Williams November 7, 2011 | 10:31 p.m.

A bit of history on how we got here from there. Hope the video is still there.......

Yeah, it's Fox....but it's also a bit hard to argue with actual video and audio from TPTB.

(Report Comment)
Louis Schneebaum November 7, 2011 | 10:42 p.m.

"Wow, and we are nearly three years deep into The Era of Hope and Change. I'd say the gap between rhetorical flourish and disillusionment is nearly as wide."

I loved the way you blamed Obama for a debacle that started under Reagan, without actually using his name.

(Report Comment)
Tony Robertson November 7, 2011 | 11:05 p.m.

Louis: My merely pointing out the distance between rhetoric and reality is not intended as an assignation of blame. Why just start with Reagan? Let's blame McKinley. If only we'd have elected WJ Bryan, one of those times he ran. A Cross of Gold might have been a wise investment, after all.

(Report Comment)
Louis Schneebaum November 7, 2011 | 11:17 p.m.

What a yawn, you loosely cited an Obama-ism -- let's not pretend it was anything but that. We should point at Reagan, because he is a Messianic figure for most Obama haters and he was a corporate lap-dog.

(Report Comment)
Tony Robertson November 7, 2011 | 11:26 p.m.

I'm only aware of one Messianic figure. And He's never appeared on any ballot I've seen. Perhaps I'm just cynical that way - and One has pointed out that such cynicism is somehow not helpful, at the least.

(Report Comment)
Michael Williams November 7, 2011 | 11:37 p.m.

The disparity is mainly (I said "mainly", not "all") the fault of the middle class.

What the hell did you expect would happen when you...the middle crap you wanted, asked for, didn't need, and couldn't afford, from someone willing to sell it to you?

And you blame the guy selling it to you! Whatsamatta-U? Yer brain been on a 40 year walkabout?

You get poorer from purchasing degradable crap...the other person gets richer making degradable crap. You buy a non-asset from someone else's factory (an asset to him/her) that makes your non-asset.

If this wasn't so economically awful, this would be a great SNL skit!

Shoulda bought assets a long time ago.

Financial illiteracy has penalties not satisfied by gov't intervention when that intervention is unaccompanied by attitudinal changes on the part of the fleecee.

(Report Comment)
Ellis Smith November 8, 2011 | 5:42 a.m.

@ Tony Robertson:

Actually, these problems began during Grover Cleveland's second (but discontinuous) term. :)

For those who may have forgotten, or never knew, President Cleveland was the only Democrat to become President between the Civil War and the election of Woodrow Wilson in 1912; however, Cleveland's political philosophy appears to have been at least as far to the right as any Republican of that era.

Also, Cleveland is the only President (so far) to be married in the White House. Illustrations of the wedding show a rather rotund Grover with his slender bride.

(Report Comment)
frank christian November 8, 2011 | 7:30 a.m.

Mike & Jimmy - I've been feeling like something was wrong with your answers to the Yahoo 25 year unemployed college graduate, Maybe this is it. "What do you think of a 25 year old graduate working at marshalls? Is it a mostly girls job??" is from the educated dummy's quote, not me.

I've feared you thought *I* was concerned about a guy working at a women's clothing store. I favor Walter Williams, formula for youth staying of prison. "Finish High School, Take any job you can get, Get married.

(Report Comment)
frank christian November 8, 2011 | 7:43 a.m.

Louis S. - "a debacle that started under Reagan,". "We should point at Reagan, because he is a Messianic figure for most Obama haters and he was a corporate lap-dog."

You used his name and made meaningless accusations using usual progressive phrases and buzz words. You, my man are the "yawner".

(Report Comment)
Michael Williams November 8, 2011 | 10:36 a.m.

Remember the $8K stimulus for buying a new home?

Well, let's look how that worked out financially for those who took the gov't up on it.

This kind of warped financial thinking is similar to selling a perfectly good $8K used car to buy a "green" car that costs $35K...all the while thinking you'll make up the difference in gas costs. While feeling good about it.

THIS is the kind of financial thinking that causes disparities discussed in this article.

Wealthy folks don't think this way. Neither should you.

But, if you wish to take a so-called moral "high ground" and believe these are good deals, then your gripes at the outcome will be looked upon rather unsympathetically.

(Report Comment)
Ellis Smith November 8, 2011 | 1:46 p.m.

Thanks, Michael. I was about to trade my 1951 Hudson Hornet for a more eco-friendly vehicle, but now I'll reconsider.

(Report Comment)
Michael Williams November 8, 2011 | 1:59 p.m.


I said nothing about the cost of parts when trading in.

Only gasoline.

I think you need a Volt.

But some say you need lots of amperage.


(Report Comment)
John Schultz November 8, 2011 | 2:19 p.m.

I agree that Ellis needs a more current car; although there is much resistance to the Volt in some circles. Ohm-y, some people might exclaim.

(Report Comment)
Ellis Smith November 8, 2011 | 3:49 p.m.

Michael & John:

Your comments are positively (not negatively) electrifying.

(Report Comment)
Michael Williams November 8, 2011 | 5:21 p.m.

Ellis: Thanks for the compliment, but I think John and I are too wired. Either that, or our wires are crossed.

Get the Pb out and keep that car up-to-date.

I'm gonna go watch some Mho, Larry, and Curly

(Report Comment)
Louis Schneebaum November 8, 2011 | 8:43 p.m.

Progressive buzz words == any word with more than one syllable.

(Report Comment)
frank christian November 8, 2011 | 9:24 p.m.

"Progressive buzz words == any word with more than one syllable."

Wrong, words used in meaningless statements meant to denigrate, or demean a conservative, or the successful work of one, randomly parroted, with no sense of their truth, can be referred to as "progressive buzz words".

(Report Comment)
Tony Robertson November 8, 2011 | 10:31 p.m.

@Louis Schneebaum: Duh. Jeez.

(I've always found "progressives" so delightfully entertaining when they are in that condescendingly smarter-than-thou phase. A phase that lasts a lifetime, for some. Also entertaining is the geniune shock many exhibit, when one is not overly-awed by the obvious intellectual heft and self-evident superiority of their arguments.)

(Report Comment)
Michael Williams November 9, 2011 | 9:46 a.m.

Aw geez. Italian stock market now down 5%, bond yields to 7%. EU is in serious trouble, and it's gonna spread.

Pensions, public salaries, entitlement mentalities....starts with Greece, Italy, and Spain. Eventually will catch us all in the web. OccupyAmerican ain't seen nuttin' yet.

(Report Comment)

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