Income inequality in the United States appears to have risen in recent decades. NC State University economist Mike Walden takes a look at how income inequality has changed for people of different ages.
“No question that income inequality has increased. Many potential reasons for that — technology, the increase in the returns to education, the fact that big companies run by CEOs have a greater scope in our economy with globalization. So many, many reasons.
“But when you look at income inequality by age groups, what you find over the last quarter century when we had this big bump in income inequality is, number one, income inequality has increased for all age groups.
“But here I think is the interesting finding. This actually surprised me: The age group that’s seen the biggest increase — the biggest increase — in income inequality in the last quarter century are older people — those 65 and over. Income inequality there has gone up 15 percent — much higher than for other age groups.
“This really puzzled me, and then I dug a little deeper, and I think the explanations make sense. When you retire, obviously you are mainly going to live off of whatever income you get through your pension, Social Security, your investments, etc., and it turns out there’s a big divide there. A lot of people for whatever reason have not planned well or maybe they’ve just not been able to plan well for retirement, so they are essentially living off of Social Security, which was never developed to be the sole source of your income in retirement.
“And so you’ve got those folks on the one side, and then you have the folks who have a good company pension, they’ve invested well, and they are getting very, very substantial amounts of money. And this trend seems to have accelerated over the last quarter century. So very, very interesting that income inequality is highest for those at the older end of the age spectrum.”