A recent report came out documenting the growing gap in wealth accumulation between old people and young people in the United States. The gap is larger than it has ever been.
While it makes sense that people over 65 should have higher median net worth than people under 35, does it seem healthy that older Americans have 47 times the net worth of younger Americans? That gap is a bit drastic, especially considering it has grown substantially over the last few decades. But right or wrong, that’s what the Pew Research Center found, in their study “The Rising Age Gap in Economic Well-Being”.
Looking at net worth — all assets minus all debts — form data culled from the Census’ Survey of Income and Program Participation (SIPP), Pew discovered some disturbing trends in the distribution of income and wealth across age groups, especially when compared to their numbers from 1984, the first year they conducted this research.
While adults over 65 saw their wealth grow by an inflation-adjusted 42% since 1984, adults under 35 saw theirs shrink by 68% — from $11,521 to a paltry $3,662. In 1984, the over 65 group had a median net worth of $120,457, or about 10 times that of the under-35 group; nowadays, senior Americans have a median net worth of $170,494, which is roughly 47 times as big as younger Americans’ $3,662.
Naturally, housing plays a big part in this. As home equity plays a large part in wealth accumulation in the United States, people over 65 have likely paid off most, if not all, of their 30 year mortgages, while people under 35 are likely quite deep in debt on their homes. Add to this that younger homeowners were more likely to buy their first home during the height of the bubble, and it becomes clear that declining home prices have hurt younger Americans much more than older ones.
Indeed, the Pew Center notes that since 1984, median home equity for Americans over 65 has increased by 57%, while home equity values for those under 35 have declined by 31%. So while the wealth gap between these age groups should naturally be wide, due to the typical structure of mortgages, it’s clear that recent developments have hurt young Americans substantially more than older Americans.
The report shows that while all age groups’ net worths declined since 2005, as a result of the Great Recession, no one was hit harder than those under 35 — their net worth took a 55% plunge. Those 65 and older only lost 6% of their net worth over the last half decade.
Perhaps the most disheartening part of the report is the part that documents the growth in no net worth or negative net worth Americans; as we are more and more saddled with debt, with stagnant wage growth making it difficult to get out, this category has seen a bit of growth. One in five Americans has no net worth or negative net worth, their debts outweighing all their assets, and then some. But among those younger than 35, that number is 37%, almost double the average, and double the 1984 figure. For those over 65: 8%, up from 7% in 1984.
For anyone curious as to why old people like the Tea Party and young people like Occupy Wall Street, here you have it. Read the full report here.