The New Frontier of Wealth Inequality: Young Vs. Old
With all of the talk in recent months about the 99% vs. the 1%, it’s easy to lose sight of other forms of economic inequality. One of the most pervasive, and unrecognized, inequality problems facing recent college graduates is actually intergenerational wealth inequality, between them and their grandparents.
According to a new Pew study, “Households headed by older adults have made dramatic gains relative to those headed by younger adults in their economic well-being over the past quarter of a century.” Whereas the wealth of households headed by people above the age of 65 have gone up by 42%, the wealth of households headed by people below the age of 35 has gone down by 68%. Indeed, the average young household only has $3,662 to its name. These trends are similar for income too, with younger peoples’ incomes rising at only 1/4 the rate of their senior peers.
This research is, unfortunately, not all that surprising. Recent college grads are stuck with high levels of debt and no prospects for well paying work. And it looks like things aren’t going to get much better for younger households any time soon. Student debt continues to balloon, and the policies put in place to mitigate it aren’t likely to have much of an effect. At the same time, future cuts to Medicare and Social Security (as advocated by Republicans and the deficit-cutting supercommittee) will only redistribute wealth from younger taxpayers to current beneficiaries — those households who have benefited the most from recent wealth trends.
Ultimately, it’s not entirely clear what the long-term effects of this wealth shift will be. It’s certainly possible that the excess wealth in older households will trickle down in the form of inheritance over the next couple decades. At the same time, though, that doesn’t address the biggest problems for younger households right now: they have no way to get out of all of their debt. Until that’s addressed, this problem will only get worse.
Photo credit: TheElders's Flickr stream.