by Jamie Hale
The wealth gap between young and old Americans has soared over the last three decades, deepened by the economic downturn that has resulted in high levels of unemployment and cost-cutting measures around the country.
A typical U.S. household headed by someone 65 and older has 47 percent more net wealth than a typical household headed by someone 35 and younger, according to new data released by the Pew Research Center on Monday. The average net wealth of the older household was $170,494 compared to $3,662 for younger Americans.
But the gap didn’t happen overnight, it’s been growing over the last three decades. Pew compared today’s numbers with the same statistics from 1984, a year with a markedly better economic outlook. In that year, the gap between the two groups was only about 10 percent. The average net wealth was $120,457 for older Americans compared to $11,521 for younger residents.
Although people tend to accumulate wealth as they age, the study shows Americans over 55 have been making gains in average wealth since 1984, while younger Americans are making much less than their ’80s counterparts. Those 65 and older made the biggest gains, by 42 percent, while those under 35 saw the biggest negative difference, by 68 percent.
Some critics of the study attribute the gap simply to that same idea that as we age, we make more money. While Scott Benson, an economics professor at Idaho State University, said this is true, it’s not the whole story behind the new study.
According to Benson, several factors play into the widening gap, which he said is a disturbing trend. Although the housing market crash and economic recession hit Americans hard, one of the biggest contributors to the difference between young and old are student loans.
“We’ve had a dramatic change in this country with individuals being asked to pick up the cost of their education,” said Benson. “25 to 30 years ago, states were funding higher [education] much more fully, so students weren’t walking out of school with so much debt.”
According to a November 2010 Pew Research study, the number of students with loans and the amount of those loans has been rising quickly. In 2008, 60 percent of college students took out loans, compared to the 52 percent that borrowed in 1996. Among those who borrowed, the average loan debt for a 2008 bachelor’s degree was $23,000, compared to $17,000 in 1996.
Today, it’s not uncommon for students to graduate with loans upwards of $50,000 and more. Benson said this is a key difference between the college graduates of the last two decades and graduates from 50 or 60 years ago–starting so far in the hole hurts how quickly and how far someone can rise economically.
But Benson doesn’t entirely trust the data. There’s one major factor that could skew the numbers in favor of the older generation, and it’s something that can be found on makeshift cardboard signs on campus this week: the so-called “one percent.”
The recent Occupy Wall Street movement has taken research that shows that 40 percent of our nation’s wealth is owned by one percent of the population, and turned it into a rally cry. Benson said it’s likely that much of the one percent is of the 55 and older bracket that is so far ahead of the younger population, skewing the results much higher for seniors.
Meanwhile, there are plenty of senior citizens who rely on their social security checks to just get by, he said. So it’s not just a matter of older Americans having more wealth than younger Americans, it’s a matter of wealthy Americans, who happen to be older, having more than low and middle-class Americans.
The future is therefore uncertain, said Benson. We’ve never really had a society in which getting good jobs often relies on getting a college education, and getting a college education often relies on accruing massive loads of debt. It’s difficult to say whether or not the gap will continue to widen or start to close, said Benson. “We’re sort of in uncharted territory here.”
Contact Jamie at JHaleTBA@Gmail.com