USA Today: Money Gap Not Class-Related; It's Age
Score one for the ol’ American Dream.
“I’ve lived the American dream,” said a 55-year-old immigrant from India who now owns a 3,000-square-foot house. The story included several working Americans who were optimistic about their futures. Another was a Hispanic American who expressed confidence in the opportunity for upward mobility.
The USA Today report showed that working toward the future makes sense, because Americans earn more as they age – a common-sense conclusion that could change the “income inequality” debate.
“The growing divide between the rich and the poor in America is more generation gap than class conflict, according to a USA Today analysis of federal government data,” wrote Dennis Cauchon.
As baby boomers reach their peak earning years (Cauchon said the Fed lists 57 as the year of peak income) and head into retirement, the scale is tipping in their favor.
“Inequality within age groups hasn’t changed much,” Cauchon reported. “People in their 30s or 60s have roughly the same wealth distribution among themselves as in 1989. What’s changed is inequality between age groups.”
As Cauchon said, “the implications are far-reaching and can turn conventional wisdom on its head.” That “conventional wisdom” has focused on the top 1 percent of taxpayers, such as high-paid CEOs and hedge fund managers, and has produced countless class-warfare stories of rich vs. poor. But older Americans are the untold story, USA Today reported, partly because IRS data “don’t include information on age, race and education.”
Why the increase? Cauchon’s report gave two main reasons.
“Younger generations now delay the start of wealth accumulation,” he wrote. “They postpone careers to get more education. They marry later (delaying the financial benefit of a shared household), have children later (delaying the arrival of lower-cost, kid-free days) and inherit money later (their parents live longer).”
Meanwhile, their elders aren’t leaving them alone, thanks to the massive tax-funded programs that are taking the younger generations’ money.
“Social Security and Medicare increasingly are functioning as a transfer of money from less affluent young people to much wealthier older people,” Cauchon said, pointing out that the two programs’ shortfalls over the next 75 years amount to $340,000 per household.