A lot has been written about the widening gulf between the wealthy and everyone else. Touching on my commentary from last Thursday, I wanted to explore the relative changes in wealth between Americans of different ages. The data below is from the Census Bureau.
Last Thursday, I argued that declining interest rates and capital gains taxes predominately helped those who had already saved a lot at the expense of those who had not yet saved. The data certainly supports the argument that the wealth gap between the young and elderly is widening, although it does not point to the driver.
In general, the median net worth for households younger than 44 have seen essentially no increase in nominal wealth, while the older cohorts have all done better. And the accumulated difference is very significant. In real terms, the difference between the real change in median wealth between the youngest cohort and the older Baby Boomer cohort is in excess of 50%:
This data set ended in 2007, which means the 55-64 cohort is now 60-69 years old, which probably means that most of that cohort is now collecting Social Security and Medicare. And it has been noted elsewhere that the ratio of Social Security beneficiaries to private employment has just passed the 50% mark.
It is important to question how much of this differential is driven by the increased costs and necessity of an advanced education. But the size of widening wealth gap between the under 35 and 55-64 cohorts, suggests that is probably not the only factor. At 47k, it is well in excess of the full cost of a 4 year program in 1990. (I used 1990 figures because that was the most relevant figure for the 44 and under cohorts)
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- NY Fed: Lowering the interest rate paid on reserve balances to zero would have no meaningful effect on the quantity of balances that banks hold on deposit at the Fed.
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