Growing wealth gap between families with children and seniors

May 18, 2018, Duke University
The wealth gap between households of seniors and those with children has ballooned since 1989, a new study finds. Credit: Christina Gibson-Davis and Christine Percheski, based on analysis of federal data

The wealth gap between households of seniors and those with children has ballooned since 1989, a new study finds.

Also, is now spread very differently within each group: The gap between the richest and poorest seniors has remained stable, but a vast economic divide now exists among families with . Among the wealthiest parents—the parental 1 percent—average net worth increased by $3 million between 1989 and 2013. Meanwhile, a third of all families with children have negative net worth due to debt.

Families at the bottom of the have it hardest, said Christina Gibson-Davis, associate professor at Duke University's Sanford School of Public Policy, who co-authored the paper with Christine Percheski of Northwestern University.

"If your net worth is in the red for $233, you are pretty stuck as a parent. You probably can't provide much for your child, much less think about sending her to college," Gibson-Davis said.

The study, "Children and the Elderly: Wealth Inequality Among America's Dependents," appears online in the journal Demography.

The researchers analyzed data pertaining to 41,500 households from the Survey of Consumer Finances from 1989 to 2013. The survey conducted by the Federal Reserve Bank is considered the best source of household wealth data for the United States.

In 1989, ' median net worth was approximately 3.8 times greater than the net worth of households with at least one child under 18. By 2013, after adjusting for inflation, senior households' median net worth was 12.5 times greater.

"We knew that the elderly had more wealth than younger families. What we didn't know was elderly households have seen increases in their wealth, while families with children have lost wealth," said Gibson-Davis.

Several factors contributed to seniors having greater wealth. Since the early 1980s, the United States has directed far more social welfare dollars to those over 65 compared with those under the age of 18. Seniors are also protected from declines in purchasing power because their Social Security income is indexed to keep up with inflation.

The elderly also had lower levels of debt than households with children. They purchased and paid off their homes before the housing crisis of the late 2000s.

In contrast, most parents saw little gains in wealth. Labor market changes led to declining wages for lower-skilled parents. They took on more debt, in part to pay for rising education costs. The Great Recession and the collapse of the housing market led to many being underwater on their homes, the primary asset for most families.

There was also rising inequality among households with children during the period. Those in the top 10 percent of wealth, especially the top 1 percent, had large increases in , with rising income, increased home equity and large returns from the stock market.

Meanwhile, households at the bottom of the wealth distribution had declining income, increased debt and loss of home equity.

In 2013, the least wealthy 90 percent of families held less than 20 percent of wealth, compared to 42 percent for the parental 1 percent.

"The good news in our study is that wealth has increased for poor and working-class elderly couples," said Gibson-Davis. "The bad news is that wealth has not increased for poor and working-class families with kids. Many with children simply don't have the resources to successfully raise the next generation."

Explore further: Wealth inequality doubles among US households

More information: Christina M. Gibson-Davis et al, Children and the Elderly: Wealth Inequality Among America's Dependents, Demography (2018). DOI: 10.1007/s13524-018-0676-5

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mdarr
not rated yet May 19, 2018
The article seems to miss a critical piece of the puzzle, at least as far as the graph indicates.
By 2004 the increase in wealth for the %1 levels out with no real change for 14 years that seems significant.
Even with the 2004 gap it looks like the 99% parents got hit hard by the 2008 recession and now they have stabilized.
For policy concerns this is very different from the story of continuing divergence.
Shakescene21
5 / 5 (1) May 19, 2018
This article is focused on the wrong parameter. INCOME is much more relevant than WEALTH in measuring intergenerational trends in standard of living. Seniors tend to have large amounts of home equity, and in many cases have completely paid off their mortgages. This home equity wealth is good to have but it is not spendable unless the senior homeowner gets a "reverse mortgage" which is not common (which is fortunate because reverse mortgages often end badly).

The home equity wealth that seniors accumulate over their lifetimes is typically passed to the next generation, unless it is wiped out to pay for end-of-life health care and nursing homes.

Seniors also have also increased their wealth holdings in 401-k plans, but much of this was due to the shift from defined pensions toward defined contribution plans, which usually left them worse off.

If this study had compared income rather than wealth, I suspect the trends would be in the same direction but not as dramatic.
katesisco
2 / 5 (1) May 20, 2018
I feel the graph incorrectly categorized home of elderly as wealth as they are a 'reserve' not ready wealth. Families with children are poor because society has decided to not pay a living wage and instead focus on robotics.
I also suspect that the $500 Great American Allowance that will be the big discussion of the 2020 elections is a sham. The pay out will be attached to multiple 'musts' like obligating elderly homeowners to put their children and grandchildren name on the deed of their home, which they would have to do for their progeny to get the $500. Just another way to get the asset obligated as the owners have so far avoided reverse mortgages.
I see the travel home livers being fined for parking violations and having 'their' $500 attached to pay the fines, and forced to move. This is similar to the 'foster care' scam where children are vanished into the system instead of being in a designated orphanage. We have become a nation of 'appearances' instead of actual fact.

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