Income inequality describes the gap between a six-figure salary and minimum wage. But the more alarming gap occurs in wealth — a household’s total assets minus debts.
.. According to our research, wealth inequality is much worse among families with children, and the gap has widened greatly over the past two decades
.. The demographer Samuel Preston warned in 1984 that the United States had made “a set of private and public choices that have dramatically altered the age profile of well-being,” by devoting resources toward improving conditions for the elderly while neglecting to do the same for families with children.
.. Unlike income, which can change quickly because of a booming economy or a rise in the minimum wage, changes in wealth usually happen slowly.
.. Parental wealth is also a critical determinant of where children live and the quality of the schools they attend . It can affect the kind of job they have, if and when they marry, and whether they own their homes.
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The net worth of most households with children declined from 1989 to 2013, except for those at the top. Among the elderly, the richest gained wealth, but so did everyone else.
.. Our research shows that in terms of wealth, those over 65 have weathered the past quarter-century much better than families with children, despite two major recessions. The net worth of older people’s households increased by 45 percent from 1989 to 2013.
.. And for the past 25 years, the distance between the rich elderly and the poor elderly remained stable. The very wealthiest elderly households grew richer, but so did those of working-class and middle-class older people.
.. The top 1 percent saw their wealth increase by 156 percent, while parents in the bottom half saw their wealth shrink by 260 percent. About a third of all families with children in 2013 had no wealth, only debt.
.. if they face an unexpected expense, like a medical emergency, they don’t have a cushion of savings or other assets to draw on. And when their children start college, some of these parents may still be paying off their own student loans.
.. Why are so many parents with children faring so poorly? In part, it’s a result of long-term changes in employment. Over the period we studied, employment became more unstable, as companies replaced full-time jobs with part-time work and short-term contracts. These employment changes affected families with children more than the elderly, who are mostly retired.
.. The other problem for families with children is debt: not credit card or car loan debt, which hasn’t changed much since the late 1980s, but student loan and mortgage debt.
.. Education debt has been rising throughout the period in our study, in part because federal Pell Grants failed to keep up with rising tuition costs. Pell Grants now cover only 29 percent of the cost of a four-year degree at a public college, the lowest percentage on record. Even earning a two-year degree at a community college usually means taking on debt.
.. Why did older households fare better?
First, older Americans’ incomes were largely stable. Their primary source of income, Social Security, is indexed to inflation. With stable income, fewer older people dipped into savings to pay their bills, and they had more money to invest.
Second, most of them bought their homes before the housing bubble, and
third, they graduated from college before the era of high student loan debt.