Age and inequality

Posted: 9 November 2015 in Uncategorized
Tags: , , , , ,

6a01348793456c970c01b8d16ea597970c

Income inequality in the United States increases as people get older.

That’s the stark conclusion of a new study by Fatih Karaham for the Federal Reserve Bank of New York.* In the chart above, men are grouped into percentiles of total lifetime income (income earned between ages twenty-five and sixty).

The chart shows that the median worker in the income distribution experiences about a 38 percent rise in his real earnings between ages twenty-five and sixty. There is an impressive amount of heterogeneity: Workers below the 20th percentile actually experience a decline in earnings, while those in the top 1 percent experience a fifteenfold increase.

Both Karaham and Mark Thoma [ht: ja] then focus on two causes of that growing inequality: “differences in permanent abilities” (which have “to do with human capital investments before labor market entry”) and “labor market risk” (such as unemployment and health problems).

Me, I think there’s a key difference between the wages of those who produce the surplus and those at the top who get a cut of the surplus.

In the way the U.S. economy is currently organized, the wages of workers who actually produce the surplus may or may not increase over their lifetimes (depending, of course, on how precarious their jobs and their job-related lives are)—and, even if they do increase, it’s not by a lot. However, the incomes of those at the top, who manage to capture a portion of the surplus created by the workers they manage or because they work in sectors (like finance) where a great deal of the surplus ends up, get older with much higher incomes.

Neither improved education and job training nor better social insurance will solve the growing dispersion of incomes as Americans get older.

*To be clear, this is a study of men’s earnings only. Apparently, they’re “currently undertaking a similar study that focuses on the earnings dynamics of women.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s