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The Wealth of 'America's Dependents' [Podcast]

October 16, 2018

Duke University Sanford School of Public Policy faculty member Christina Gibson-Davis has compared wealth among families with children and the elderly. Who is doing better?

"One would expect that elderly people would have higher levels of wealth than families with children," says Gibson-Davis. "They're generally older, they've had more time to save."

But researchers found the gap between elderly families and families with children has grown startlingly wide over the past 25 years. The wealth of the elderly has gotten much higher whereas the levels for families with children has gotten much lower.

Christina Gibson-Davis is an Associate Professor of Public Policy and Sociology and Director of Undergraduate Studies at the Sanford School of Public Policy at Duke University. The conversation has been edited for readability and clarity.

Conversation Highlights

If income is your paycheck, what is wealth?

You can think about wealth as the resources that you have. For most people, their chief source of wealth is their house, right? So, you buy a house and that's really what your wealth is. But you can also think about your assets or your savings accounts - what you take away from [your wealth] is your debt. (How much you owe on your house, how much you might owe on credit card, bills, or education loans and things like that.)

So, wealth is really your assets minus your debts.

What we wanted to know was, "What does this look like for families with kids versus the elderly, or those people who are over the age of 65?" Those are the two groups that in American society are considered to be the most vulnerable. Those are groups that aren't directly in the labor force.

And traditionally, a lot of our social safety net and our public policies have been directed at protecting those two groups. There's a well-known demographer who called those groups "America's dependents.” So, we were interested to see how these two groups of vulnerable individuals fared in terms of wealth inequality.

What kind of information did you have access to?

A lot of people might have heard of the Federal Reserve; we often hear about "minutes" from the Federal Reserve and this is survey data that's collected by the Federal Reserve. And what they basically do is they go and ask a sample of households about their wealth and about their income, so it's a really detailed economic portrait of how people are doing.

What did you find?

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One would expect that elderly people would have higher levels of wealth than families with children. They're generally older, they've had more time to save, they [perhaps] paid off their houses, so one would expect that elderly people as a group would have more wealth than families with children.

What we found that was surprising was that this gap between elderly families and families with children has really grown over the past 25 years in a way that you wouldn't expect ... in the past 25 years  the level of wealth of the elderly has gone much, much higher whereas the levels for families with children has gotten much, much lower.

Our study also mirrors this common narrative of the very rich getting richer. We found that the very wealthy are in fact getting even wealthier, but what was surprising to us is how bad the least wealthy families with children are doing. They have really seen what little wealth they had completely dissipate over the past 25 years, and in fact, one third of families with children have no wealth at all, just debt.

Why are families doing so poorly? 

Part of it is the rise in educational loan debt, probably for the parents themselves. (A lot of  parents are still paying off their own educational loans.) And for most people the primary source of their wealth is their house, and then when the housing crash happened in the late 2000s that really decimated a lot of people's wealth portfolios and a lot of these folks went underwater on their mortgages.

How much of this can be attributed to a set of public policies?

Our analysis don't look at why this was happening and so we're not able to say, "This happened because of this certain public policy" but there's no doubt that the kinds of things that have gone on for the past 25 years, in particular, people's rising level of education debt and the decrease in things like Pell Grants have definitely contributed, as well as the more discriminatory housing practices, which tend to disproportionately affect minority families and families with kids. So there's no doubt policies have played a really important role in this rising gap.

Is there any reason that the elderly have fared better?

Yes, we can point to some very specific policies as to why the elderly are doing better over time. First of all, the primary source of income for the elderly is social security, and social security always goes up year after year because it's adjusted for inflation. So the elderly are shielded from the workforce in ways that households with children are not.

The other thing is that many of the elderly had already paid off their houses by the time the Great Recession arrived, so their wealth didn't take the same kind of hit that families with children did.

And then the final thing is that the elderly weren’t paying off education loans- they got their education at a time when education costs were much lower and we had a different loan structure in place.

So, for those three reasons, the elderly have seen their wealth levels increase.

In some ways, [though], our story is a hopeful one. The least wealthy elderly families are actually doing pretty well, and are doing better than they were, so at least for that group of America's dependents we've been able to see an increase in their wealth, it's just unfortunate the same cannot be said for families with children and their levels of wealth.