Cumulative Advantage, Cumulative Disadvantage, and Evolving Patterns of Late-Life Inequality

Earlier studies have identified a pattern of cumulative advantage leading to increased within-cohort economic inequality over the life course, but there is a need to better understand how levels of inequality by age have changed in the evolving economic environment of recent decades. We utilized Survey of Income and Program Participation (SIPP) data to compare economic inequality across age groups for 2010 versus 1983-1984.

We examined changing age profiles of inequality using a summary measure of economic resources taking into account income, annuitized value of wealth, and household size. We adjusted for survey underreporting of some income and asset types, based on National Income Accounts and other independent estimates of national aggregates. We examined inequality by age with Gini coefficients.

Late-life (65+) inequality increased between the 2 periods, with Gini coefficients remaining higher than during the working years, but with a less steep age difference in inequality in 2010 than in 1983-1984. Inequality increased sharply within each cohort, particularly steeply in Depression-era, war-baby, and leading-edge baby boom cohorts. The top quintile of elderly received increasing shares of most income sources.

Increasing inequality among older people, and especially in cohorts approaching late life, presages upcoming financial challenges for elderly persons in the lower part of the income distribution. Implications of this increasingly high-inequality late-life environment need to be carefully evaluated as changes are considered in Social Security and other safety-net institutions, which moderate impacts of economic forces that drive increasingly disparate late-life economic outcomes.