Price and income changes for the elderly

Area of Science:

• Economics
• Gerontology
• Consumer Price Index Analysis

Background:

• Common belief suggests inflation disproportionately harms the elderly.
• Arguments include less-than-full inflation indexing of senior income sources.
• Seniors' spending patterns may expose them to higher inflation rates.

Purpose of the Study:

• To assess if a general consumer price index (CPI) accurately reflects the cost of living for the elderly.
• To analyze changes in average real incomes for the elderly population during the 1970s.

Main Methods:

• Constructed a CPI using expenditure weights specific to the elderly population (1967-1979).
• Compared the elderly-specific CPI to the economy-wide CPI.
• Examined changes in real incomes for families headed by individuals aged 65+ between 1970 and 1977.

Main Results:

• The elderly-specific CPI moved similarly to the general CPI but grew slightly faster.
• Average real income for families headed by individuals 65+ increased by 10% between 1970 and 1977.
• However, the real income of a specific cohort of families (aged 65+ in 1970) decreased by 4% from 1970 to 1977.

Conclusions:

• While a general CPI is a reasonable proxy, a senior-specific index indicates slightly higher inflation for this demographic.
• Overall real income gains for the elderly mask potential financial declines for specific long-term cohorts.
• Inflation's impact on the elderly is nuanced, varying by income sources and cohort-specific income trajectories.