Young, American and Poor
The average retired couple in the U.S. is 47 times richer than the average family under 35, and the gap is widening rapidly.
On the surface, there was nothing particularly strange about the results of a study by the Pew Research Center published on Monday because, after all, people save throughout their lives, pay off their mortgage before retirement and so on. In the U.S., however, the gulf between the young and the old is widening ever more quickly. In 1984, people over 65 were 10 times richer on average than those under 35. Until just a few years ago, they were 20 times richer. Nowadays, however, the average family of individuals over 65 has $170,000 in the bank, whereas those under 35 scrape by on an average of $3,600.
For decades, the abiding principle in the U.S. was that each new generation enjoyed a better quality of life than the one before it. Now, however, it appears this rule needs amending — each new generation does enjoy a better quality of life, but only after they have retired. Young people have it a lot worse than their parents.
The pensioners of 2011 are on average 42 percent richer than their counterparts from 1984; this figure was adjusted for inflation, meaning it was converted to contemporary dollar figures. They have not been hit particularly hard by the crisis and are only 6 percent worse off compared to 2005. At the same time, the young Americans of today (those under 35) are 65 percent poorer than they would have been in the 1980s!
The Pew study is further proof of the inequality affecting U.S. society. Up until now, however, the debate has focused primarily on the gap between rich and “normal” Americans. Between 2002 and 2007, the wealth owned by the country’s richest 1 percent increased by 10 percent each year, while that of the remaining 99 percent grew by a mere 1.3 percent. This is one of the main reasons why, for nearly two months now, hundreds of people have been camped out in Zuccotti Park, not far from the New York stock exchange, and in parks across the U.S. It seems to be no coincidence that the Occupy Wall Street demonstrations have turned out to be a protest by the young against the old.
Why are pensioners’ lives getting better and better while those of young people are looking ever bleaker? The first reason for the worsening situation has been the crisis and the collapse of the real estate market. Many young people took out mortgages at the worst possible time — just before the crash, when prices were exorbitant — and are now drowning in debt. Many have gone bankrupt. The older generation, who bought their houses at a time when prices were still reasonable, managed to pay off their mortgages in time.
The second reason is unemployment: Whereas total unemployment stands at 9 percent, the figure is twice as high amongst those in their 20s.
The third reason is the sharp increase in the cost of studying. It can cost as much as $60,000 a year to study at a good private college and around $20,000 at a state university. Young people take out student loans, with most finding themselves tens of thousands of dollars in debt during their adult lives. The overall amount borrowed in student loans recently passed the $1 billion mark — higher than the total credit card bill for the entire U.S. population.
However, all these reasons are merely temporary and cannot fully explain the phenomenon that emerged before the crisis had even broken. Gazeta Wyborcza spoke to Dr. Andrew Biggs from the American Enterprise Institute for Public Policy Research, which drew up a plan to reform the pension system under George W. Bush. He said, “It’s true that the older generation have it better in the U.S. because they’re the ones that are in charge of the country.”
Many experts feel that the most influential organizations in Washington’s political circles is AARP, formerly the American Association of Retired Persons, which has donated a total of $210 million to lobbyists in Congress since 1998. In recent times, it has paid around $20-30 million each year to persuade Congressmen and Congresswomen to support its ideas.
At the same time, children, for instance, are seen and not heard. The Children’s Defense Fund, set up to champion their interests, pays its lobbyists 100 times less.
“Children can’t vote, and most young people don’t,” Biggs explains. “Turnout among pensioners is always higher. And, most importantly, children don’t subsidize election campaigns for members of Congress either. The political system is inherently attracted by money and influence. This is the reason why, for instance, the federal government spends seven times less money on children than it does on pensioners, who, after all, represent the richest social group in the U.S.”
Seen across an American’s entire lifespan, however, the situation is not as unfair as it may seem; today’s children and young people will themselves one day be retired and in a position to benefit from a system that favors the older generation. “Provided the system doesn’t collapse,” warns Biggs. “For many years now, we have been aware that it needs an overhaul. When the pensions system and health care for the elderly was introduced in the 1950s and ‘60s, it accounted for several percent of the U.S. budget. It now makes up one-third, with the situation set to worsen further as the ratio of pensioners to workers continues to increase!”
Biggs believes that the system should not be evaluated over the whole course of a person’s life, but only with regard to the current situation. 22 percent of children in the U.S. live below the poverty line, which is defined as where a family of four earns less than $22,000 a year; 8 percent of pensioners have an income equal to or below this level. “This country needs to genuinely address the question of whether the way in which resources are currently allocated, which is weighted so heavily in favor of the elderly, is right,” he adds. “Unfortunately, if anyone ever tried to start such a debate, they would be shouted down by the power of the pensioners’ lobby.”
On the surface, there was nothing particularly strange about the results of a study by the Pew Research Center published on Monday because, after all, people save throughout their lives, pay off their mortgage before retirement and so on. In the U.S., however, the gulf between the young and the old is widening ever more quickly. In 1984, people over 65 were 10 times richer on average than those under 35. Until just a few years ago, they were 20 times richer. Nowadays, however, the average family of individuals over 65 has $170,000 in the bank, whereas those under 35 scrape by on an average of $3,600.
For decades, the abiding principle in the U.S. was that each new generation enjoyed a better quality of life than the one before it. Now, however, it appears this rule needs amending — each new generation does enjoy a better quality of life, but only after they have retired. Young people have it a lot worse than their parents.
The pensioners of 2011 are on average 42 percent richer than their counterparts from 1984; this figure was adjusted for inflation, meaning it was converted to contemporary dollar figures. They have not been hit particularly hard by the crisis and are only 6 percent worse off compared to 2005. At the same time, the young Americans of today (those under 35) are 65 percent poorer than they would have been in the 1980s!
The Pew study is further proof of the inequality affecting U.S. society. Up until now, however, the debate has focused primarily on the gap between rich and “normal” Americans. Between 2002 and 2007, the wealth owned by the country’s richest 1 percent increased by 10 percent each year, while that of the remaining 99 percent grew by a mere 1.3 percent. This is one of the main reasons why, for nearly two months now, hundreds of people have been camped out in Zuccotti Park, not far from the New York stock exchange, and in parks across the U.S. It seems to be no coincidence that the Occupy Wall Street demonstrations have turned out to be a protest by the young against the old.
Why are pensioners’ lives getting better and better while those of young people are looking ever bleaker? The first reason for the worsening situation has been the crisis and the collapse of the real estate market. Many young people took out mortgages at the worst possible time — just before the crash, when prices were exorbitant — and are now drowning in debt. Many have gone bankrupt. The older generation, who bought their houses at a time when prices were still reasonable, managed to pay off their mortgages in time.
The second reason is unemployment: Whereas total unemployment stands at 9 percent, the figure is twice as high amongst those in their 20s.
The third reason is the sharp increase in the cost of studying. It can cost as much as $60,000 a year to study at a good private college and around $20,000 at a state university. Young people take out student loans, with most finding themselves tens of thousands of dollars in debt during their adult lives. The overall amount borrowed in student loans recently passed the $1 billion mark — higher than the total credit card bill for the entire U.S. population.
However, all these reasons are merely temporary and cannot fully explain the phenomenon that emerged before the crisis had even broken. Gazeta Wyborcza spoke to Dr. Andrew Biggs from the American Enterprise Institute for Public Policy Research, which drew up a plan to reform the pension system under George W. Bush. He said, “It’s true that the older generation have it better in the U.S. because they’re the ones that are in charge of the country.”
Many experts feel that the most influential organizations in Washington’s political circles is AARP, formerly the American Association of Retired Persons, which has donated a total of $210 million to lobbyists in Congress since 1998. In recent times, it has paid around $20-30 million each year to persuade Congressmen and Congresswomen to support its ideas.
At the same time, children, for instance, are seen and not heard. The Children’s Defense Fund, set up to champion their interests, pays its lobbyists 100 times less.
“Children can’t vote, and most young people don’t,” Biggs explains. “Turnout among pensioners is always higher. And, most importantly, children don’t subsidize election campaigns for members of Congress either. The political system is inherently attracted by money and influence. This is the reason why, for instance, the federal government spends seven times less money on children than it does on pensioners, who, after all, represent the richest social group in the U.S.”
Seen across an American’s entire lifespan, however, the situation is not as unfair as it may seem; today’s children and young people will themselves one day be retired and in a position to benefit from a system that favors the older generation. “Provided the system doesn’t collapse,” warns Biggs. “For many years now, we have been aware that it needs an overhaul. When the pensions system and health care for the elderly was introduced in the 1950s and ‘60s, it accounted for several percent of the U.S. budget. It now makes up one-third, with the situation set to worsen further as the ratio of pensioners to workers continues to increase!”
Biggs believes that the system should not be evaluated over the whole course of a person’s life, but only with regard to the current situation. 22 percent of children in the U.S. live below the poverty line, which is defined as where a family of four earns less than $22,000 a year; 8 percent of pensioners have an income equal to or below this level. “This country needs to genuinely address the question of whether the way in which resources are currently allocated, which is weighted so heavily in favor of the elderly, is right,” he adds. “Unfortunately, if anyone ever tried to start such a debate, they would be shouted down by the power of the pensioners’ lobby.”
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