Reprinted from the Center for Economic and Policy Research (November 7, 2011)
By Dean Baker
All Things Considered did a major piece on a study from the Pew Research Center which showed substantial increase in the median wealth of people over age 65 from 1983 to 2009, while wealth among those under 35 actually fell. The Pew study was seriously misleading for several reasons.
First, the wealth of all groups except the young rose. In other words, it is not just the wealthy who saw an increase in their wealth over this period. The Federal Reserve Board’s Survey of Consumer Finance (a different survey) shows that the median wealth of households aged 35-44 rose by almost 25 percent over this period, median wealth for households between the ages of 45 to 54 rose by 60 percent, and more than 100 percent for people between 55 and 64. Of course much of this wealth is simply defined contribution pensions (which do get counted) displacing defined benefit (DB) pensions, which don’t get counted.
It is remarkable that the researchers at Pew did not make a point of discussing the role of DB [Defined Benefit] pensions since it is likely that the decline of DB pensions likely offsets much of the rise in wealth. It is also very misleading to highlight the percentage decline in the wealth of the young, since they had very little wealth even in 1983. If the median young household had $10 in wealth in 1983 and this fell to $1 in 2009, this would be a 90 percent drop in wealth. However, it would be foolish to highlight this decline. The basic story is that young people had little wealth in both periods.
Dean Baker is the author of The End of Loser Liberalism: Making Markets Progressive, Taking Economics Seriously, False Profits: Recovering from the Bubble Economy, Plunder and Blunder: The Rise and Fall of the Bubble Economy, The United States Since 1980, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, Social Security: The Phony Crisis (with Mark Weisbrot), and The Benefits of Full Employment (with Jared Bernstein). He was the editor of Getting Prices Right: The Debate Over the Consumer Price Index, which was a winner of a Choice Book Award as one of the outstanding academic books of the year. He appears frequently on TV and radio programs, including CNN, CBS News, PBS NewsHour, and National Public Radio. His blog, Beat the Press, features commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in economics from the University of Michigan.