Abstract
Several researchers have shown that income inequality of a cohort increases as the cohort ages. The various studies examining cohort income inequality use a variety of data, measures, and methods. Is the U.S. experience documented in other studies due (1) to cumulative advantages and disadvantages continuing to work through market income into retirement, (2) to the relative weakness of the U.S. Social Security program, or (3) to potential biases due to data, measures and/or methods? This study examines cohort income inequality using nationally representative longitudinal data and a variety of inequality measures to follow a large sample of individuals from their late pre-retirement years into their retirement years. The findings are: (1) the course of the Gini coefficient is flat as the cohort ages into retirement, (2) but the course of income inequality as this cohort ages into retirement depends on the inequality measure employed, and (3) the trend results suggest that what is going on in the bottom part of the distribution is different from what is going on in the upper part.
Similar content being viewed by others
References
Bee, A., Mitchell, J.: Do older Americans have more income than we think? SESHD working paper #2017-39. U.S. Census Bureau. (2017)
Blinder, A.S.: The level and distribution of economic well-being. In: Feldstein, M. (ed.) The American economy, pp. 415–479. University of Chicago Press, Chicago (1980)
Bosworth, B., Burtless, G., Zhang, K.: Later retirement, inequality in old age, and the growing gap in longevity between rich and poor. Brookings Institution, Washington (2016)
Cates, J.R.: Insuring inequality. University of Michigan Press, Ann Arbor (1983)
Chen, A., Munnell, A.H., Sanzenbacher, G.T.: How much income do retirees actually have? Evaluating evidence from five national datasets, CRR WP 2018–14, Center for Retirement Research at Boston College (2018)
Commission on Income Maintenance Programs: Poverty Amid Plenty: The American Paradox. Government Printing Office, Washington (1969)
Cowell, F.A.: Sampling variances and decomposable inequality measures. J. Econ. 42, 27–41 (1989)
Cowell, F.A., Jenkins, S.J.: How much inequality can we explain? A methodology and an application to the United States. Econ. J. 105(429), 421–430 (1995)
Crystal, S., Shea, D.: Cumulative advantage, cumulative disadvantage, and inequality among elderly people. The Gerontologist. 30(4), 437–443 (1990a)
Crystal, S., Shea, D.: The economic well-being of the elderly. Rev. Income Wealth. 36(3), 227–247 (1990b)
Crystal, S., Waehrer, K.: Later-life economic inequality in longitudinal perspective. Journal of Gerontology: Social Sciences. 51B(6), S307–S318 (1996)
Crystal, S., Shea, D.G., Reyes, A.M.: Cumulative advantage, cumulative disadvantage, and evolving patters of late-life inequality. The Gerontologist. 57(5), 910–920 (2016)
Czajka, J.L., Denmead, G.: Income data for policy analysis: A Comparative Assessment of Eight Surveys, Final Report submitted to U.S. Department of Health and Human Services, MPR Reference No. 6302–601, Mathematica Policy Research, Inc (2008)
Dannefer, D.: Aging as Intracohort differentiation: accentuation, the Matthew effect, and the life course. Sociol. Forum. 2, 211–236 (1987)
Dannefer, D.: Cumulative advantage/disadvantage and the life course: cross-fertilizing age and social science theory. J. Gerontol. B Soc. Sci. 58B(6), S327–S337 (2003)
David, M., Menchik, P.L.: Nonearned income, income instability, and inequality: A life-cycle interpretation. In: Sudman, S., Spaeth, M.A. (eds.) The collection and analysis of economic and consumer behavior data: In Memory of Robert Ferber, pp. 53–73. Champaign, Ill.: Bureau of Economic and Business Research, Champaign (1984)
Deaton, A., Paxson, C.: Intergenerational choice and inequality. J. Polit. Econ. 102(3), 437–467 (1994)
Eisner, R.: Capital gains and income: real changes in the value of capital in the United States, 1946-1977. In: Usher, D. (ed.) The measurement of capital, pp. 175–346. University of Chicago Press, Chicago (1980)
Esping-Andersen, G.: The three worlds of welfare capitalism. Princeton University Press, Princeton (1990)
Haig, R.M.: The concept of income—economic and legal aspects. In: Haig, R.M. (ed.) The Federal Income tax, pp. 1–28. Columbia University Press, New York (1921)
Henretta, J.C., Campbell, R.T.: Status attainment and status maintenance: a study of stratification in old age. Am. Sociol. Rev. 41, 981–992 (1976)
Hicks, J.R.: Value and capital, 2nd edn. Oxford University Press, Oxford (1946)
Hungerford, T.L.: The persistence of hardship over the life course. Res. Aging. 29(6), 491–511 (2007)
Hungerford, T.L.: Broadening the social security Tax Base: issues and options. Tax Notes. 151(10), 1391–1401 (2016)
Jenkins, S.: The measurement of income inequality. In: Osberg, L. (ed.) Economic Inequality and Poverty, pp. 3–38. M.E. Sharpe Inc, Armonk (1991)
Jenkins, S., van Kerm, P.: The measurement of economic inequality. In: Salverda, W., Nolan, B., Smeeding, T. (eds.) Oxford Handbook on Economic Inequality, pp. 40–67. Oxford University Press, Oxford (2009)
Kaldor, N.: An expenditure tax. Routledge, London (1955)
Kapteyn, A., Michaud, P-C., Smith, J.P., van Soest, A.: Effect of attrition and non-response in the health and retirement study, RAND Working Paper WR-407, RAND (2006)
Karabarbounis, L., Neiman, B.: The global decline of the labor share. Q. J. Econ. 129(1), 61–103 (2014)
Lerman, R.I., Yitzhaki, S.: Income inequality effects by income source: a new approach and applications to the United States. Rev. Econ. Stat. 67(1), 151–156 (1985)
Masters, R.K., Hummer, R.A., Powers, D.A.: Educational differences in U.S. adult mortality: A cohort perspective. Am. Sociol. Rev. 77(4), 548–572 (2012)
Menchik, P.: Economic status as a determinant of mortality among black and white older men: does poverty kill? Popul. Stud. 47, 427–436 (1993)
Meyer, B.D., Mok, W.K.C., Sullivan, J.X.: Household surveys in crisis. J. Econ. Perspect. 29(4), 199–226 (2015)
Michaud, P.-C., Kapteyn, A., Smith, J.P., Soest, A.: Temporary and permanent unit non-response in follow-up interviews of the health and retirement study. Longitudinal and Life Course Studies. 2(2), 145–169 (2011)
Noble, C.: Welfare as we knew it. Oxford University Press, Oxford (1997)
O’Rand, A.M.: The precious and the precocious: understanding cumulative disadvantage and cumulative advantage over the life course. The Gerontologist. 36(2), 230–238 (1996)
O’Rand, A.M., Henretta, J.C.: Age and inequality. Westview Press, Boulder (1999)
Pampel, F.C., Hardy, M.: Changes in income inequality during old age. Research in Social Stratification and Mobility. 13, 239–263 (1994)
Piketty, T.: Capital in the twenty-first century. Harvard University Press, Cambridge, MA (2014)
Piketty, T., Saez, E.: Income inequality in the United States, 1913-1998. Q. J. Econ. 118(1), 1–39 (2003)
Prus, S.G.: Income inequality as a Canadian cohort ages. Res. Aging. 22(3), 211–237 (2000)
RAND HRS Data File (v. P). Produced by the RAND center for the study of aging, with funding from the National Institute on Aging and the Social Security Administration. Santa Monica, CA (2016)
Schoeni, R.F., Stafford, F., McGonagle, K.A., Patricia Andreski, P. Response Rates in National Panel Surveys. Ann. Am. Acad. Pol. Soc. Sci., 645(1), 60–87(2013).
Simons, H.C.: Personal income taxation: The definition of income as a problem of fiscal policy. University of Chicago Press, Chicago (1938)
Singh, G.K., Siahpush, M.: Widening socioeconomic inequalities in US life expectancy, 1980–2000. Int. J. Epidemiol. 35, 969–979 (2006)
Waldron, H.: Trends in mortality differentials and life expectancy for male social security-covered workers, by socioeconomic status. Soc. Secur. Bull. 67(3), 1–28 (2007)
Yitzhaki, S.: On an extension of the Gini inequality index. Int. Econ. Rev. 24(3), 617–628 (1983)
Yitzhaki, S., Schechtman, E.: The properties of the extended Gini measures of variability and inequality, Working Paper, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=815564 (2005)
Acknowledgements
The author thanks Howard Iams, seminar participants at the Pew-EBRI Retirement Researchers’ Network Lunch, an anonymous referee, and associate editor Marcus Jäntti for comments on previous versions of this paper.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Hungerford, T.L. The Course of Income Inequality as a Cohort Ages into Old-Age. J Econ Inequal 18, 71–90 (2020). https://doi.org/10.1007/s10888-019-09427-5
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10888-019-09427-5