Chapter 2 ECONOMIC STATUS Older Americans as a group have a lower economic status than other adults in our society. This largely results from changes in status often associated with aging. In retirement, elderly persons lose earnings and become reliant instead upon Social Security benefits supplemented with pensions and the assets they have accumulated over their lifetimes. With limited potential to improve their income through work, older persons become economically vulnerable to circumstances over which they have no control: the loss of a spouse, deterioration of their health and self-sufficiency, Social Security and Medicare legislation, and inflation. In recent years, there has been a growing perception that the economic status of the elderly as a group has improved significantly, and that they now have economic resources approximating those of the younger working population. The common assumption is that many elderly have economic benefits and resources other than cash which enable them to meet their needs in retirement. In fact, if all of these additional resources could be converted to a cash value, the economic status of the elderly as a group would be closer to that of the nonelderly. However, while some older persons have substantial resources, others have practically none. The economic status of the elderly is far more varied than that of any other age group. Comparisons of average statistics conceal the simple fact that a high proportion of the elderly have incomes and other economic resources below or just barely above the poverty level. MEDIAN CASH INCOME OLDER PEOPLE HAVE SUBSTANTIALLY LOWER CASH INCOMES THAN THOSE UNDER 65 Compared strictly on the basis of money income, persons 65 and older, on average, receive substantially less income than those under 65. In 1987, the median income of families with heads aged 65 or older was $20,808, about 61 percent of the median income of families with heads in their peak earning years, age 25 to 64, ($34,275) (table 2-1 and chart 2-1). The median income of elderly individuals not living in families was $8,149, about 48 percent that of comparable nonelderly individuals ($17,117).1 1 Selected median income statistics in this chapter were calculated by the Congressional Research Service (CRS) from the U.S. Bureau of the Census, March 1988 Current Population Survey. CRS's calculated medians are derived from individual records and vary slightly from published Census Bureau statistics based on grouped data. TABLE 2-1.-Median income of older and younger families and unrelated individuals: 1987 Source: U.S. Bureau of the Census. Data from the Current Population Survey, March 1987. Table prepared by the Congressional Research Service. Chart 2-1 MEDIAN INCOME OF OLDER AND YOUNGER FAMILIES AND UNRELATED INDIVIDUALS: 1987 The distribution of money income is substantially more unequal among the elderly than it is among younger age groups. In 1988, 73 percent of 65-plus persons had money incomes below $15,000, compared to only 43 percent of persons age 45 to 54. However, there is a greater concentration of nonelderly families than elderly families at the very lowest income level, indicating the better income protection available for the elderly poor as opposed to the nonelderly (chart 2-2). Chart 2-2 DISTRIBUTION OF MONEY INCOME OF ELDERLY AGE OF HEAD OF HOUSEHOLD 25-64 A 65+ PERCENT IN INCOME CATEGORY 20 15 10 5 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 75+ INCOME CATEGORY IN THOUSANDS OF DOLLARS Source: Current Population Survey, March, 1988. Data POVERTY STATUS WHILE THE ELDERLY ARE ABOUT AS LIKELY AS THE NONELDERLY TO BE POOR, A GREATER PROPORTION OF THE ELDERLY LIVE NEAR POVERTY Elderly persons are more likely than other adults to be poor. However, when children are considered, elderly poverty rates are slightly below poverty rates for the rest of the population. In 1988, 12 percent of persons 65 and older were below the poverty level, compared to 10.5 percent of those age 18 to 64 and 13.1 percent of all persons under age 65.2 The elderly are much more likely than the nonelderly, however, to have incomes just above the poverty level. In 1987, 15.2 percent of persons aged 65 and older were in families or were unrelated individuals with incomes between the poverty level and one-and-onehalf times the poverty level. At the same time, only 8.3 percent of those under age 65 were in families or were unrelated individuals with incomes that fell within this range (table 2-2, chart 2-3). 2 Poverty is a measure of the adequacy of money income in relation to a minimal level of consumption (the poverty level). This level is fixed in real terms and adjusted for family size. The dollar values of the poverty levels are adjusted each year to reflect changes in the consumer price index (CPI). In 1987, the poverty level for a family of four was $11,611, for an elderly couple, $6,872, and for an elderly individual $5,447. 21-415 O 89. 2 TABLE 2-2.-ELDERLY AND NONELDERLY PERSONS BY RATIO OF INCOME TO POVERTY: 1987 Source: Current Population Survey, March 1988. Data prepared by the Congressional Research Service. Chart 2-3 PERCENT OF ELDERLY AND NONELDERLY Source: Current Population Survey, March, 1988. Data Poverty level data across age groups, however, cannot be considered exactly comparable. The Census Bureau uses a different poverty standard or income threshold when determining poverty among the elderly and the nonelderly. In 1987, unrelated individuals between ages 15 to 64 with incomes below $6,155 were considered poor while those 65 and older were not defined as poor unless their income was below $5,674. The differential among elderly and nonelderly couples was even greater-$7,958 versus $7,158. Therefore, comparisons of data on poverty status for the elderly and nonelderly should take into account the assumptions regarding the existence and size of these differentials in poverty thresholds. AGE AND INCOME THE OLDEST AMONG THE ELDERLY HAVE THE LOWEST MONEY INCOMES Persons who are 85 years of age or older have significantly lower money incomes than those who are 65 to 74 or 75 to 84 years old. In 1987, the median cash income of families aged 85 and older ($16,210) was less than three-quarters of the median cash income of families aged 65 to 74 ($22,504). The median income for single persons aged 85 and older ($6,975) was about 77 percent of the income of singles aged 65 to 74 ($9,033) (chart 2-4, table 2-1). Chart 2-4 MEDIAN INCOME OF FAMILIES AND UNRELATED INDIVIDUALS BY THREE OLDER AGE GROUPS: 1987 FAMILIES UNRELATED INDIVIDUALS Source: Current Population Survey, March, 1988. Data In addition, the oldest elderly are the most likely to have incomes below or just above the poverty level (chart 2-5 and table 23). In 1987, the poverty rate for persons 85 and over was 19.2 percent-more than twice the 9.8 percent rate of those 65 to 74 years old. |