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TABLE 2-7.-POVERTY RATES FOR ELDERLY AND NONELDERLY ADULTS: 1959 TO 1987

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Source: Congressional Research Service with 1985-87 data supplied by U.S. Bureau of the Census.

The median income for families with a head 65 and older rose in constant (1987) dollars by over a third-from $12,780 in 1966 to $17,293 in 1974. Growth in the median income for families with a head between 25 and 64 also rose in constant (1987) dollars over this period, but not nearly as rapidly as that of elderly familiesfrom $28,561 in 1966 to $33,135 in 1974, an increase of 86 percent (chart 2-13 and table 2-8).

Chart 2-13

MEDIAN INCOME OF ELDERLY AND NONELDERLY
FAMILIES IN 1987 DOLLARS: 1967-1987

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Source: Congressional Research Service. 1985-1987 data
supplied by the U.S. Bureau of the Census

($34,275)

($20,808)

1987

TABLE 2-8.-MEDIAN FAMILY INCOME OF ELDERLY AND NONELDERLY FAMILIES: 1965-1987

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Note.-CPI [Consumer Price Index] figures establish a baseline (100) of the cost of goods and services in 1982-84 against which price increases and decreases can be measured.

Source: U.S. Bureau of the Census. Current Population Reports Surveys.

TRENDS IN INCOME AND POVERTY: 1974-86

INCREASING POVERTY AMONG THE NONELDERLY HAS CONTINUED TO CLOSE THE GAP IN THE ECONOMIC STATUS OF THE ELDERLY AND NONELDERLY

Economic stagnation in the late 1970's and early 1980's, slowed real income increases for all age groups. Nonelderly persons still in the labor force were more directly affected by the two recessions during this period than were the elderly. While real incomes of the nonelderly remained relatively constant during this period, the real incomes of the elderly rose slowly. Underlying the slow rise in elderly income was a growth in Social Security benefits resulting from the retirement of new generations with better wage records. Automatic annual Social Security cost-of-living adjustments (COLA's), which went into effect in 1975, served to keep the real benefits of those already retired from declining.

As a result, the gap in income between the elderly and nonelderly narrowed further between 1974 and 1982. The median income of families with a head 65 and older rose in constant (1987) dollars from $17,293 in 1974 to $18,974 in 1982, while the median income of families with a head under age 65 declined in constant (1987) dollars from $33,135 in 1974 to $30,611 in 1982 (chart 2-13 and table 2-8).

Poverty rates showed a similar trend. The poverty rate among the elderly remained fairly stable throughout the mid-1970's and

early 1980's-ranging between 14 to 15.7 percent. At the same time, the poverty rate among nonelderly adults rose dramatically from a low of 8.5 percent in 1974 to a high of 12.3 percent in 1982 (table 2-7).

With the economic recovery of the last few years, income trends have shown a marked change from the pattern set in the late 1970's and early 1980's. Since 1982, wage earners have realized real gains paralleling those of the elderly. The median income of families with a head 65 and older rose slightly in constant (1987) dollar terms from $18,974 in 1982 to $20,808 in 1987 (an increase of 10 percent), while the median income of families with a head under 65 also increased from $30,611 in 1982 to $34,275 in 1987 (an increase of 11 percent). At the same time, poverty rates have declined for both elderly and nonelderly adults. The poverty rate among those 65 and older has declined from 14.6 percent in 1982 to 12 percent in 1988, while the poverty rate among adults age 18 to 64 has declined from 12.3 percent in 1982 to 10.5 percent in 1988.

COMPOSITION OF INCOME

THE ELDERLY RELY HEAVILY ON SOCIAL SECURITY BENEFITS AND

ASSET INCOME

The elderly depend more heavily on Social Security for their income than they do on any other source. In 1986, 38 percent of all income received by aged units came from Social Security (chart 214). Nine out of every 10 aged units were receiving some income from Social Security, and 14 percent of the aged units received all of their income from Social Security. In all, 3 aged units in 10 (31 percent) depended on Social Security for 80 percent or more of their income. The elderly with the lowest incomes were the most dependent on Social Security benefits. In 1986, 77 percent of aggregate income received by aged units with incomes under $5,000 came from Social Security benefits. By contrast, only 21 percent of the aggregate income received by aged units with incomes of $20,000 or more came from Social Security.

4 Information in this section on composition of income is from Susan Grad. Income of the Population 55 or Over, 1986. Pub. No. 13-11871, Washington: Social Security Administration. An aged unit is either a married couple living together with one or both members 65 or older, or an individual 65 or older who does not live with a spouse. Income is measured separately from the income of the family or household in which the unit lives.

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Source: Grad, Susan. Income of the Population 55 or Over, 1986

Pub. No. 13-11871, Washington: U.S. Social Security Administration

Income from assets was the second most important income source for the elderly. In 1986, 26 percent of the income received by aged units was income from assets. In recent years, savings and other asset income have grown in importance as sources of income, increasing from 16 percent of total income in 1962 to 22 percent by 1980. However, income from financial assets was unevenly distributed among the elderly in 1986, with one-third (33 percent) of the aged units reporting no asset income, and one-fourth (26 percent) of those with asset income reporting less than $500 a year. Only 33 percent of those who had asset income received more than $5,000 a year from this source.

Earnings from paid employment were a particularly important source of income to the younger elderly, but declined in importance with age. Overall, 17 percent of the income of aged units came from earnings. Those aged 65 to 69 received 30 percent of their income from earnings, compared to only 4 percent for those aged 80 and older.

Employee pensions provided 16 percent of the income the elderly received in 1986. This share has remained fairly constant in recent years, and is similar for all but the oldest age group. Overall, two in five (40 percent) of aged units received income from public and/ or private pension benefits other than Social Security-about one in four (27 percent) received income from private pensions.

TRENDS IN COMPOSITION OF INCOME

SOCIAL SECURITY IS BECOMING AN INCREASINGLY IMPORTANT PART OF THE INCOME OF THE ELDERLY, WHILE EARNINGS CONTINUE TO DECLINE IN IMPORTANCE

The rapid growth in real benefit levels for the elderly during the late 1960's and early 1970's was accompanied by a substantial change in the composition of income the elderly received. In the late 1960's, families with heads 65 and older derived nearly half of their income from earnings, while only 23 percent of their income came from Social Security. By 1980, Social Security had surpassed earnings as the leading source of income for these families. This shift may be due in part to more older persons qualifying for Social Security benefits and the inclusion of groups such as the self-employed in the program (charts 2-15 and 2-16).

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