The demography of dependency doesn’t look good.
NPR has a new report on the personal expectations and economics of retirement, and new poll data. It fits with what I was about to say about the troubling trends in early adulthood incomes. Here are some trends.
The new Census poverty report shows that poverty rates have increased for everyone under age 65 since 1999.
In fact, as the figure shows, compared with previous recessions in particular, the current recession has driven up poverty rates more for people in the ages 18-64.
But this doesn’t show a different aspect of the trend — that 18-64 poor population has been a growing share of the total poor population. They are now 57% of all poor people, up from less than 40% in the 1960s. That’s partly because the Baby Boomers aged into this group, and also because poor people have fewer children than they used to, so there are fewer poor children. When you divide the poor into three age categories, this is how their shares have changed since the 1960s:
Source: Census historical tables.
It’s actually worse than that for the mid-adulthood folks. Not only are they more likely to be poor, but their median incomes have fallen. Among men ages 25-54, the last decade has been brutal.
Source: Census historical income tables.
One of the social problems with having more poverty in the mid-adulthood years is that the social safety net needs their earnings to pay for the old and the young, and they need to be accumulating wealth, too, so that wealth can be seized by the state and redistributed later.
In traditional actuarial models, people in the mid-adulthood ages were expected to support everyone else. That’s why demographers invented the “dependency ratio,” which is the ratio of people not in those prime earning ages per 100 people who are — the lower the number the better — if you want your kids in school and your old people securely retired . By 2030, the ratio rises to a whopping 83 in Census projects:
The unemployment, declining earnings, and growing poverty among middle-aged people is going to reduce their contributions now into pensions, and hurt their savings for later. On the other, if they’re too broke to retire when they want to — as many in the NPR survey report — that would help keep the pension system solvent.