October 28, 2015

A New Study on the Growing Impact of Income Inequality on Life Expectancy Hits Home

One after another, studies keep coming in showing that the income inequality gap in the U.S. keeps getting wider and brings with it serious consequences in most areas of our lives. A report from the National Academy of Sciences (NAS) last month on the growing life expectancy gap underscored the effects of income and education on old age. Demographers were staggered by its findings regarding the size of the increased gap.

The study looked at two cohorts. The first was men and women born in 1930. I was born in 1929. The second cohort was men and women born in 1960. My son was born in 1958 and my daughter in 1960.

Life Expectancy Gap
The NAS committee found that men born in 1930 who reached the age of 50 had a life expectancy of another 26.6 years (to age 76.6) if they were in the lowest income bracket. But for those in the highest income bracket, the life expectancy extended 31.7 more years (to age 81.7), so the gap between the two income groups was about five years.

For men born in 1960, life expectancy for those in the lowest income group was about the same as it was for the similar low-income men born in 1930 (about 26 more years after age 50). But for men in the highest income bracket, life expectancy at age 50 for those born in 1960 was projected to extend 38.7 more years (to age 88.7)... a full seven years more than the high-income men born in 1930.

The difference in life expectancy between the lowest and highest income groups born in 1930 was 5.1 years. For men born in 1960, that difference had stretched to 12.7 years.

For females, the gains for those at the top of the income brackets was even more spectacular. Lower-earning women actually showed declining life expectancy from those born in 1930 to those born thirty years later. The decline was attributed to increased smoking among the 1960 cohort. But those in the top-earning bracket who reach 50 can now expect, on average, to live another 41.9 years (to age 91.9).

So the gap in life expectancy for women in the lowest and highest income brackets was four years for the 1930 cohort. That gap surged to more than 13 years for those born in 1960.

Note: Remember that these life expectancies are for those who survive to age 50. Life expectancies at birth would be much lower.

Here we have one more study showing that the U.S. is increasingly "the land of opportunity" but especially for those with the most income and education.

Consequences of the Life Expectancy Gap
These widening gaps in male and female life expectancies mean that the rich get richer when it comes to federal benefits -- Social Security, Medicare and Medicaid. In the 1930 birth cohort, lifetime benefits for low- and high-earning men were about the same. Among those born in 1960, however, those in the highest-earning bracket will receive $132,000 more on average than those in the lowest; the highest earning women will receive about $28,000 more.

"The increasing gap in life expectancy means even more inequality over a lifetime," said Peter Orszag, co-chairman of the committee and former director of the federal Office of Management and Budget. From the study report:
In essence, actual and projected changes in life expectancy mean that major federal entitlement programs will unexpectedly come to deliver disproportionately larger lifetime benefits to higher-income people who, on average, will increasingly collect those benefits over more years than those with lower incomes.
Impact of Proposed Reforms
The committee explored the possible impact of seven proposed reforms on the inequality gap in lifetime federal benefits. Only modest effects would come from increasing the eligibility ages -- either for Social Security (62) or Medicare (65).

One proposed reform would almost completely eliminate the inequality gap that results from these life expectancy trends: reducing benefits for those in the top half of the lifetime earnings distribution.

Since I like that idea, it will never be enacted. I get furious at the current set up which means that my children and grandchildren who inevitably find it more difficult to climb the economic ladder than I did are being taxed to give me Social Security and Medicare benefits.

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