Academic journal article Social Security Bulletin

Family Unit Incomes of the Elderly and Children, 1994

Academic journal article Social Security Bulletin

Family Unit Incomes of the Elderly and Children, 1994

Article excerpt

The economic status of the elderly and that of children are analyzed using a comprehensive definition of income that takes selected types of noncash income and taxes into account. Estimates are presented for detailed age groups over the entire age range and for socioeconomic classifications within the elderly subgroup and within the subgroup of children. The article finds that children and the elderly are less well-off than the middle age groups. This result is obtained using median incomes and the percentage of the group that has low income, as defined in this article. When results obtained with the measures presented in this article are compared with those obtained with more commonly used measures, there are important differences for both the elderly and for children. For both groups, the composition of the low-income population differs in important ways from the composition of the official poverty population.

1. Introduction

Perceptions about the economic status of various subgroups of the population can have important impacts on income support and other policies chosen by the government. For example, for many years the elderly as a group were perceived to be in poor economic condition. The reaction was to increase government assistance to the elderly (for example, by raising Social Security benefits). In contrast, in recent years the elderly as a group have been perceived to be well-off financially. The reaction in this case has been a tendency to decrease government assistance to the elderly (for example, proposals to reduce Social Security benefits).'

Perceptions about economic status can be affected in important ways by technical choices made in estimating economic status. Those choices include the definition of income and the adjustment, if any, made for differential needs of units of different size or composition. There is general agreement that an income definition that is confined to cash income before tax, the most commonly used definition, is not fully satisfactory in most cases. There is also general agreement that the official U.S. poverty measure is less than ideal. In both cases, however, there is no consensus on the best alternative for the analysis of economic status.

Perceptions can also be affected by the choice of comparisons. For example, examining detailed age groups or detailed socioeconomic subgroups within an age group emphasizes the heterogeneity present within a group. Also, the examination of such subgroups can produce insights that are not apparent using summary groups.

For many years the economic status of subgroups of the population generally has been assessed using cash income before tax as the measure of resources. This has been particularly true for detailed examinations of the income of the elderly (for example, Radner 1995, Grad 1996). Although it has been recognized that such a measure was less than fully satisfactory, the data needed to estimate a more comprehensive measure of income often were not available, especially when changes over substantial periods of time were examined.

In recent years, however, definitions of income that include several types of noncash income and that take several types of taxes into account have been used more frequently in analyses of subgroups of the population. For recent examples, see Bureau of the Census ( 1996) and Congressional Budget Office estimates in U.S. Congress (1993, pp. 1405-1409).2 It should be noted, however, that choices regarding which types of noncash income should be included and how those types should be valued are controversial.3

In this article, the economic status of the elderly (persons aged 65 or older) and the economic status of children (persons under age 18), the two age groups that are considered by many analysts to be the least well-off, are examined. First, estimates for detailed age groups over the entire age range are presented to examine how well-off the elderly and children are relative to other age groups. …

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