Consumption and Income of the Poor Elderly Since 1960

Bruce Meyer, James Sullivan

NBER Retirement Research Center Paper No. NB 10-08
Issued in September 2010

We examine changes in material well-being among individuals 65 and over during the last five decades, focusing on poverty and low percentiles of income and consumption, housing quality, and durable ownership. Our analyses make many methodological improvements in the measurement of income and consumption for those with few resources. We answer three related research questions. First, how has poverty and well-being changed among those 65 and over during the past five decades? Second, for which groups of elderly have the changes in consumption and income been the most pronounced? Third, what are the proximate causes of the changes in poverty and low percentiles? In particular, what is the role played by changes in the demographic composition of the elderly, taxes, transfers, household savings, and the ownership of durables such as houses and cars? The consumption data show much greater improvement over time than do the income data. This pattern of greater improvement in consumption is even more striking for poverty gaps, deep poverty, and relative poverty. Low percentiles of consumption have risen sharply in recent years, much faster than the same percentiles of income. Housing quality and durable ownership have increased sharply over time for those at the bottom of the income and consumption distributions. We find that the sharp differences in income poverty by age have narrowed over time, and for consumption-based poverty they narrow further. Sharp differences in income poverty by gender continue, but have almost disappeared for consumption poverty. In analyzing these trends, how one accounts for price changes has a large affect on the results. Demographics (other than education) do not play a large role in explaining the patterns, nor do taxes and in-kind transfers, but changes in social security benefits play a large role.

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