The Washington PostDemocracy Dies in Darkness

For many older Americans, the rat race is over. But the inequality isn’t.

Joanne Molnar, 64, and her husband Mark, 62, are employed as “Workampers” in Trenton, Maine.  Workampers are employees, mainly retirement-age couples, who work various seasonal jobs at RV parks and camping parks for minimum or relatively low wages during the summer months.  (Linda Davidson/The Washington Post)

While the rat race ends with retirement, one of its principal features extends well past a person's last day of work.

Income inequality in the United States spills over from the job into the last decades of life, according to a new survey that ranks the differences among U.S. retirees as among the most extreme in the 35-country comparison.

The report being issued Wednesday by the OECD, or Organization for Economic Cooperation and Development, reports levels of inequality in a survey of member countries.

The inequality among older people in the U.S. is among the most extreme, according to the report.

“Inequality has been growing from one generation to the next in the United States,”  according to the report. “This is particularly alarming . . . as old age inequality among current [U.S.] retirees is already higher than in all other OECD countries, except Chile and Mexico.”

The gap between the top and bottom incomes seems destined to rise, too.

Within each generation of workers, according to the OECD data, inequality rises. For example, researchers tracked U.S. income inequality for four different generations — people born in 1920, 1940, 1960, and 1980. For each group, inequality has been more extreme than the previous generation.

Alicia Munnell, director of the Center for Retirement Research at Boston College, said she was not surprised that the U.S. would rank at the extremes for income inequality.

“The big problem in the U.S. is that half of the working population in the private sector has no retirement plan available at work — and people do not save on their own,” Munnell said. “Without any retirement saving, they only have Social Security,  and Social Security is getting less generous over time.”

Her analysis of recent Federal Reserve data shows large gaps in retirement savings. The households in the top 20 percent in retirement savings -  as measured in 401k plans and Individual Retirement Accounts - had a median of $780,000 squirreled away. By comparison, households in the bottom 20 percent had $26,700 in those accounts.

"If you have a pile of money, you can earn a lot in returns," Munnell said.

According to the OECD report, one of the drivers of income inequality — from young workers to retirees — stems from the fact that so many Americans have simply stopped working.

“The United States is one of [a] few countries where employment among the prime working-age population is lower today than it was in 2000,” according to the report.

More specifically, it noted that in 2000 about 82 percent of Americans between the ages of 35 and 44 worked; by 2016, that number had slipped to 79 percent. The shortfall of employment is most striking among workers at the bottom rungs. While more than four-fifths of the highly educated working-age population is actually working, the report says, only about half of those with low education levels are.

While the inequalities among  people of working age are a primary reason for inequalities among older Americans — the inequalities follow people into retirement — ill health is another critical source of difference. More than 1 in 3 American adults is obese, more than in any other OECD country, according to the OECD, and the ill health is concentrated among the poor.

“Americans are far more unhealthy than their peers in a number of other countries and people from low socio-economic backgrounds are particularly affected by bad health,” according to the report. “Disabilities, depression and obesity are widespread.”

The exact nature of the financial pressures on older Americans has been a subject of intense debate among economists in recent months because of a surprising finding by Census researchers that suggests that the financial fortunes of retirees are much, much rosier than previously thought.

The research by Adam Bee and Joshua Mitchell of the U.S. Census Bureau found that previous government estimates, which are based on survey responses, had significantly underestimated retiree income. By looking at tax data, rather than survey responses, Bee and Mitchell  found that median household income for those over 65 was actually about 30 percent higher than previously reported in official statistics. The finding means that the official poverty rate among older people is seven percent rather than the previous estimate of nine percent.

Some scholars have taken the new research to mean that retirees in the U.S. are faring well - and not to worry too much about them.

But the Bee and Mitchell research also shows that a large share of retiree households are being left behind.

Because while their research showed that overall retiree income had been underestimated, it showed that the previous government statistics had also underestimated the inequality among retirees. For example, the old Census figures indicated that the gap between the 25th percentile of income and the 75th percentile of income was $44,000 annually. The Bee and Mitchell figures show a much broader gap - about $54,000 - or more than 20 percent larger.