Late-Life Inequality, CAD and Retirement Income Systems: Insights From Cross-National Analysis

TL;DR

The paper finds that income inequality among older adults is much higher in the US compared to other developed countries, likely due to differences in retirement income systems.

Contribution

This study provides cross-national evidence linking late-life income inequality to the structure of retirement income systems, particularly highlighting the US as an outlier.

Findings

US income inequality was persistently higher for those aged 65+ compared to 18-64, with inequality ratios ranging from 105% to 111%.

Late-life inequality in the US was 36% higher than the average of other OECD countries in 2022.

Countries like Czechia, Belgium, and Norway had the lowest late-life inequality, while Portugal, Chile, and the US had the highest.

Abstract

Prior research on cumulative advantage/disadvantage in the US has shown that income inequality is higher after age 65 than at younger ages, both in within-cohort and between-cohort analyses, a pattern thought to be related to the structure of retirement income systems in the US. There has, however, been less study of late-life inequality and its relationship to inequality among non-elderly among adults across multiple countries with differing retirement income systems, particularly in the pandemic and post-pandemic period. We used OECD data to compare Gini indices of inequality for the 65+ population and the 18-64 population for 27 developed countries from 2018-2022. Results indicate that US income inequality was persistently higher at 65+ than at 18-64, with ratios ranging from 105% to 111% across years and relatively stable over the study period. In contrast, income inequality was on average lower in the other OECD countries after age 65 than before. Late-life inequality was higher in the US in each year than in any of the comparison countries, with the US inequality index (.453) exceeding the non-US rate by 36% in 2022. Countries with the lowest late-life inequality in 2022 included Czechia, Belgium, Norway, Poland, Slovenia, the Netherlands, and France, while countries with higher late-life inequality included Portugal, Chile, Israel, Latvia, New Zealand and the US. We will discuss some of the ways in which pension systems vary between countries with higher and lower late-life inequality.