Inequality in Equal Land

Adam Nash has a good post on wealth inequality:

…Every year, we pull the most recent data from the US Census on household wealth, cut by age.

…invariably, the students’ initial response is a reaction to the apparent disparity in wealth between households based on age.

For many students, it just doesn’t seem fair at first blush. Households between the ages of 65 to 69 have a median net worth that is 9.83x that of households under 35. You can almost hear their cries, “the Baby Boomers are hoarding all the wealth!”

Almost all of the graph, however, is aging! Nash considers a totally equal society called Equal Land. In Equal Land:

• Everyone works from the ages of 25 to 64, retiring at 65
• Everyone lives to the age of 85
• Everyone makes the same amount, $100,000 per year
• Everyone saves 10% of their income, every year while they work
• Everyone makes 8% on their savings, every year
• Everyone spends 4% of their portfolio, every year in retirement

The result is that in equal land the distribution of wealth is even more unequal by age than in our world! This is not to say all or even most inequality is explained by age. Most inequality in our world is within-age, not between-age. But when you look at an age-wealth graph specifically, almost all of what you are seeing is just age and the power of compounding.

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