On Piketty's Capital: Inequality Is Not A Phenomenon of Age

In "Capital in the Twenty-First Century," Piketty writes:

To be sure, older individuals are certainly richer on average than younger ones. But the concentration of wealth is actually nearly as great within each age cohort as it is for the population as a whole. In other words, and contrary to a widespread belief, intergenerational warfare has not replaced class warfare.

By my count, Piketty makes this point two times in the book and very briefly both times. But it deserves to be underscored.

With concerns about inequality growing, much has been made about wealth and income across the life-cycle, i.e. the fact that younger people have lower incomes and less wealth than older people. For some conservatives, this is supposed to diminish the importance of inequality and even the validity of society-wide inequality metrics in general. If income and wealth inequality is just a function of age, then it doesn't seem to matter that much because those on the bottom today will be on the top tomorrow as they move up in age.

For some leftists, this has been used to suggest the real war is a generational war. The battle is between the young who have less income and wealth and the old who have more of both. Some conservatives have also seized upon this rhetoric to call for reforms like cutting Social Security and other retirement benefits.

Wealth Inequality

When you look at mean wealth broken up by age groups, you can certainly understand how this life-cycle explanation of inequality gets traction:

Mean wealth (which is much higher than median wealth it should be mentioned) certainly progresses up with age. The older you are, the more time you have had to accumulate saved income or receive gifts and inheritances of wealth from your parents.

Nonetheless, as the Piketty quote explains, overall wealth inequality is not a phenomenon of age. Using the 2010 Survey of Consumer Finances microdata, I calculated the distribution of wealth within each age group, and found it to be relatively even across the board:

Of all the wealth held by those below the age of 35, around 80 percent is held by the wealthiest 10 percent in that age group. Around 27 percent is held by the next wealthiest 40 percent (i.e. those in the 50th to 90th percentile). Those in the bottom half hold negative 7 percent of the below-35 wealth, which is to say they are net debtors.

As we progress through the life-cycle, wealth actually becomes slightly more evenly distributed, but the overall distribution is very similar. At all age groups, the bottom 50 percent hold basically none of the age group's wealth, the top 10 percent holds two-thirds or more of the age group's wealth, and then the rest goes to the 40 percent of people just below the top 10 percent.


When it comes to income distribution across age groups, the similarities are less crisp, but there is still a significant and fairly pronounced class divide. First, let's start with overall income levels by the age group of the householder.

When it comes to absolute income levels by age, we see the same inverted-U situation. Household incomes rise with age, and then taper off a bit with retirement. The gaps between the ages are much less severe than with wealth though.

When calculating the income distribution within age groups, we get this:

Across age ranges, the poorest 50 percent captured around 13 to 20 percent of a given age group's income.  The next 40 percent and the top 10 percent then largely split the rest of the income, with the exception of the below-35 age range where the top 10 percent's share is much lower and the 55-64 age range where the top 10 percent's share is much higher.

So income inequality is less severe than wealth inequality and somewhat noisier across different age ranges. Nonetheless, you still see a severe and obvious class divide up and down the life-cycle.


The idea that economic inequality is a function of age and that people are making a big deal out of nothing because all of us will one day be older is just wrong. Income and wealth levels rise with age, but distributive disparities hold pretty consistently throughout the life-cycle.

You may of course quibble with wealth and income inequalities between generations. Perhaps you think younger people should have more and older people less just as a general rule. This quibble is of a slightly different nature though because it is not about reducing inequality per se; rather, it is about smoothing wealth and income across the life-cycle. Since everyone is young and old at some point in their life, such smoothing merely entails that each age group will, on net, give up as much as they get.

So, despite suggestions to the contrary, the issue of distributive inequality in and of itself is still everywhere and anywhere about the class war.