PHYLLIS CUMMINS

OHIO ASSOCIATION OF GERONTOLOGY AND EDUCATION

APRIL 15, 2011

Easterlin Hypothesis:An Update of the Status of the

Baby Boomer Cohort

Presentation Summary

What is a cohort and why is it important to study cohorts?

What is the income status of the baby boomer cohort as compared to their parental cohort?

What are the intracohort differences in income for the baby boomer cohort?

What is a Cohort?

Ryder (1965) defines a cohort as:“the aggregate of individuals (within

some population definition) who experienced the same event within the same time interval” (p. 845)

A cohort can be based on year of birthA cohort can also be any group of

individuals who experience the same event within a time interval

Why is it Important to Study cohorts?

Insights can be gained on the impact of sociohistorical events, gender, race, and other life course factors

Cohort studies are usually longitudinal rather than cross-sectional

The Baby Boomer Cohort

There are about 78 million baby boomersIncludes those born between 1946 and 1964Largest group of older Americans ever They have had and will continue to have a

great influence on societyEasterlin, Schaeffer, and Macunovich (1993)

studied the economic status of the baby boomer cohort as compared to their parental cohort

This study updates the analysis of Easterlin et al. (1993)

The Easterlin Hypothesis

Economic prospects are adversely affected by cohort size

Cohort aspirations are established during adolescence

Incomes will be higher but there will be substantial intracohort variability

To offset reduced economic prospects:Young adults will marry later, delay

childbearing and have fewer childrenMore women will work outside the home

Research Question:

Have baby boomers maintained an economic advantage over their parental cohort?

Methods

Used Current Population Survey (CPS) data from 1964, 1974, 1984, 1985 (parental cohort), 1989, 1999, 2009, and 2010 (baby boomer cohort)

Compared inflation adjusted “Income per Adult Equivalent (IAE)” of the baby boomer cohort to their parental cohort

Considered the baby boomer as a whole and as four smaller cohorts

Compared baby boomer median IAE to parental cohort median IAE

Results

The economic advantage of the baby boomer cohort over their parental cohort has steadily declined between 1988 and 2009

In 1988 the advantage was 85% and by 2009 it had declined to 11%

IAE for the boomer cohort as a whole and by quartile declined between 2008 and 2009

Effects of the Great Recession are only partially reflected in this analysis

 Baby Boomer Cohort - Median Annual Income per Adult Equivalent (adjusted to 2009 dollars)

Baby Boomers 1988 1998 2008 2009 First Quartile 24,457 32,922 31,450 30,058

Second Quartile 22,032 27,938 32,150 31,727

Third Quartile 22,030 23,801 29,063 27,332

Fourth Quartile 22,806 22,520 26,207 25,769

All Baby Boomers 22,770 26,396 29,386 28,846  

Percentage Advantage in Median Annual Income per Adult Equivalent for Baby Boomer Cohort over Their Parental Cohort Baby Boomers 1988 1998 2008 2009 

First Quartile 84.8 32.1 27.311.1

Second Quartile 88.7 27.8 21.218.1

Third Quartile 89.1 28.8 15.2 2.2

Fourth Quartile 84.9 28.8 11.8 2.4

All Baby Boomers 85.3 29.0 17.411.3 

Age and Income Comparisons for the Baby Boomer Cohort and their Parental Cohort (in thousands of dollars)

Age and Income Comparisons for the First Quartile Baby Boomer Cohort and their Parental Cohort (in thousands of dollars)

Age and Income Comparisons for the Second Quartile Baby Boomer Cohort and their Parental Cohort (in thousands of dollars)

Age and Income Comparisons for the Third Quartile Baby Boomer Cohort and their Parental Cohort (in thousands of dollars)

Age and Income Comparisons for the Fourth Quartile Baby Boomer Cohort and their Parental Cohort (in thousands of dollars)

Summary and Discussion

Results of the current analysis are consistent with Easterlin et al.’s (1993)

The baby boomer cohort still has an economic advantage over their parental cohort but it has narrowed over time

There is substantial intracohort variability in median IAE

Summary and Discussion

Effects of high unemployment rates have had a greater impact on the retirement prospects of the baby boomer cohort than has their decline in wealth

Less educated baby boomers are at an economic disadvantage

Higher unemployment ratesLower IAE

The retirement prospects of younger baby boomers and those with less with less education are very uncertain

Opportunities for further research

Questions?

References

Easterlin, R.A., Schaeffer, C.M. and Macunovich, D.J. (1993). Will the baby boomers be less well off than their parents? Income, wealth, and family circumstances over the life cycle in the United States. Population and Development Review 19, 497-522.

Rossignol, A. (2007). Principles and practice of epidemiology: An engaged approach. New York: McGraw Hill.

Ryder, N. B. (1965). The cohort as a concept in the study of social change. American Sociological Review, 30, 843-861.