Decline of Paired-Adult Households, and the Rise of Single-Adult Households

My research in household finances suggests that marriage is a major determinant of households’ financial fortunes.  Married households generally do much better financially, because they have the potential for multiple income streams and the ability to share costs.  This week’s posts probe the relationship between changing living arrangements and households finances.  In this post, we look at the rising incidence of living outside of paired-unions.

Decline Paired Unions Since 1967

The proportion of households headed by adults in a paired union has declined markedly since 1970. This change is depicted in the figure below, which is based on Census data.1

The proportion of married adults has declined substantially, while the incidence of cohabitation has grown dramatically. Rising cohabitation rates have not fully offset the decline in marriage. In 1967, 70.3% of US adults lived with a spouse, 0.4% lived with a non-spousal partner, and about 7.6% lived alone. By 2015, 51.4% lived with a spouse, 7.5% lived with a non-spousal partner, and 14.4% lived alone. This leaves a substantially smaller proportion of adults living outside a paired union (70.7% in 1967 vs. 58.9% in 2015, a difference of 11.8 percentage points).

Much of this change has produced a rise in adults living alone, which doubled from 7.6% of households in 1967 to 14.4% in 2015.

The remaining adult population appears to have shifted to alternative cohabitation arrangements with non-partners. Other living arrangements, like living with other relatives (9.8% in 1967 to 12.1% in 2015) or non-relatives (1.3% to 3.6%) rose, but the incidence of living with one’s parents is roughly the same as it was decades ago (11% in 2015 vs. 10.6% in 1967)

Do these changes have financial consequences?  There are many indications that the answer is yes.  Marital status appears to have a significant impact on households’ incomes and net worth.  In my forthcoming book, I argue that being in a paired union sways a family’s ability to stay in the middle class.  The consequences of being single while having children seem particularly strong, because children require considerable investments of labor that either have to be met by foregoing work or using commercial alternatives.

This does not necessarily imply that staying in a first marriage is critical.  Many of these benefits may exist in unmarried cohabitants or recombined families (in which previously divorced adults recombine into a new paired union household).  They may also exist in other multiadult household arrangements, like living with a sibling or roommate.  These questions will be examined in future posts.


  1. Census Bureau (2015) “Table AD-3. Living arrangements of adults 18 and over, 1967 to present” Data table from Census Bureau.http://www.census.gov/hhes/families/data/adults.html

Workers Haven't Received Raises in Decades

American real hourly wages haven’t moved for decades.

The hourly wage rate attempts to measure how much workers earn for each hour of work. It is calculated by estimating the total wage payments, divided by the total number of hours worked, economy-wide. In 2014, the average American worker earned about $20.60 for each hour worked, compared to $2.53 in 1964.1

At first glance, this suggests that Americans are better-paid than they were fifty years ago. However, these are nominal figures, which do not account for changing consumer prices. An hourly wage of $2.53 went much further in 1964, when the median home sold for about $18 thousand2, a one-year, 52-issue subscription to Life magazine cost $5, and a gallon of gas cost 30 cents.3

TO get a sense of how well workers are paid today, we need to adjust wages for inflation, which renders an interesting view of wage growth over the past several decades. The figure below, which reproduces a graph from the Pew Research Center’s Drew Desilver4, shows how both nominal and real wages’ growth since 1964.

real wage growth

Although hourly wages have been rising continuously in nominal terms, they have barely moved in inflation-adjusted terms. Between the 1970s and mid-1990s, hourly wages actually fell. Household incomes were rising during this period, but mainly because people worked more hours. A key element of this trend involved more labor force participation: dual-income households became more common, and homemaking became less common. Since the mid-1990s, hourly wages have risen. However, incomes and wages have generally stagnated. Part of what may be happening is that, while workers were paid more per hour of work, they’ve had fewer work hours.

At the end of the day, a lot of this is splitting hairs. In inflation-adjusted terms, hourly wages have barely moved for 50 years.


  1. Bureau of Labor Statistics (2015) “Employment, Hours, and Earnings from the Current Employment Statistics survey (National)” Series ID: CES0500000008 http://data.bls.gov/
  2. US Census Bureau (n.d.) “Median and Average Sales Prices of New Homes Sold in United States”http://www.census.gov/const/uspricemon.pdf
  3. Mary Braswell (2013) “Looking back at life in 1914, 1939, 1964 and 1989” Albany Herald December 26http://www.albanyherald.com/news/2013/dec/28/looking-back-at-life-in-1914-1939-1964-and-1989/
  4. Drew Desilver (2014) “For most workers, real wages have barely budged for decades” Factank Pew Research Center. October 9http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/

Download the raw data and Markup file here

More Debt Does Not Necessarily Mean Bigger Debt Service Obligations

Despite the rise in household indebtedness, cheap and easy debt has meant that the cost of sustaining these debts has not exploded.

Many analysts voice concern about the weight of indebtedness on household finances. Over the past several decades, household debt has risen considerably. In 1950, household debt stocks were 24% of GDP.1 That means that the estimated value of all of the debt owed by US households was roughly one quarter the estimated value of everything produced in the economy. By 1980, it was 45%. By 2000, it was 65%. By 2014, household debt was 95% of GDP – it quadrupled in proportion to national economic production. In the aggregate, households carry bigger debts than they did sixty years ago.

One might infer that households are under greater financial pressure to service these debts. If people are getting bigger mortgages, carrying more credit card debt, more education debt, and so on, wouldn’t they have bigger principal repayments and bigger interest expenditures? Interest and principal payments are collectively described as debt service payments.

That does not appear to be the case. The figure below depicts two data series. The first is the household Debt Service Ratio (DSR), which is the ratio of required households’ debt service payments to their disposable (post-tax) income. The second is the Financial Obligations Ratio (FOR) is a broader measure of households’ financial obligations, and includes debt service, rent payments, auto lease payments, homewoners insurance, and property taxes.

DSO

Households’ debt service ratio did rise between 1980 and 2007, but the rate of change is very modest. In 1980, the debt service ratio was 10.6%, and it peaked in 12.77% in third quarter of 2008. The overall size of household debt stock nearly doubled, but debt service obligations rise by about 20%. Concretely, this suggests that a fairly typical household – for example, one with a disposable income of $50,000, paid $5,300 in debt service obligations at 1980 rates and $6,385 at peak 2008 rates. This translates into about a $90 difference per month. And much of this increase debt service involves repayment of mortgages, which is partly a form of investment.

Why did the burden of servicing debts seem to rise so much more modestly than household debt? In part, it is a product of cheap debt. Credit is less expensive and more abundant today than in 1980. The market for non-traditional mortgages (for example, low-downpayment or adjustable rate mortgages) has developed considerably, and now lends money to people who might not otherwise be able to buy a home. Credit cards are very easy to acquire. The pay day loan industry has grown considerably.

The figure suggests that, if anything, this rise and debt has had a rather modest effect on households’ day-to-day cash flows. Although households are much more in debt, their debt is cheap and plentiful. Cheap, plentiful debt has also been in abundance during the Great Recession and its aftermath, and households have increasingly sought to pay down their debts. All of this has resulted in household debt falling back to the low range of where it stood in the 1980s. Overall, debt service obligations do not seem to be very volatile.

A similar story could be told with the Financial Obligations Ratio. One can really squint at the above figure to discern some very modest growth in household financial obligations between 1980 and 2007. However, it is a substantively mild rise, and it has fallen with debt service obligations since 2008.

The moral of the story? Although household debt is very high, this book has not dramatically affected households’ cash flows. Household finances are not being choked by debt service obligations. The cost of servicing debt has been reasonably stable within a confined range of about 15% to 18%. This is not an earth shattering growth in financial obligations. If debt has some kind of systematic negative effect on household finances, this effect is not manifesting itself as growing debt repayments, relative to incomes.


  1. Federal Reserve Board (2014) “CMDEBT_GDP” Data series from Federal REserve Economic Data set. Accessed in Spring 2014.http://research.stlouisfed.org/fred2

Download the raw data and Markup file

The Spectacular Fall, and Very Modest Recovery, of Household Savings

Household savings rates have fallen considerably since the early-1970s

The personal savings rate tries to estimate the proportion of people’s disposable (post-tax) income that is not spent. Presumably, it gives us a sense of how much money people are putting aside for the future. A lower savings rate suggests that more people are financially ill-prepared for the future.

The figure below illustrates changes in US households’ personal savings rates. The data comes from the Federal Reserve Board.1 Keep in mind that these rates are derived from aggregate data, and represent means rather than medians. It seems likely that wealthier households with much higher savings rates push these averages up, and that the median household would save below the average personal savings rate.

During the 1960s and early-1970s, households saved between 10% and 14% of their incomes. At those rates, a household earning a yearly salary would put aside between $6,000 and $8,400 a year. Over thirty years of compounding 5% real annual returns, such savings would result in a nest egg of between $400 and $558 thousand.

us personal savings rate

Since 1976, the personal savings rate has declined steadily, eventually reaching near-zero right before the 2008 crisis. Throughout the Great Recession, many observers have celebrated a resurgence in savings, but the magnitude and expected durability of this rebound can easily be overstated. When savings rebounded to about 5% in 2013,[^21] it was reverting to levels that prevailed in the mid-1990s, not the mid-1960s. This decline is enough to produce a substantial diminishment in long-term wealth accumulation. Were our $60,000 a year family to save between 2% and 5% of their income (as opposed to 10% – 14%), they would be left with a nest egg of $78 to $199 thousand. The effect of low savings seems more moderate on a year-by-year basis, but they can render substantial differences in wealth over a lifetime.

Why have savings been falling? There are many explanations. Part of the picture probably involves income stagnation. Many analysts argue that people are more spendthrift today, and more amenable to borrowing money. Consumer debt is also cheaper and easier to obtain than in the 1960s or 1970s. In my own research, I also focus on the rising cost of living, particularly the rising cost of essential goods and services like health care or education.

Whatever the cause, it seems likely that people save less money, which suggests that they will have less wealth from which to draw in the future.

Federal Reserve Board (2014) “Personal Saving Rate, Percent, Annual, Seasonally Adjusted Annual Rate” Series PSAVERT from Federal Reserve Economic Data set. Accessed in Spring 2015. http://research.stlouisfed.org/fred2↩

Demographic Predictors of Wealth: Rough Estimates

Which demographics have more or less wealth? Some rough estimates

Who is wealthier, and who is poorer? The question can be answered by looking at data from the Survey of Consumer Finances. Figures are for 2013.

I consider the following predictors:

  • Sex of household head
  • White Non-Hispanic vs. Others
  • Age of head
  • Education of head
  • Household headed by pair/single
  • Children vs. no children

Notes: Wealth bottom-coded at $1 and top-coded at $4MM. Model predicts logged net worth.

Predictor exp(Coef) SE
Baseline $662
Female -53% 0.12
Non-White -77% 0.09
Age 35-44 +426% 0.15
age 45-54 +1,327% 0.16
Age 55-64 +3,227% 0.16
Age 65-74 +13,110% 0.17
Age 75+ +22,471% 0.21
HS +77% 0.14
Some College +109% 0.13
College +574% 0.13
Unpaired -73% -0.12
Working +214% 0.13
Parents +34% 0.10

The model does not do a very good job of developing precise estimates, but it still imparts some sense of the magnitude of different predictors’ effects.

The model suggests that age is the strongest predictor of net worth. This makes sense: Not only does it take time to accumulate wealth, but family wealth is more likely to be passed on to older people, because their ancestors are more likely to have passed away. The effects of age are huge. Holding all other factors constant, a senior is predicted to have several thousand times the amount of wealth than his or her otherwise similar under-35 counterpart.

The effects of sex, race, cohabitation status, and education are also considerable, where the wealth of a household headed by a man who is non-Hispanic white, a college graduate, married or cohabiting, and working has several times higher wealth. The effects of these different factors are multiplicative. For example, the model predicts that a household headed by a working, married, college-educated, non-white woman, age 40 with no children is $8,267. If she were white, it is predicted to be just under $36 thousand. If she were still black but were 60 years old, her household is predicted to have a net worth of just over $50 thousand. If she were white, it would be $217,510.

Again, it is important not to take these coefficients too literally. The model only gives a sense of relative magnitudes. What we do learn is that age matters a lot in predicting how much wealth someone holds. While age is of critical importance, sex, race, education, and working status also seem to play an important role.

Family Business in Decline?

Data from the Survey of Consumer Finances suggest that family-owned businesses are experiencing a decline. There appear to be as many households earning some income from proprietary businesses, but the proceeds from these businesses are falling. There are fewer businesses that earn a living wage, and the prevalence of high-earning proprietary businesses also seems to be falling.

Proportion of Households Earning Business Income

Consider the figure below, which shows the proportion of US households earning (1) any income, (2) at least a median income, and (3) at least a 90th percentile income from a proprietary business.

bizincearn

Between 8% and 10% of US households receive some business income, but between a two-thirds and three-quarters of these households fail to secure the equivalent of a median household income through personally-owned businesses. In 1992, about 3.3% of US households received at least a median household income from personally-owned businesses. By 2013, just over half as many households – 1.8% – received a median income from such businesses. The proportion of high-earning personal businesses has fallen even more sharply, from 1.3% in 1992 to 0.4% in 2013.

On one hand, these reduced earnings could be the byproduct of random variation. For example , business earnings took a bit of a dip in 1995 and 2004, but then recovered. This could be a product of sample variability or a natural minor fluctuation in small business profitability. However, that seems less likely when we look at the wider distribution of personal business earnings.

Distribution of Business Earnings

The figure below shows the distribution of business earnings from 1992 and 2013. It describes the 25th, 50th, 75th, 90th, and 95th percentile earnings from proprietary businesses.

incomedist

This figure shows a long-term decline in proprietary business earnings, which seems to have begun after the 2001 recession. In 2001, the median household business earned $26,664. This figure fell regularly through 2013, where the median stood at $16,400. This represents a fall of about 38%.

A similar decline occurred among the higher ranks of the business income scale. From 2001 to 2013, 75th percentile income fell from $79,200 to $40,000. Ninetieth percentile income fell from $217,800 to $87,000. Ninety-fifth percentile income from $370,920 to $156,600. These are staggering losses.

What Does It Mean?

If these figures accurately reflect changes in personal business earnings, it suggests that their earnings are falling quickly. Why might this be happening? It may be that small business faces mounting pressures from many quarters. Retailers may have increasing difficulty competing with big box stores and online retailers. Small manufacturing outfits may have trouble competing with foreigners. It might be that many small businesses are being replaced with automated substitutes (e.g., TurboTax and LegalZoom are killing small accountants and lawyers).

Whatever the cause, it seems quite clear that small businesses (at least unincorporated ones) are doing badly in the US.

The Long Consumption Boom, 1980 – 2014

US households’ finances have been deteriorating for decades. Rising expenditures and consumption are part of the puzzle.

Any attempt to explain US households’ financial struggles must engage the issue of rising spending. While income stagnation is almost certainly part of what is causing households’ money problems, it is only a partial explanation at best. “Stagnation” means not growing quickly – it does not imply that household incomes have necessarily been shrinking (although they often have done so over the past several years). Even if incomes are stagnating, people should be able to maintain their savings by restraining their spending.

The problem is that households generally have not tightened their belts when faced with earnings difficulties – at least not until the Great Recession. The first figure below depicts changes in average personal income and expenditures for the United States from 1921 until 2014. All values are denominated in inflation-adjusted 2014 dollars.

At first glance, the graph suggests that average incomes have generally outpaced average expenditures.However, a closer look reveals that the space between disposable incomes and expenditures has been shrinking. In other words, the average American was spending more of their take-home pay.

This space can be seen more clearly in the figure below, which depicts the ratio of mean per capita total expenditures to disposable incomes. As noted in the previous chapter, the typical household saves about 10% or so of the take-home pay, but spending grew steadily – relative to income – and households were putting aside pennies on the dollar right before the Great Recession. Household savings rebounded after the Recession, but it was to savings rates that prevailed in the early 2000’s, not the 1970s.

These shifts of 5 to 10 percentage points in household savings rates translated into substantial differences in the amount of money people were putting aside from year-to-year. In the late 1950s, the average household put aside about $1750 (at 2014 prices) yearly. With the passage of time, households found themselves able to put aside more money, and by the early 1970s the typical household was putting aside over $3000 (again, at 2014 prices). However, per capita savings fell steadily over the ensuing decades. Even though the average person earn far more money in 2005 than in 1970, Americans typically put aside three times as much from year-to-year. Savings did rebound after the 2008 Crisis, even though people should be putting aside much more money today – retirement, health care, a college education, and many other living costs are much higher today than 40 years ago.

More spending is undoubtedly part of what is causing US households’ money problems. One might argue that, in an age of Walmart, Costco, and cheap Chinese imports, it has never been so easy to save money. Yet people are not saving money. Any endeavor to explain US households’ financial insecurity must engage over-spending.

Download the R Markdown and Data FIles Here

Home Prices and Income

Home prices are high, but how much more expensive than in the past?  Are all homes more expensive, or just homes for rich people?

Home Ownership Rates Roughly Similar

The table below describe changes in home ownership rates across the income scale. Although it looks like home ownership widely fell, these differences are generally insignificant at the bottom of the income scale. Below the 90th income percentile, home ownership rates in 1989 and 2013 are indistinguishable. At the top of the income scale, ownership rates seem to have fallen slightly, but these changes are at the border of statistical significance.

Income Class % Own Homes (1989) % Own Homes (2013)
Bottom 20% 29% 29%
Second-Lowest 20% 49% 45%
Middle 20% 56% 57%
Second-Highest 20% 73% 78%
80% – 90% 82% 86%
90% – 95% 92% 90%
Top 5% 92% 95%

Any difference in home values across the income scale are likely not the product of changes in home ownership rates.

Prices Have Risen Faster at the Lower and Middle End of the Market

The table below compares the median home value among owned homes in each income category. All values are in 2013 inflation-adjusted dollars.

Income Class Median Value of Owned Home (1989) Median Value of Owned Home (2013) Change 1989 – 2013
Bottom 20% $33,200 $100,000 +201%
Second-Lowest 20% $51,200 $125,000 +144%
Middle 20% $63,000 $133,000 +111%
Second-Highest 20% $75,000 $175,000 +133%
80% – 90% $112,800 $250,000 +121%
90% – 95% $167,600 $335,800 +100%
Top 5% $224,000 $646,000 +188%

Home prices rose fastest for those at the bottom of the income scale. On one hand, this means that poorer home owners got the proportionally greatest returns, relative to those higher on the scale. On the other hand, this means that poorer young people have to bear proportionally higher costs to buy a home. Overall, home values doubled to tripled between 1989 and 2013. Of course, incomes did not rise commensurately.

The table below shows how the ratio of home values to income changes during this period. In 1989, most households’ homes cost the equivalent of one year’s salary. Near the bottom end of the income scale, owned homes were two to three times annual salaries. By 2013, home values were double to triple annual salaries, and even higher at the bottom end of the income scale.

Income Class Median Income (1989) Median Home Value:Income (1989) Median Income (2013) Median Home Value:Income (2013)
Bottom 20% $11,313 2.9 $14,203 7.0
Second-Lowest 20% $26,398 1.9 $28,407 4.4
Middle 20% $47,139 1.3 $45,654 2.9
Second-Highest 20% $74,290 1.0 $76,090 2.9
80% – 90% $111,248 1.0 $121,945 2.1
90% – 95% $158,764 1.1 $183,021 1.8
Top 5% $285,473 0.8 $361,579 1.8

Homes have certainly gotten more expensive, relative to incomes.  In relation to incomes, housing costs have roughly doubled, and in some cases tripled.  The rise in home values seems to have been greatest for the middle of the income scale.

Welfare Spending: Most Goes to Seniors

More elderly people receive social assistance, and their social assistance is far more generous.

What is interesting is that a core constituency of these anti-welfare initiatives are in fact society’s biggest welfare recipients: the elderly. We can illustrate that fact by digging into data from the Survey of Consumer Finances.1

Varieties of Welfare

Our first step involves asking, what is welfare? Here, it includes economic transfers from taxpayers to households that qualify for government programs designed to help families who do not earn enough money on their own. There are three major types of social payments programs in the US:

The Distribution of Social Spending, from Center on Budget and Policy Priorities
The Distribution of Social Spending, from Center on Budget and Policy Priorities

Many readers might object to the inclusion of Social Security as a type of welfare program, on the grounds that it is a system into which its recipients have paid. In fact, Social Security is a PAYGO system, in which today’s seniors’ checks are principally funded by the payroll deductions taken from the working populations’ paychecks. Today’s recipients’ payroll deductions were used to pay for the Social Security checks of those who were elderly during their working years. These are current transfers from the working to (largely) non-working population.

Program Costs

One way to gauge how much people are getting from these programs is to look at their costs. The figure to the left was taken from Center on Budget and Policy Priorities

Social Security is by far the most expensive, absorbing nearly one-quarter of the federal budget, along with a substantial part of state budgets. It roughly costs as much as all health care spending (post-Affordable Care Act) and more than double the amount of all remaining social safety net programs combined.

Number of Recipients

The figure below describes the percentage of households receiving any money from these three social payments programs:

g1

The number of people receiving all three types of assistance fell in numbers over the 1990s. In part, this was a byproduct of an extraordinarily long prosperity and strong labor markets. When jobs are bountiful and better paid, fewer people need public assistance.

Since 2001, America’s welfare system – at least the part of it that provides money to poor people – expanded considerably. Social Security recipients grew as a group since the mid-1990s. The proportion of households receiving welfare as cash payments (e.g., TANF, SNAP, traditional welfare checks) has grown steadily since 2001. Workers’ benefits have grown since the 2008 crisis.

Program Generosity

The figure below describes the median take from each of these three program types. This is the median receipts from each program type among all households receiving any money.

g2

The median take from Social Security is by far the biggest and fastest-rising. In 1992, it was just over $8100. By 2013, it stood at $16,740. Payments more than doubled, and did so at a time when incomes stagnated.

The take from workers’ programs also doubled, from $2,480 to $5,120.  This growth has been fueled by largely temporary expansions after the 2008 financial crisis (e.g., extending eligibility for Unemployment Insurance). Many of these program extensions have since expired, and they will probably be lower when the 2016 survey’s results are released.

Welfare, on the other hand, has not grown. In 1992, median welfare take stood at $2940. By 2013, it was $2,660.

Poor Young People Aren’t Major Social Assistance Recipients

America has a large welfare state, but it primarily serves the elderly. Social payments to the working age population and the poor are far less generous. Payments to the poor are low and have been shrinking, probably as a result of the political demonization of these programs.

In contrast, senior-targeted social programs have been generous. This generosity has been growing at a time when the government has been trying to cut other assistance programs.


  1. These analyses were aided by the excellent R resources made available by Anthony Damico

Household Income Sources: Who Gets Welfare?

Conservative politicians and pundits often imply that massive parts of the country are dependent on government assistance (e.g., Mitt Romney’s famous 47% claim).  Many imply that much of this assistance goes to hoardes of people live lives of luxuries while doing little to no work.  These depictions are often racialized to imply that non-whites are the chief recipients of assistance.  It is often implied that this money is taken by young drug-users, or women who cannot or do not want to control their fertility.

Racialized depiction of social assistance recipients, from The Gender Press

How accurate are these depictions?  We can probe the question by examining data from the Survey of Consumer Finances.

Household Income Sources

When we think about where people get money, we generally think about wages, payments in exchange for labor. Wages are the most prevalent form of income, but it is not the only way that people earn money. People also earn money through financial investments, business income, government payments, payments from personal relations, royalties, rents, and a range of other sources. People do not just differ in terms of how much income they earn, but also in the composition of their income portfolio.

Income Type % Receiving Any % Receiving >$10k
Any Income >99% 96%
Wages 72% 66%
Social Security & Pensions 36% 30%
Interest & Dividends 22% 4%
Business / Farm 16% 10%
Welfare1 14% 1%
Capital Gains 6% 2%
Alimony & Child Support 5% 1%

The table shows six prominent forms of household income. Most households are sustained by wages, but over one-quarter of households earn no wages. Many of these households earn some, but not much, in wages – only two-thirds earn more than $10,000 in wages.

The second most prevalent form of income is Social Security and retirement pension payments. Most of this is Social Security, which is received by 30% of the country’s households. Keep in mind, this does not mean that 30% of households are entirely sustained by Social Security, but rather that someone in 30% of households receives a check from the program. About 23% of households get more than $10 thousand from this program.

Social Security represents the biggest source of government payments to households by far. By contrast, only 14% of households receive some form of welfare payment, including food stamps, TNAF or some other welfare. Usually, this is a meager source of inceom. Only 1% of households get more than $10 thousand in welfare. When people are bemoaning the fact that many households are receiving large payments from the government, they are referring to programs for the elderly, not programs for the poor.

Aside from wages and government payments, most other forms of income are not very common. Just over one-fifth receive money from interest or dividends, but most of this involves very small interest income from deposit accounts. Only 4% of households receive more than $10 thousand from this form of income. Very few households received much in capital gains either. About 10% of households receive more than $10,000 from a business or farm.

The Takeaway.  The vast majority of government assistance recipients are elderly people.  Comparatively few households receive “welfare” that is directed towards indigent members of the working age population.  Moreover, the latter form of welfare is much less than that the social assistance directed towards elderly people.

Market versus Government-Sustained Income

About 89% of households receive any income kind of income from wages, business/farm income, interest, dividends, and private pensions. Just of ten percent of society’s households earns no money through markets. In contrast, 39% receive money from government payments.

Which demographics more or less often sustained by government payments, as opposed to markets? Older households almost universally receive government payments, though most households receive market earnings throughout their life cycle.

Age Group % Receiving Market Earnings % Receiving Government Payments
< 35 94% 21%
35 – 44 95% 18%
45 – 54 93% 18%
55 – 64 88% 33%
65 – 74 81% 91%
Age 75+ 76% 99%

Education also differentiates earnings compositions. College graduates overwhelmingly receive market earnings, but one-quarter still receive government payments. A majority of high school dropouts receive government payments.

Education % Receiving Market Earnings % Receiving Government Payments
< High School 72% 61%
High School 86% 50%
Some College 91% 38%
College 95% 25%

Race and enthnicity also distinguish the composition of household earnings. Hispanics and “Others” are least likely to receive government payments.

Race/Ethnicity % Receiving Market Earnings % Receiving Government Payments
White 91% 39%
Black 81% 50%
Hispanic 88% 32%
Other 86% 27%

The Takeaway.  A considerable proportion of virtually all racial, ethnic, and educational groups receive government assistance.  Among different age groups, younger people receive considerably less assistance than the elderly.

Unfair Characterizations

The imagery that the working population is being taxed heavily to support lazy young minorities is inaccurate and unfair.  Government assistance mainly goes to supporting the elderly, while payments to poorer members of the working age population are less common and much smaller.  Moreover, a wide variety of demographic groups receive social assistance.


  1. Includes SNAP, TANF, and other welfare payments