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.
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.