Mortality Inequality

Retirement
Economics
By
John R. Brock, Ph.D., Vice President

Presidential campaigns often expose a lot of gloom and doom, and so far the 2016 race has not disappointed.  One subject that has already received much attention is the growing income inequality in the United States, an issue that has been explored by economists for some time.  However, despite the rising income inequality, somewhat more encouraging results are reflected in another, less recognized, measure of inequality.  In a recent paper, “Mortality Inequality:  The Good News from a County-Level Approach,” published in the current issue of The Journal of Economic Perspectives, Janet Currie and Hannes Schwandt report that the link between income and mortality rates is weakening.  Although not exactly earth-shaking, this is good news.

From previous research, we know that life expectancy gaps have existed between high and low income levels—higher poverty correlates with greater mortality and lower life expectancy.  Currie and Schwandt examined the strength of this poverty-mortality relationship in three-year periods starting in 1990, 2000 and 2010.  By comparing county-level data on mortality rates in age, gender and race with the poverty rate of each county, the researchers were able to determine how mortality inequality has varied over time.

Many conclusions emerge from this research; however, I highlight two key findings:

 - Inequality in mortality rates has fallen greatly among children, and among young men the largest gains have been in the poorest counties.  In fact, the reductions in mortality among African-American males are striking.  The authors stress that “good health in childhood predicts better health in adulthood [so] today’s children are likely to face considerably less inequality in mortality as they age than current adults.”

 - The changes in mortality inequality are not correlated with the rise in income inequality—some population segments experience rising income inequality but declining mortality inequality.  Mortality changes across groups may have more to do with changes in habits (e.g., smoking, which has declined significantly, particularly among men) and public policies (e.g., nutrition and health care access) than with income changes.

While mortality inequality is likely to keep declining, life expectancy continues to rise. In 1990, average life expectancy at birth for women was just under 79 years of age and for men just below 72, but by 2010—just 20 years later—it had risen to over 81 for women and over 76 for men.  Moreover, a 64-year-old couple has a joint life expectancy over 90 years of age.  Although this is an encouraging trend, it does reinforce the need for retirement planning.  Given a rising average retirement age—now about 64—and an average life expectancy at age 64 of about 20 years, we have approximately 40 years of work to save for about 20 years in retirement (most likely more, given longevity trends and the possibility we outlive the average).  This means that for every two years of work we must save for at least one year of retirement.  Therefore, one key piece of advice I offer my university students and all millennials:  Don’t procrastinate—start a savings and investment plan now!