TOTAL NET WORTH
If net worth differs by age, then population aging will have an impact on total net worth and thus the pool of assets available to an economy to fund growth. To examine this possibility, the committee used data on the average net worth of families in the United States by the age of the family head. These data come from the 2007 wave of the Survey of Consumer Finances (SCF), reported in the Federal Reserve’s February 2009 Bulletin (available at http://www.federalreserve.gov/pubs/bulletin/2009/pdf/scf09.pdf).
Let NW(x,t) be the average net worth of a family with head age x at time t. In order to apply this family measure to individuals, the committee assumed that all assets are owned by the head of the family and that nonheads have no assets. When NW(x,t) is multiplied by the headship rate h(x,t), or the proportion of persons age x who are family heads at time t, the product is the average net worth of a person age x at time t.4 The data on headship come from the 2007 March Supplement of the CPS. The CPS data were accessed through the Integrated Public Use Microdata Series facility found at http://cps.ipums.org/cps/.5
Finally, multiplying the average net worth per person in 2007, NW(x,2007)h(x,2007), by the population schedule n(x,t) gives the total net worth at time t. Dividing through by the total population gives the per capita amount:
As with the other calculations in this report, the committee is interested in the change brought about by population aging. This formula gives some indication of that by showing what will happen to per capita net worth in the future if the age profile of net worth and headship remain constant but the population continues to age.
4Note that NW(x,t) is the ratio of total net worth of families headed by those age x to the number of families headed by those age x. The headship rate h(x,t) is the ratio of the number of families headed by those age x to the number of persons age x. Multiply these two quantities together and the family terms cancel, leaving a ratio of total net worth of families headed by those age x to the number of persons age x. This is per capita net worth if we assume that only family heads own the assets.
5The concept of family in the CPS is not exactly the same as that in the SCF, so the headship data used from the CPS are the headship rates for households, not families. Across the entire population, the differences in family and household headship are small, as most households contain only one family, by both the SCF and CPS definitions.