Over the past few years, as the Millennial generation has grown into its own, in 2016 surpassing Baby Boomers as the nation’s largest living generation according to the Census (Americans aged 18-34 in 2015 now number 75.4 million, surpassing the 74.9 million Baby Boomers aged 51-69), in the process becoming the fulcrum support of the US economy. This has prompted many questions:
- Why aren’t Millennials investing in the stock market?
- Why aren’t they starting families and buying houses?
- Why are they living in their parents’ basements well into their thirties? Why don’t they just… spend?
The latest answer to all these questions came yesterday following a new analysis of Fed data by the Young Invincibles group, according to which with a median household income of $40,581, despite being better educated, millennials now earn 20% less than boomers did at the same stage of life in 1989, who earned $50,910 some 25 years ago.
The analysis released on Friday shows other disturbing trends, which confirm that America’s troubling generational divide is all too real and helps explain much of the anxiety that defined the 2016 election. Some examples: millennials have half the net worth of boomers; their home ownership rate is lower, while their student debt is drastically higher.
The generational gap is a central dilemma for the incoming presidency of Donald Trump, who pledged a return to the prosperity of post-World War II America. The analysis also hints at the issues of culture and identity that divided many voters, showing that white millennials — who still earn much more than their blacks and Latino peers — have seen their incomes plummet the most relative to boomers.
Andrea Ledesma, 28, says her parents owned a house and were raising kids by her age. Not so for her.
Ledesma graduated from college four years ago. After moving through a series of jobs, she now earns $18,000 making pizza at Classic Slice in Milwaukee, shares a two-bedroom apartment with her boyfriend and has $33,000 in student debt.
“That’s not at all how life is now, that’s not something that people strive for and it’s not something that is even attainable, and I thought it would be at this point,” Ledesma said.
Her mother Cheryl Romanowski, 55, was making about $10,000 a year at her age working at a bank without a college education. In today’s dollars, that income would be equal to roughly $19,500. Romanowski said she envies the choices that her daughter has in life, but she acknowledged that her daughter has it harder than her. “I think the opportunities have just been fading away,” she said.
The Fed data shows the extent of the decline. It compared 25 to 34 year-olds in 2013, the most recent year available, to the same age group in 1989 after adjusting for inflation. Education does help boost incomes. But the median college-educated millennial with student debt is only earning slightly more than a baby boomer without a degree did in 1989.
The home ownership rate for this age group dipped to 43 percent from 46 percent in 1989, although the rate has improved for millennials with a college degree relative to boomers. The median net worth of millennials is $10,090, 56 percent less than it was for boomers.
While whites still earn dramatically more than Blacks and Latinos, reflecting the legacy of discrimination for jobs, education and housing. Yet compared to white baby boomers, some white millennials appear stuck in a pattern of downward mobility. This group has seen their median income tumble more than 21% to $47,688. Median income for black millennials has fallen just 1.4 percent to $27,892. Latino millennials earn nearly 29 percent more than their boomer predecessors to $30,436.
The analysis fits into a broader pattern of diminished opportunity. Research last year by economists led by Stanford University’s Raj Chetty found that people born in 1950 had a 79 percent chance of making more money than their parents. That figure steadily slipped over the past several decades, such that those born in 1980 had just a 50 percent chance of out-earning their parents.
This decline has occurred even though younger Americans are increasingly college-educated. The proportion of 25 to 29 year-olds with a college degree has risen to 35.6 percent in 2015 from 23.2 percent in 1990, a report this month by the Brookings Institution noted.
The declining fortunes of millennials could impact boomers who are retired or on the cusp of retirement. Payroll taxes from millennials helps to finance the Social Security and Medicare benefits that many boomers receive, programs that Trump has said won’t be subject to spending cuts. And those same boomers will need younger generations to buy their homes and invest in the financial markets to protect their own savings.
“The challenges that young adults face today could forecast the challenges that we see down the road,” said Tom Allison, deputy policy and research director at Young Invincibles.
For now, despite Obama’s recurring narrative of an economic “recovery” which unfortunately skipped some 75.4 million Americans, and despite Trump’s promises that he will somehow make it batter, it remains unclear just how this most important US generation will emerge from its demographic and economic doldrums.