For years, Millennial finances have been worse than that of previous generation. However, a new study from the St. Louis Fed suggests that after making progress over the past decade they are nearly caught up:
The Fed methodology is to calculate the average "life cycle of wealth" and then compare it to actual wealth. For example, my generation (Boomers born in the '50s) is currently about 7% above expectations for our place in the life cycle (age 60-70).
Older Millennials, it turns out, who took a big hit during the Great Recession, have now made up a lot of ground and are only about 11% below where they should be. That's a huge advance from the deficit of 40-50% they suffered during the Great Recession and its aftermath. By contrast, the cohort of younger Millennials and Gen Z (age 20-30) are still a massive 50% below expectations.
The authors don't speculate about the reasons for this, but I suspect that the life cycle of wealth may have simply changed. It's quite possible that later marriages, more time spent in college, higher housing costs, and later inheritances as lifespans have increased, have fundamentally changed the average wealth of 20-somethings but that those things start to wash out later in life. It's also possible that this is nothing but a statistical artifact caused by the timing of the Great Recession.
In any case, it looks like Millennials are finally catching up, though I suspect we won't know for sure until a few years after the pandemic is over.
It seems like a lifecycle change where people in their 20s and early 30s are much more financially insecure than they were in previous generations is a pretty bad thing in-and-of-itself even if there's catchup later. Especially because that's the age where people are deciding on careers and starting families. A permanent shift in the age distribution of wealth seems like a pretty strong argument for some kind of program to transfer generational wealth earlier (high taxes, child benefits, subsidized college, etc.) is needed.
The first two columns are mislabelled. People born in the 1930s are from the "Silent Generation" and those born in the 1940s are a mix of "Silent Generation" and "Boomers." No Boomers were born in the '30s.
Right. Boomers are those born between 1946 and 1964.
There is significant disagreement about the boundaries between generations. For example, Strauss-Howe place the Boomers in the range 1943 - 1960.
This Silent is much above expectations. For many years I assumed life in a cardboard box somewhere would be my fate. Got lucky. I am at least 10 times better off than what I expected while in my twenty's.
Older generations are now getting older on average.
We're older than we've ever been, & now we're even older.
And Cracker Barrel costs money!!!
So, after its obligation to protect against foreign or domestic threats to life and liberty, government can fulfill its obligation to protect property by being the insurer of last resort against fire, flood, pestilence, irresponsible capitalism and the legacy of racism. In a country as wealthy as this, people need not suffer loss from events they cannot control.
As Krugman said: An insurance company with atomic weapons.
"later marriages, more time spent in college, higher housing costs, and later inheritances"
I assume these terms (Millenial etc) and the associated wealth tracking are supposed to be for the entire US population?
The factors you discuss are pretty much all upper 30% factors...
(Certainly college and inheritance.
Marriage I suspect is in a different place, never happening rather than happening later; and the consequences of that for wealth are too politically incorrect to be discussed here.
Higher housing costs are certainly true for the upper 30%; however I've seen much less discussion of how those numbers [and other expenses] have changed for the lower 70%.)
Maybe the issue is that the aggregation across a population is by mean rather than median? Or (essentially equivalent) the lower 50% population had zero wealth then, zero wealth today, so they're irrelevant to tracking changes?
I'm not trying to woker than thou; I just find it unsatisfying to read so many of the articles claiming to be about the state of generational cohorts that always immediately reach for explanations that to me seem irrelevant to the bulk of the cohort.
Increased housing costs impact the lower end of the income scale much more than the upper end.
IF there are substantially increased housing costs at the low end...
That's part of my point. Every story I read about increased housing costs turns into a story about how million dollar homes have become 1.5 million dollar homes, or how expensive San Francisco just keeps becoming, or suchlike.
These are not representative of life for someone living in a mid to low-range house or apartment in Akron or Fresno or whatever: a 70% dwelling in a 70% community, not a 1% dwelling in one of the four or five most high-end cities in the US.
Well.... yes. It's not really Wokeness, it's properly analytical.
The analysis for a middle class born kid going to a reasonable 4 year college no matter how expensive in the modern economy is vastly different than a working class kid maybe getting a crap 2yr degree... And journos tend to write about the [Insert Generation Here] as if whole [Insert Generation Here] is of journo's background (college educated, probably biased to humanities background, urban leaning) entirely ignoring such demographic is a minority within the age cohort (and perhaps a tiny minority).
I still recall my GenX days when the Boomers were supposed to be the hyper-liberals (aka progressives), which of course was a mirage of a certain sub-demographic profile of said generational cohort that happened to match the journos/writers demographic exposure.
Generational cohorts analysis is effectively bunk in the end for exactly the reasons you cite - rather like trying to build conclusions on genetics from culturally defined races. The variation within a generational cohort by different educational and social classes is almost certainly more important than the semi-nonsense of the generations. (of course as Gen Xer right on the charts divide between sub-cohorts I am not sure if I am supposed to be more or less wealthy than expected. Maybe both!! Since GenX is the blithely ignored generation nowadays. I guess when Boomers die off we will get our chance to be a focus of trite and empty generational pseudo-analysis...)
While I am hardly a Lefty, it strikes me this generations nonsense is a dodge most of the time to avoid looking at social class (which again as a center-right person myself is not exactly the lens I adore, but anyone properly analytical has to admit there's a social mobility issue).
I'm pretty sure the link between wealth and marriage is the reverse: i.e., less wealth leads to a lower likelihood of getting married, and not the reverse (getting married leading to increased wealth).
Econometric data tends to suggest it is a double effect.
Yes, low wealth seems now in the past few decades to lead to less marriage.
At the same time marriage (or stable long-term family households) does seem to have a wealth effect (which logically makes sense from an economic unit efficiency view).
18% behind boomers is is still a pretty big deficit so we'll have to see how that changes as we (Millenials) get older.
Good point about the later inheritances. I am 46 and my grandmothers have a combined 192 years between them and counting. Any money from either side was long ago bled dry by the nursing homes. My parents have another ten statistical years left in them as well. If I ever inherit anything of substance at all, it will almost be time for me to retire!
Soylent Green is people.
How much of this is just certain Willenials being allowed to withdraw from trustfunds?
I believe twenty five or thirty is a common age for eligibility to access to be attained.