Millennials are the largest workforce and the least wealthy — why?
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In 2016, Millennials became the largest cohort of the American workforce, defined as those working between the ages of 16-64.
What is most striking about the demographic changes in the workforce is the amount of wealth accumulated among each successive generation. It turns out that the Millennials — again, the largest of the four working cohorts — also own the least amount of wealth.
Common sense would dictate that the youngest generation own the least amount of wealth because they are building their careers and starting at entry level positions. This plays out until you hold everything equal and measure the wealth of each generation at their equal stage of development.
(By wealth we mean the amount of assets you have minus debts. So, bank accounts, stocks and bonds in your 401(k), your home equity and Dogecoin minus things like student loan, credit card or medical debt and your outstanding mortgage. Income is different. It measures the amount of money your household brings in each year, from whatever source.)
In 1989, when Baby Boomers were roughly the same age as Millennials today, Boomers owned 21.3% of the national wealth. Millennials today own just 4.6%. This means that at their same stage of earnings development, Baby Boomers owned proportionally four times as much of the total wealth as Millennials.
Mark Zuckerberg, with an estimated net worth of $97 billion, owns 2% of all Millennial wealth. This means that the concentration of wealth among the Millennial cohort is just as bad as the rest of the population, except that there isn’t much wealth to go around for Millennials in the first place.
Millennials have caught up a bit, especially between 2016 and 2019, but they still lag previous generations by 11% of expected wealth and earnings, according to the St. Louis Federal Reserve.
As the economy continues to change, things are looking worse and worse for Millennials without a college degree. Race also plays a significant role in wealth statistics. At the end of 2019, Black Millennials had just $5,000 in household wealth on average, compared with their white counterparts, who had on average $88,000. The same study also showed that not only are Black millennials trailing white Millennials in terms of wealth, but are also trailing previous generations of Black families' average wealth by 52%.
Your parents got a mortgage; you got a student loan
One significant dampener of Millennial wealth is student loan debt. As shown in the chart below, Millennials hold roughly $500 billion in student loan debt. Between 1964 — when the youngest Boomers were born, and 2015 — the annual cost of a four-year public university grew by 3,700%, even after adjusting for inflation. This means that in 2019 dollars, when Boomers entered college in 1982 they paid an annual tuition of $1,031; Millennials had to pay $9,970 for yearly in-state tuition. (Average costs are more than double at out-of-state four-year universities are more than double and nearly quadruple at private universities). Again, both of those amounts are adjusted for inflation to 2019 dollars.
How does this impact wealth? When compared to Millennials’ total wealth, as shown in the first chart, we get a wealth/student debt ratio of 10:1. Gen Xers by comparison have a wealth/student debt ratio of roughly 48:1. Baby Boomers have a 226:1 ratio.
Of course, this doesn’t account for the years during which Boomers and Xers were paying off their loans. It does provide a snapshot in time, however, which shows how much student debt impacts a whole generations’ wealth.
The growth of student loan debt is a phenomena unto itself. Student loan debt is increasing nearly 8% per year. Since 2003, student loan debt has increased more than 600%.
Nearly 40% of Millennials between the ages of 25-37 have bachelor's degrees, whereas only 25% of Baby Boomers hold this degree. This means that not only are Millennials proportionally more educated — and more in debt — but they are also making less than their Baby Boomer counterparts, despite promises that if they finished college they’d share in the American dream.
Bosses have been winning for decades
Aside from college debt, Millennials are also suffering from the massive tilt in the American economy in recent decades away from labor to the advantage of capital.
Starting in the 1980s, a chasm has grown between the growth in productivity and wages, as shown in the chart above. A part of this has to do with automation — machines allow fewer people to accomplish more work — but by and large workers have not realized much of the income gains that new technology has brought us. What this means is that when the economy grows, staple goods like food, housing, education and health care increase in cost, but wages have not kept up. This is an important reason why recent generations like Millennials have seen their share of national wealth shrink.
A punishing political landscape, but how and why?
Both of these causes of the dearth of Millennial wealth are the result of deliberate political and policy choices: States have cut support to higher education, shifting the cost on to students, who in turn borrowed money for college degrees they were told were essential to survive in today's economy. Once in the economy, Millennial workers were left to confront a political economy in which labor unions were crushed and employers given maximum leverage.
So, how did Millennials get such a raw deal from the nation's politics?
We would like to think that in the U.S., one person, one vote decides our elections. We live in an electoral environment, however, in which money plays a sizable role in determining which voices are heard. What happens then, when the largest generational workforce — the Millennials — also spends the least on political contributions?
In overall spending, Baby Boomers manage to outspend every other generation, including their forebears, the Silent Generation. Millennials account for just 5% of total spending in each category, as well as overall. Certainly the disparity of household wealth plays a role in how much each generation is able to spend on political campaigns. The result is that Millennials have a much smaller voice in an arena where money really matters.
Millennial wealth building is being blocked by a range of government policies that benefit older, wealthier Americans. In addition to rapacious student loans, consider restrictive zoning policies that blunt the supply of homes for first-time homebuyers but drive up the value of existing real estate.
If you’re wondering why older politicians — even supposed progressives like President Joe Biden and House Speaker Nancy Pelosi — are so cool to ideas like canceling student debt that would be a boon to Millennials, you may have your answer.
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