American Millennials: The Generation the Recovery Left Behind

By Karen Petrou

In our last blog post, we chronicled the continuing demise of the American middle class.  Now, we turn to the equality disaster evident in the most recent U.S. demographics.  A new General Accountability Office (GAO) study confirms that millennials (those aged 18-37) are rapidly losing any chance of doing better than their parents and trends are extraordinarily inauspicious for NextGen followers.  Inter-generational economic mobility was once as much a hallmark of America as its robust middle class – in 1970, 92 percent of 30-year-olds made more money in inflation-adjusted terms than their parents did at similar ages even though the 1970 economy was considerably weaker than the prewar boom.  Now, millennials are far, far behind their parents.  Looking at wealth share,* baby-boomers owned 21 percent of U.S. net wealth when they turned 35 (1990 on average).

GenXers on average turned 35 in 2008, holding only a 9 percent share of the national wealth of course then being hit hard for everyone by the great financial crisis.  No matter the recovery in which the Fed takes so much pride, millennials now own just 3.2 percent of national wealth.  Maybe they’ll make it all up by the time they hit 35 (2023), but I doubt it and, judging by recent political developments, so do they.

Millennial Count-Down

Requested by Sen. Bernie Sanders with an eye to his voters, the GAO study surveys recent, authoritative studies of U.S. inter-generational mobility, also conducting its own assessment using the Fed’s Survey of Consumer Finances (SCF).  In broad terms, GAO confirms that “absolute mobility” (making more than one’s parents at the same age) has declined.  The chances of moving up the economic ladder (relative mobility) are flat for millennials, who are most likely to stay where their parents are if they fall into the lowest or highest income groups.  Other key findings include:

• Millennials are more likely to be college-educated than GenX or baby-boomers, but millennial income is flat with or without higher education, suggesting that millennials gained nothing in terms of income from higher education. For all the good it does them, getting a BA degree is almost five times more likely for kids in the highest income quartile than the lowest (i.e., 62 percent of wealthier kids go to college versus 13 percent of those in lower-income households). 
• Due to all their student debt, millennials have significantly lower median net worth than GenX, with lower-income millennials actually having negative net worth due to all their debt. In 2016, millennial households had student debt-to-income ratios over 100 percent; this ratio was under 50 percent for GenX.  Note that the lowest-income millennials have student debt of over 372 percent of income, with all of these alarming ratios covering only households with student debt, not population averages.
• Median millennial net worth is only $20,000, with lower-income households in this demographic posting negative net worth. Strikingly, even upper-income millennials are less well off than prior generations.  Reinforcing our longstanding view that medians indicate economic equality, not averages, GAO finds wide differences between medians and averages demonstrating significant wealth concentration in a very few millennial households.  
• Only 43 percent of millennials owned homes in 2016, compared to 51 percent of GenX in 2001 and 49 percent for baby-boomers in 1989. Although the percentage differences seem relatively small, GAO emphasizes that the homeownership gap could materially set back retirement security even though millennials have higher defined-contribution plan balances than GenX due to the growth of mandatory matched contributions over recent years.  Baby-boomer retirement income is more likely to come from defined benefits than 401(k)s and the like.
• Blacks experience considerably less upward generational mobility than whites, Asians, or Hispanics. Black men are also more likely to be downwardly mobile than white men regardless of educational level. 

The 2020 Context

Last December, the White House issued a brief concluding that Trump Administration policy led to “historic” labor-market gains disproportionately benefiting the disadvantaged, reducing income inequality.  This is true to the extent one looks only at recent wage growth for low-income households and focuses on nominal, average wage data.  It misses stagnant real income, debt spikes, consumption-cost spurts, and the acute dismay of millennials, now the largest proportion of the labor force who nonetheless continuously lost ground during the “economic recovery” trumpeted by the Administration analysis.

Given the data discussed above, it’s unsurprising that millennials have become dramatically more energized in just the last four years.  In 2014, only 21% of eligible millennials showed up to vote; in 2018, this rate doubled to 42%.  This may account not only for the sharp shift to Democrats in the election, but also close races in states such as Georgia.  One of the startling findings in the GAO report is that counties in the Southeast are less economically mobile even than those in the rural Midwest, perhaps energizing once solidly-red districts to turn purple or even blue. 

We will shortly go in depth on recent U.S. economic-equality data in relation to U.S. political trends, parsing income, wealth, and mobility data by class, demography, and district.  Elections are of course won and lost on many issues, not just equality, but the “chicken in every pot” formula still has a stunning record of ballot-box success.  The millennials’ chickens have flown the coop. 

* Note that this wealth-share calculation does not reflect the share each demographic group was of the overall population when it turned 35.  However, adjusting for overall demographics does not materially change these dire inter-generational mobility data.