The generational wealth gap has widened to historic levels, according to a recent study comparing millennial earnings to older generations’, according to CNBC.
When adjusted for inflation, millennials earn 20% less than baby boomers did at the same stage in their careers, according to the study, entitled “the Emerging Millennial Wealth Gap”. Median incomes for workers aged 18 to 34 are way down from their levels in the 1980s. The disparity is nothing new: Other studies have arrived at a similar conclusion. Despite being the most well-educated generation of all time (aside from Gen Z, probably), millennials earn comparatively less than their older peers did during similar periods.
Nearly 40% of millennials have at least a bachelor’s degree, compared with 25% of baby boomers, and 30% of Gen Xers during the same period.
The lower wages will likely lead to long-term problems for millennials, the experts said. Already, many millennials are struggling with jobs that are either inconsistent, like contract or freelance work (which doesn’t offer benefits), or don’t pay enough. This is already having a serious impact on their ability to build wealth, since most millennials still can’t afford basics like their own home. For prior generations, homes were important tools for building wealth, in addition to providing a place to live.
Among young families, households headed by someone under the age of 35 in 2016 had an average net worth of $10,900, roughly half the level from 1995.
Much of this disparity stems from the Great Recession. Those who entered the workforce in its aftermath came in with low wages, leaving them at a career disadvantage. Many are also struggling with the $1.4 trillion-plus pile of student loan debt that has been accumulated by American students. For many, student debt payments make building wealth and buying homes unthinkable.
“Even as the economy steadily added back jobs lost, the protracted recovery was experienced unevenly, with well-off households doing better at the expense of others,” said Reid Cramer, director of the office that oversaw the study.
Using data from the St. Louis Fed, CNBC put together a generational “balance sheet” to illustrate how economic circumstances have changed.
Unfortunately for millions of workers, the uneven he recovery left many behind, and wealthier households typically found it easier to get back on their feet. By 2016, the top 10% of the country’s highest income earners received half of the total income generated in the US, a dramatic increase from just 38% of the country’s total income in 1992.
Anybody interested in reading the entire study can find it here.