Are fewer 30-year-olds out earning their parents than in the past? #incomeinequality #generationalincomegap
Have you heard about the claim that fewer 30-year-olds are earning more than their parents did at the same age? Can someone clarify this trend and its implications for young people today? #economy #incomegap
**Trend Analysis: 30-Year-Olds Income vs. Parents’ Income**
– Is it true that only 50% of 30-year-olds now earn more than their parents did?
– How has the income of 30-year-olds compared to their parents’ income since the 1940s in the US?
– What is the current trend in real income over time for young people?
**The Reality Behind Income Discrepancies**
– Could rising wealth inequality be contributing to the decline in 30-year-olds out earning their parents?
– How does rising wealth inequality impact the income prospects of young adults today?
– What nuances are missing from the narrative of 30-year-olds’ income compared to their parents in the past?
Let’s explore the intricate details behind the claim that has been circulating regarding young adults’ income levels compared to previous generations. #incomegap #realincome #wealthinequality #economicopportunities
>I’ve seen the claim [[1](https://www.cnbc.com/2016/12/09/only-50-of-30-year-olds-now-earn-more-than-their-parents-did.html), [2](https://youtu.be/qEJ4hkpQW8E?t=119)] that since the 1940s in the US there is a declining rate of 30-year-olds earning more than their parents did at the same age, and this is used to bolster the argument that the economy is getting worse for young people. Is this true?
These claims tend to be rather misleading. More comprehensive estimates tend to put (age- and purchasing parity) millennial and gen x income [considerably](https://www.federalreserve.gov/econres/feds/files/2024007pap.pdf) ahead those of the silent generation and boomers.
It may well be true that, on an unadjusted basis, there is a declining rate of 30-year-olds earning more than their parents did at the same age. However, this observation ignores things like the growing share of workers with college/advanced degrees. Few 30-year-olds are still in school, however more schooling tends to backload earnings by delaying the highest-compensation portion of one’s career. Further, even without these adjustments gen Z is pulling considerably ahead of every other cohort starting from the silent generation, although it is possible that this is coming at a cost of lower peak earnings (for people who went straight from high school into the labor force during/after the pandemic.
Quoting from the conclusion of the paper:
>We investigate the role of two potential explanations for perceptions of worsening outcomes for Millennials despite their observed income growth relative to previous generations. First, we find that the higher household incomes of Millennials relative to Generation X, through their 20s, is a result of dependence on their parents rather than a rise in their own market incomes. By age 31, however, less than 10 percent of Millennials are still dependent on their parents and by then their own market incomes exceed that of previous generations.
I should also mention that my personal view is that *any* cross-sectional or wage-based study on this issue is by definition grossly incomplete: the correct metric to evaluate intergenerational outcomes is [lifetime spending power](https://www.nber.org/system/files/working_papers/w22032/revisions/w22032.rev0.pdf). The paper I cited is more focused on intragenerational redistribution effects. However, extrapolating U.S. [productivity](https://fred.stlouisfed.org/series/RTFPNAUSA632NRUG) trends would likely favor younger cohorts to a similar extent.