Are Millennials and Gen Z worse off economically than previous generations? #Millennials #GenerationZ #economicdivide
Understanding the Concern
Many left-leaning individuals express worry about the financial well-being of younger generations. They argue that millennials and Gen Z are facing challenges in building wealth, investing in assets like homes, and managing economic stressors like student debt.
Exploring the Issues
- Is there a notable decline in home ownership among younger generations?
- How do real wages and debt burdens compare between millennials/Gen Z and older generations?
- Are rising living costs and unequal wages contributing to economic disparities?
Examining the Data
What do the statistics and research reveal about the financial status of millennials and Gen Z compared to previous generations, particularly the Baby Boomers?
Seeking Clarity
Does lower home ownership rates for younger individuals correspond to decreased living standards and financial stability? Are student debt and escalating expenses truly creating a wide economic gap?
Let’s delve into the data and see if the concerns about the economic well-being of younger generations are valid. Your insights and perspectives are welcomed.
Statistically, no*. Gen Z are making more (adjusted for inflation) than any previous generation, and most Millennials are ahead of the pace set by Gen X and Boomers.
*The significant asterisk is housing. NIMBY dominated local politics in the most desirable and highest-wage areas of the country have driven rent and housing prices so high that even high-wage non-homeowners, who can easily afford pretty much every other major expense when compared with previous generations, are spending ~40 percent of their income on housing expenses.
This really depends on where you’re talking about to be honest. In the US my understanding is that actually a lot of this rhetoric is slightly overblown. That said, I won’t go into it too much there.
I’ll speak to the UK – which I know more about. It is clear that *recently* in the UK millennials specifically have been worse off than previous generations. The Resolution Foundation, a think tank that focuses on intergenerational inequalities, have produced reams of evidence on this. If you want a summation, here is [Lord Willets talking about their findings from a number of years ago.](https://youtu.be/ZuXzvjBYW8A?si=M-auRJiHVgnPt6fF) If you tracked a bunch of different economic indicators by cohort – millennials either lag or match their predecessors (which breaks a trend of each successive generation advancing on the last) in savings, inflation adjusted earnings, home ownership, square-footage of housing occupied among other things. A large part of this, as in much of the Anglophone world, is due to housing market dysfunction, but there are other stories.
There is a typical ‘scarring’ effect which you expect to see. Basically, cohorts that come of age during an economic downturn typically see some reduction in lifetime earnings compared to those generations that don’t. This is because it delays them getting into the professional world by X years or so, and puts them behind peers which they typically don’t catch up to. But…
In the UK, policy has also exacerbated intergenerational equalities. In the aftermath of ’08, from 2010 onwards policy has been to generally protect public spending on services that flow to older households (triple lock on pension, ring fencing NHS spending from real terms cuts etc.) and to deprioritise spending on services that typically most benefit working-age households or the young who will shortly become working-age (welfare spending, decrease in subsidisation for university fees which leads to more student debt).
However, as [John Burn-Murdoch in the FT has pointed out](https://www.ft.com/content/6f7d7522-42e9-43cb-bd73-36eee6681f3e) these intergenerational inequalities are giving way to intragenerational inequalities. As Baby Boomers begin to pass away en masse, certain Millennials are inheriting their housing wealth, and other assets. This means that up until now, while Millennials have lagged Gen Xers in many indicators, there is a rapid catching up effect but also exacerbating inequalities between those Millennials whose parents had done well for themselves (or lived in certain parts of the UK with high house prices) and those whose parents had done less well for themselves.
Answer from economist Allison Schrager:
America has had a [generation gap](https://teachingamericanhistory.org/resource/convention/delegates/age/) from the very start, and generational warfare for [almost as long](https://www.pewresearch.org/politics/2018/03/01/the-generation-gap-in-american-politics/). But we can end the war over which generation had it worse when they were young.
With soaring rents, high mortgage rates, student loans and a ballooning national debt to pay for entitlements, Generation Z and many younger millennials say they are getting [a raw deal](https://www.cnbc.com/2024/01/18/gen-z-says-they-have-it-harder-than-their-parents-did.html). Older Americans, meanwhile, are sick of all the whining from entitled young coworkers who they [see as slackers](https://nypost.com/2023/04/25/employers-reveal-why-gen-z-is-hardest-generation-to-work-with/).
The truth is somewhere in between. It is getting a little easier for young people, at least economically. But that does not take away from the fact that getting a start in the world is hard. All sides have a point — and we’d be better off if we had more realistic expectations for ourselves and empathy for each other.
More data analysis: [https://www.bloomberg.com/opinion/articles/2024-05-08/think-gen-z-has-it-too-hard-too-easy-you-re-right](https://www.bloomberg.com/opinion/articles/2024-05-08/think-gen-z-has-it-too-hard-too-easy-you-re-right) (no paywall)