In topsy-turvy economic times, it’s easy to focus on uncertainty and fret about the future. That impulse, though, can mask progress: Income inequality has plateaued in the last decade, and recently growth in wages paid to the lowest earners has exceeded that of the highest.
What about wealth, though? It’s something of a truism that Millennials—the generation of Americans born between the early 1980s and the late 1990s—have it worse than their parents. A source no less august than the Economist will mention in an aside that “they have accumulated less wealth than earlier generations had by the same age.”
There’s a problem, though: That’s not quite true.
Jeremy Horpedahl, an economist at the University of Central Arkansas, has been following this debate for several years. Attempts to measure the wealth of various generations often use the Federal Reserve’s Survey of Consumer Finances. One way to interpret that data is to show that when Baby Boomers (born between 1946 and 1964) were in their early 30s, they controlled more than 20% of national wealth, while similarly aged Millennials only have about 3.5% of national wealth today.
If that seems like a big disparity, you’re forgetting a larger one: There were a lot more Baby Boomers than Millennials, and they made up a much larger share of the population when they were in their early 30s. Even today, Millennials only overtook Baby Boomers as the largest American generation in 2019. When Horpedahl controlled for population size by measuring wealth in per capita terms, a different picture emerged: Millennials are as wealthy as Boomers were at their age, and Gen X (born between 1965 and 1981) is wealthier now than Boomers at the same age.
Wealth accumulation has changed over time
One thing that appears to be true about Boomers: They’re much wealthier than their own parents. A recent study focusing mainly on Boomers and preceding generations found that by the time people born between 1940 and 1960 reached old age, they were 65% wealthier than previous generations. That, in turn, is because of the growing importance of financial assets, mainly homes but also securities. Roughly speaking, before Boomers, people saved from their incomes to generate wealth; afterward, they bought homes on credit and put money into stocks and bonds, seeing their wealth blossom through capital gains.
All is not rosy, of course: The authors also find that inequality within generations has been increasing, with the richest boomers wealthier than previous generations and the poorest becoming poorer. That might be easing today, but not by much: In 2019, the wealthiest quarter of Generation X owned 81% of its financial assets (pdf), while the wealthiest quarter of Millennials owned 76% of the cohort’s assets.
One key factor to watch is homeownership. In 2019, 43% of Millennials (pdf) lived in homes they owned, compared to 48% of Boomers at a comparable age. The wild housing market of the pandemic and since saw a flood new home purchases, a steep rise in prices, and now rising interest rates that have hurt affordability and now are causing home values to stumble. We’ll have a better sense of how that impacted Millennials and everyone else later this year, when the new Survey of Consumer Finances comes out, including measures of median wealth that will shed more light on inequality. (The most recent data, through the third quarter of 2022, relies on updating the 2019 survey based on other economic indicators, and lacks median measures.)
Millennial lives are different from their predecessors
Horpedahl, at least, is optimistic Millennials will turn out to have benefited from the recent housing market, at least in the near term, since they are more likely to own real estate than stock market shares. (The oldest members of Generation Z, now entering their mid-twenties, may find affordability more daunting.) But going forward, he is concerned that treating housing primarily as a wealth-building investment is a mistake. Those high home prices bolstering older people’s net worths are also obstacles to their children’s futures, which has prompted a re-think of everything from homeownership itself to the land-use regulations constricting the supply of new housing.
A challenge when comparing the generations is that life is different today than it was 50 years ago (forgive me for stating the obvious). Compared to the past, younger generations go to school longer, move out later, delay marriage, wait to buy homes—partially out of choice, partially because of new factors like loans to finance higher education. And even with student loans making saving and investment more difficult, Horpedahl also notes that the asset behind it—the human capital and earning potential that come with a college degree—doesn’t show up in these figures, but will lead to higher earnings over time.
Meanwhile, older generations work and live longer, slowing the flow of inheritance and career advancement. For those reasons, younger people may take longer to reach the same level of wealth as their elders, which makes the per capita finding in the chart above even more interesting.
“Boomers have huge generational divides with their parents and grandparents too, it wasn’t always about wealth, [it was] about the state of the world, the environment, the job market, everything,” says Horpedahl, who situates himself on the border between Gen X and Millennial. “This is ongoing throughout human history. Younger generations feel like they have been shortchanged in some ways by older generations.”