Younger Generations Lag Parents in Wealth-Building
Annie Lowrey, New York Times, 14 March 2013 (hat tip MR)
A new study from the Urban Institute finds that Ms. Brady and her peers up to roughly age 40 have accrued less wealth than their parents did at the same age, even as the average wealth of Americans has doubled over the last quarter-century.
Because wealth compounds over long periods of time — a dollar saved 10 years ago is worth much more than a dollar saved today — young adults probably face less secure futures for decades down the road, and even shakier retirements....
A broad range of economic factors has conspired to suppress wealth-building for younger American workers; the trend predates the Great Recession. Younger Americans are facing stagnant pay — the median income, when adjusted for inflation, has declined since its 1999 peak — as well as a housing collapse and soaring student loan debt.
Note that averages tend to overemphasise the input of oversized outliers, like Bill Gates, and the rest of the 1%.
The article is focusing on younger people, but they are not the only ones being hammered
The Changing Wealth of Americans (pdf)
Eugene Steuerle, Signe-Mary McKernan, Caroline Ratcliffe, and Sisi Zhang, The Urban Institute, March 2013 (hat tip: above noted article)
Today, those in Gen X and Gen Y have accumulated less wealth than their parents did at that age over a quartercentury ago. Their average wealth in 2010 was 7 percent below that of those in their 20s and 30s in 1983. Even before the Great Recession, younger Americans were on a strikingly different trajectory.
The article is focusing on younger people, but they are not the only ones being hammered. Most of the blue collar work force, and the new black middle class, have not been doing particularly well. The main difference is that the youth are (hopefully) going to live longer with the the new reality if it continues (hopefully not).
It is also of note for those who like the idea of preparing for future "downturns." Studies of "preparedness" folks have generally put them predominantly in the "some college" category - a very common category for the blue collar types (the "some" is generally some type of trade-based, or skill-based education) who are getting hammered. Trying to build a personal safety net is difficult when your own economic situation is becoming more difficult.
5 comments:
This is an excellent point. Although all of my children had a Bachelor's degree younger than I did before going out into the world, only one of them has as much money as I did at 28. The remainder of my kids have much less than I did at their ages, and they carry more debt for their educations than I did, and I have HELPED with college. They are all good kids taking the opportunities they are given and working hard, but there have been fewer opportunities. There is one more difference. By 28, I had two of my children already and was pregnant with a third. My kids all say they think they won't have children due to the expense and difficulties in the world.
Jane: People at the tale end of the boomer generation or just at the end of it (say born 1958 to 1968) can really see it by looking at the difference between their childrens prospects, and their parents. The big bulge of the boomers that came just before the 58-68 groups own careers, caused a lot of information noise for their own careers by ramping up economic activity with borrowing. But now that some of the borrowing has settled out, it is really obvious.
Is this the same world wide or a strictly US issue at the moment.
Yep it is hard to get people motivated to work when the only thing even possible to get are low wage service or manual labor jobs. Around here construction used to fill that gap but it is almost totally gone still.
And worse yet the boomers don't seem to be retiring now and the Xer's are too old to be considered for any old boomer jobs that do open up. Most of the few cushy old Boomer positions they do retire from are simply done away with or used to further pad the "diversity" buffer.
Francis: Best I can tell it is an Advanced Ecomomies problem. Western Europe, and Japan both have similar problems. Countries that developed a little latter may not have the same issues because their children would still be doing better than their parents.
Pioneer: What is scary is that of the various job-retraining programs put in place with the recent collapse, people training to enter construction did better than most. (?) The older baby boomers were the last of the non-or semi- diversified government management positions. Mostly they can diversify by simply letting the position lapse.
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