Introduction to Today’s Young Adults Will Die Poorer Than Their Parents
According to the World Economic Forum in 2016, after World War II, nearly all advanced economies experienced an increase in employment and income.1 Traditionally, adult children typically did financially better than their parents, until recently.1 However, from 2005 to 2014, 70% of households in advanced economies saw flattening or a fall in income.2 The cause seems to be tied to the 2008 financial crisis.1 Every wealthy country has now shown that Baby Boomers and Gen X will earn more in their lifetimes than their children, the millennials.3
Decline in Socioeconomic Wealth for Millennials Compared to Their Parents
Often, adult millennials cannot afford a home or to be married at the same age as their parents.4 Almost 50% of Millennials have lower socioeconomic status than their parents. This contrasts with the Silent Generation, where 70% of them had a higher socioeconomic status than their parents.4
Factors contributing to this decline in socioeconomic status among Millennials include rising house prices, increasing college debt, wage stagnation, and the long-term effects of the Great Recession.4 5 The solutions to these problems have been widely debated by politicians, economists, researchers, journalists, professors, and Millennials themselves. There is no solution that everyone can agree on.
Example of Millennial, Gen X and Baby Boomer Housing
For example, if more housing is built, housing prices will decrease, potentially financially harming the retirement funding of Gen X and Baby Boomers and increasing the likelihood of bankruptcy for homeowners who have loans (like mortgages and business loans) that are tied to the value of their homes.5 It will also harm the Baby Boomers and Gen Xers, who have purchased properties for investment purposes to increase their financial stability.5
However, Millennials, Gen Z, and the Alpha Generation appear to be potentially perpetual renters who face rent increases outpacing inflation, in addition to the risk of eviction despite being good tenants.5 This contrasts with the parents of Millennials and Gen Z, who enjoy owning their own homes and the financial benefits that come with it. Is this reasonable to the younger generation? I do not think so, but no one seems to know the solution that benefits everyone. One generation must give, and at this time, it is the Millennials, Gen Z, and Alpha Generation.5
Possible Positive News for Millennials
On a positive note, in 2022, millennials were shown to have increased their income by 18% compared to the previous generation. 5 Overall, despite Millennials and Gen Xers showing slower growth than their parents, some growth has still occurred in the last decade.4 On the other hand, this slower growth has been attributed to Millennials working fewer hours and having more assets in their retirement accounts and stocks.4 It is currently unknown whether the COVID-19 financial collapse will have a negative long-term impact on Millennials, Gen Z, or the Alpha Generation, similar to the effects of the Great Recession.
Conclusion: Young Adults Will Die Poorer Than Their Parents
In conclusion, Millennials and younger generations are projected to die poorer than their parents due to rising house prices, rising college debt, wage stagnation and the long-term effects of the Great Recession 3 4 However, if these issues are solved, there may be hope to overcome this worrying trend.4
About the Author Madison Mussio
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References:
[1] Luxton, Emma. “Poorer than Their Parents. What’s Gone Wrong for This Generation?” World Economic Forum, 18 Nov. 2016, www.weforum.org/stories/2016/11/there-s-a-generation-growing-up-poorer-than-their-parents-a-new-study-explains-why/.
[2] Dobbs, R., Madgavkar, A., Manyika, J., Woetzel, L., Bughin, J., Labaye, E., & Kashyap, P., 2016, July 13, Poorer than their parents? A new perspective on income inequality. McKinsey & Company. https://www.mckinsey.com/global-themes/employment-and-growth/poorer-than-their-parents-a-new-perspective-on-income-inequality.
[3] Myers, Joe. “Millennials Will Be the First Generation to Earn Less than Their Parents.” World Economic Forum, 19 July 2016, www.weforum.org/stories/2016/07/millennials-will-be-the-first-generation-to-earn-less-than-their-parents/.
[4] Luhby, Tami. “Scott Larsen Doesn’t Feel He’s Doing as Well as His Father Did at the Same Age.” CNN, 11 Jan. 2020, www.cnn.com/2020/01/11/politics/millennials-income-stalled-upward-mobility-us/index.html.
[5] Mayer, Andre. “The Dirty Secret of the Housing Crisis? Homeowners like High Prices.” CBC, 15 Apr. 2024, www.cbc.ca/news/business/housing-prices-affordability-real-estate-1.7170775.