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American millennials are approaching middle age in worse financial shape than every living generation ahead of them, lagging behind baby boomers and Generation X despite a decade of economic growth and falling unemployment.
Hobbled by the financial crisis and recession that struck as they began their working life, Americans born between 1981 and 1996 have failed to match every other generation of young adults born since the Great Depression. They have less wealth, less property, lower marriage rates and fewer children, according to new data that compare generations at similar ages.
Millennials helped drive the number of U.S. births to their lowest levels in 32 years. Social Security last month estimated that the current birthrate is expected to create a Social Security deficit of nearly $2 trillion over the next 75 years. Men and women in their 30s are marrying at rates below every other generation on record.
Their slow start has been well-documented in the first years after the recession. New data show that millennials may never catch up with the generations of Americans that preceded them.
Millennial households had an average net worth of about $92,000 in 2016, nearly 40% less than Gen X households in 2001, adjusted for inflation, and about 20% less than baby boomer households in 1989. Wages didn’t look much better. At the same ages, Gen X men working full time and who were heads of households earned 18% more than their millennial counterparts, and baby boomer men earned 27% more, when adjusting for inflation, age and other socioeconomic variables.
One explanation for their slow progress is bad luck. Economists have found that entering the workforce during a downturn yields lower earnings for life. “The effects have health and lifestyle consequences well into middle-age,” said Prof. von Wachter,an economics professor at the University of California, Los Angeles. He reviewed four decades of earning data in his study, which was conducted with Hannes Schwandt of Northwestern University.
Many millennials couldn’t afford to buy houses or invest in the stock market early enough to profit from the sharp escalation of prices over the past decade. About one third of millennials owned homes in 2016, compared with half of Gen Xers at similar ages in 2001, and just under half of baby boomers in 1989. Even if millennials close the gap as they age, asset prices are so high that their expected return on real estate is lower. Losing out on a decade of gains in the stock and housing markets hurt the financial standing of millennial households.
The St. Louis Fed found the median wealth of a family headed by someone born in the 1980s was a third below the level that they would expect, compared with earlier generations at the same age and adjusted for inflation. The regional Fed bank concluded that people born in the 1980s are at risk of becoming America’s lost generation.