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How Are Millennials Doing?
Stats and sentiment
The status of American millennials is a topic of constant discussion. One on hand, millennials are killing everything from napkins to Canadian tourism. They are the poorest generation and will never equal the wealth of their parents. According to the NBER, millennials’ “median wealth in 2016 was lower than the wealth of any similarly aged cohort between 1989 and 2007.” For many millennials, their first exposure to the wider world was the terrorist attacks of September 11th. Then came the Great Recession, and then Covid.
On the other hand, millennials were raised in the 1990s, at what may prove to be the apogee of American power. Except for the Great Recession, the American economy has done very well over the last 20 years. The world is safer than it’s ever been. Prices for many goods have steadily declined in real terms. New technology gives the average individual power that the richest billionaire didn’t have a generation ago. Not only do millennials have it good, but they are creating their own problems by eating $20 avocado toast.
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These are the two narratives. So, which is true? As with most things, both camps have valid points. Jean M. Twenge recently waded into the debate with a good article in The Atlantic. She claims that the trope of the broke millennial is just a myth. That millennials are doing the same or even better than previous generations. Her headline claim is that “Income for the median Millennial household was about $9,000 higher than that of the median Gen X household at the same age, and about $10,000 more than the median Boomer household.” I’d love to fact-check this, but no source is provided other than naming the Current Population Survey as the agency that determined the statistic.
One of the reasons there are two millennial narratives is that the story is still being told. Articles written 10 years ago about millennials may have been true then, but the situation is evolving. As Twenge notes, real progress has been made. According to the Fed, those born in the 1980s had a 40 percent wealth deficit in 2016, but that had shrunk to an 11 percent deficit by 2019. Note, however, that an 11 percent wealth deficit is not equal to or better than previous generations. It is still a significant decrease, especially when the expectation should be that each generation becomes wealthier than the generation that preceded it. So there are signs of progress but still work to be done.
It’s also important to note that generational income and wealth comparisons need to be handled with caution. Millennials can’t be compared to Generation X or the baby boomers without additional context. More millennials have a four-year college degree than the baby boomer generation. Thus, one would expect that millennials in their mid-20s will make less than boomers did in their 20s, as many of the younger generation have just started their careers or are still in school.
Twenge also makes a great point about the salience of relative wealth. One’s feeling of wealth is largely relative to the wealth of others. As the journalist H.L. Mencken noted, “A wealthy man is one who earns $100 a year more than his wife's sister's husband.” People have always tried to keep up with the Joneses, but the Joneses used to be the people down the street. Now everyone is comparing their life to the heavily filtered (literally and figuratively) content we see online. The negative feelings “beauty magazines” used to bestow on readers in the 20th century are now conferred on anyone with an Instagram account.
The biggest elephant in the room, and something that the “Millennials are doing fine” camp likes to quickly elide by, is housing. One could make the argument that millennials are doing fine from a homeownership perspective because millennials own houses at similar rates to previous generations. But this omits A) the composition of the houses millennials are buying and B) ignores the debt-to-income ratio of new homebuyers. By any measure, home prices have increased significantly over the last 20 years. As bad as the 2008 Great Recession was, there is increasing evidence that the housing market did not have a bubble, but instead went through a “negative bubble” in 2008-2009 when people panicked and started selling off property at a frantic rate. After all, home prices recovered from their 2006 highs within a decade. Today, even correcting for inflation, homes are valued considerably above the 2006 peak. That indicates that there wasn’t much of a bubble to begin with.
As a recent homebuyer, I witnessed this personally. Trying to buy a first home in 2022 was a nightmare. It was normal for a house to sell above ask (and appraisal) the week it was put on the market. This was unprecedented. For millennials who are not yet homeowners, this presents a real problem. Homeownership has always been a crucial vehicle for growing wealth; if that avenue is gone or largely diminished it will require a reset of societal expectations. There is the dangerous possibility that a segment of millennials will be locked out of the housing market and society will divide into those who own property and those who don’t.
The “millennials buy too much avocado toast” camp also has a fair point. Millennials have this romantic view that anyone with a decent job could buy a house before 1990. This is far from true. The boomers that were able to buy houses when they were twenty-somethings were those that had good jobs, made significant sacrifices, or both. I know many people in their twenties and thirties today who eat out multiple nights a week, drive nice cars, go on exotic vacations around the world, live in luxury apartments, and claim they cannot afford to buy a home. So while it is true that housing is more expensive than ever before, many millennials aren’t making the sacrifices necessary to enter the property market.
Overall, with the important exception of homeownership, millennials are doing ok. Their wealth is catching up to previous generations. They are more educated than any other group. For the first time, there are more millennials alive than baby boomers. But the story is still being written. The next few years will be crucial. If trends continue, the wealth deficit will close and millennials will be in good shape. If not, then it’s time to figure out what went wrong and make sure things are better for future generations.