Do Millennials stand a chance in the real world?
That’s the question a New York Times article asks based on depressing new findings from a study conducted by the Urban Institute. The study, which looked at the average net worth of different age groups, found that while older generations are accumulating wealth, younger generations are stagnating.
“For many, the American dream of working hard, saving more, and becoming wealthier parents holds true,” writes the study’s authors. “Unless you’re under 40.”
They found that not only is this generation poorer at this point of their lives than previous generations, but they’re growing relatively poorer compared to older adults. In fact, the average wealth of those in their 20s and 30s is 7 percent below that of the same age groups 20 years ago. Even more striking, between 1983 and 2010, the average net worth of those 56 and older increased by an average of more than 100 percent while younger age cohorts average net worth increased around 5 percent. The worst off were 29 to 37-year-olds whose net worth declined by 21 percent.
The inability to find a job, earn a living and save a little money has taken a serious toll on young adults.
“They look at the house their parents live in and say, ‘I could work for 100 years and I couldn’t afford this place,” Neil Howe, an author of the 1991 book “Generations” told the New York Times. “If that doesn’t make you focus on money, what would? Millennials have a very conventional notion of the American dream – a spouse, a house, a kid – but it is not going to be easy for them to get those things.”
The plight of young adults has been made immeasurably worse by the depth and length of the recession. President Obama’s policies, which have singularly focused on stimulating aggregate demand at the expense of focusing on creating sustained economic growth, have led to this being the slowest economic recovery since the Great Depression. On top of that, Obama’s costly, government-centric approach has created historically large deficits that could add a further tax burden onto an already struggling generation.
That becomes an especially large problem given that the recession is likely to leave a serious financial scar on the earning ability of young adults. The New York Times reports:
“Lisa Kahn, a labor economist at the Yale School of Management, studied the earnings of men who left college and joined the work force during the deep recession of the early 1980s. Unsurprisingly, she found that the higher the unemployment rate upon graduation, the less graduates earned right out of school. But those workers never really caught up. “The effects were still present 15 or 20 years later,” she said. “They never made that money back.”
Kahn worries that the same pattern is repeating itself. . . Thirty or 40 years from now, young millennials might face shakier retirements than their parents. For the first time in modern memory, a whole generation might not prove wealthier than the one that preceded it.
The impact of a Millennial generation that is wired to scrimp and save as a result of lower earnings will reverberate for decades. Young adults are deciding to move back in with their parents rather than purchase a house, they are buying fewer cars and other big ticket items, and they are getting married and starting a family later. In other words, young adults are being confined to smaller dreams, and in the process stifling the growth in aggregate demand that Obama has been hoping to stimulate.
Sadly, there simply aren’t many options in the Obama economy.
“There are people with master’s degrees and bachelor’s degrees and even people with law degrees applying to work for $10 an hour,” one frustrated job-searcher told the Wall Street Journal.
He is not alone. A new paper released by the National Bureau of Economic Research found that college-level occupations peaked around 2000, then began a steady decline, though its effects were largely hidden by the housing boom. That decline has left many adults wondering when their job and wage prospects could return to normal. Many economists feel we may have a while to wait.
One of the skeptics is Kahn who carefully studied the after effects of the 1981-82 recession and how it compares to the most recent crash.
“My inclination is pessimism,” Kahn told the New York Times. “If anything, these guys might experience something worse.”
Unfortunately, it’s hard to be anything but pessimistic in the Obama economy.