Millennial income 20% less than boomers at same stage of life
Millennial income did not recover from the Great Recession like older generations', a disparity that can have dire consequences for future generations.
- A New America report shows millennial income and wealth accumulation lags dramatically behind their parents' and grandparents' generations.
- Resulting from the Great Recession, rising debt, and volatile wealth flow, this imbalance will impair future generations if not corrected.
- The report's authors argue the shortfall can be redressed with comprehensive policy changes.
Millennials are defined by their diversity, but like every generation, they have experiences and milestones they all share.
In their formative years, millennials witnessed the rise of the internet, protracted wars in the Middle East, and a burgeoning political polarization. They ignited the experience economy and shifted the values of American culture. They are more educated than previous generations, yet stumbled into the workforce among the financial gyre of the Great Recession.
That last one has had a profound impact on the shared millennial experience. While the broader economy has convalesced, and Gen Xers have recovered the wealth they lost, millennials continue to lag behind previous generations, unable to find purchase in the financial system that made their parents and grandparents among the most well-off generations in history.
According to a New America report, The Emerging Millennial Wealth Gap, millennials currently earn 20 percent less than boomers at the same stage of life. In fact, millennial wealth accumulation is on track to fall short of their parents' lot. And this imbalance may impair subsequent generations, too.
Millennial income and debt
The Great Recession catalyzed the millennials' poor financial state. Just as the generation entered the workforce, businesses began downsizing, income wages nosedived, and millennials had to compete against an established workforce for fewer jobs. Since then, wage growth has been sluggish and recovery uneven.
But as the New America report illustrates, the recession is hardly the only factor at play. As is often the case, it's a nuance issue with many contributing influences.
For example, millennials are the most educated generation (for now). They have received more bachelor's degrees than previous generations, but that education has come at a cost. American tuition fees have increased faster than wages, with the average annual cost for attending a public four-year university at just over $19,000 (2015-16). At $1.5 trillion, today's student debt has surpassed loans for cars and credit cards, stymieing those who hold it from putting that money toward asset accumulation.
"It is not surprising that the median wealth of all millennials with any debt at age 30 is lower than those with no debt who attended college; however, their median wealth levels are also lower than young adults who never attended college," the New America report states.
Between student debt, car loans, and credit card debt, millennials maintain a higher debt-to-income-and-asset ratio than previous generations at the same age. Importantly, this debt is less mortgage debt and more consumer debt. The difference being that the former later becomes an asset value, while the latter does not.
Add to this debt sluggish wages and volatile income from an increased reliance on gig jobs—which lacks the assurances and benefits of full employment—and the millennial balance sheet has taken a huge hit.
How bad a hit? According to the New America report:
For families headed by an individual under the age of 35, net worth was 41 percent lower in 2016 than 1995. In contrast, households headed by someone over age 75 have seen their wealth rise. The recent growth of net worth among older households has been especially pronounced. It has increased 32 percent from 2013 to 2016, reflecting new growth in the generational wealth gap.
That generational wealth gap is further aggravated along racial lines. The report cites the median net worth of non-Hispanic White households at $171,000, compared to $17,600 for black households and $20,700 for Hispanic households. The authors chose the median because the mean proved substantially higher for all race and ethnicity households, "which reflects the concentration of wealth among the wealthiest in each category."
"Millennials are in a fundamentally different economic place than previous generations," writes Reid Cramer, director of the Millennials Initiative at New America, in the report. "Relatively flat but volatile incomes, low savings and asset holdings, and higher consumer and student debt have weakened their finances. The Millennial balance sheet is in poor shape."
A generation feels the effects
This graph from the World Economic Forum shows millennial income wage growth alongside average student debt.
This flagging wealth accumulation plays out in many of the stereotypes associated with millennials—stereotypes often wrongly attributed to other traits.
The trend of millennials living in their parents' basements has become a threadbare zinger, but there is truth to it. The number of young adults returning home has risen since 1997. Rather than the result of a lazy, lost generation who can't properly adult, the culprit is debt, stagnant wages, and the high cost of living.
Another result is the decline of millennial marriage. One study found a negative correlation between student debt and marriage. Under the financial strain, millennials less likely to embark on marriage and starting a family until much later in their lives. (Though, we should note, decade-long trends like women workforce participation and declines in teen pregnancy rates have also affect marriage rates.)
This wealth gap has also fueled the homeownership gap.
Millennials are less likely than Gen Xers and baby boomers to be homeowners, thanks to rising prices and fewer houses on the market. As the New America report notes, this single factor is perhaps the greatest detriment to millennial wealth building, as the home is often a household's largest asset.
"While the typical homeowner had a net worth of $231,400 in 2016, the typical renter had a net worth of $5,200, making this single variable among the most significant in explaining different wealth trajectories among American households," the report states.
A cascading recession?
Inadequate wealth accumulation is not solely the problem of a single generation. Unless corrected for, it can have a cascading effect that hinders future generations, as parental wealth informs what economic resources can be invested in their children's development.
A study out of the London School of Economics showed a strong causal link between household finances and children outcomes. It found evidence that low incomes prevent parents from investing in goods and services for their children. Additionally, these parents suffer from stress and anxiety, which can have further detrimental effects on their children. The study found that poor children are more likely to have worse education, health, and social-behavioral outcomes as a result.
The New America report also cites large bodies of research indicating that the family economic resources impact a child's human potential and their own economic outcomes.
Redressing the wealth gap
Democratic nominee Senator Elizabeth Warren wants to cancel student loan debt, a potential redress for the millennial income and wealth gap.
The conclusion of the New America report is that the intergenerational wealth gap must be redressed through system-wide policy changes. That's because wealth isn't simply luxury; it's the "key to financial security and economic mobility."
Those with little to no wealth accumulation cannot participate in the economy or society at the same level as their wealthy peers. They lack the tools and resources to reach their full potential, they cannot exercise or defend their rights as effectively, and in some ways basic needs become more expensive when they can be acquired.
The report's researchers cite eight potential responses to repair the millennial balance sheet, as well as examples of what those policies may look like:
1) Promote savings to build up cash reserves
Remove taxes for savings account interest up to a certain amount. Offer bonuses or matches on saved amounts.
2) Reduce the debt overhand
A large-scale cancellation of student load debt. Improve income-based repayment plans. End taxation on forgiven student loans. Make loan repayment a standard employee benefit.
3) Facilitate deposits to retirement plans
Incentivize savings through a government match program. Develop a public-option savings plan for people without an employer option.
4) Increase the supply of affordable rental housing while promoting paths to sustainable homeownership.
Pass laws to increase oversight over the mortgage market. Draft support systems to help people save for down payments.
5) Invest in the next generation's asset development
A government plan that provides every child with a savings account and seed deposit. State-based 529 college savings plans with progressive matching features.
6) Address the rising cost of college and reduce reliance on student loans.
Increase tuition subsidies for low-income students. Improve transparency at educational institutions. Better regulate for-profit educational institutions. More robust support for four-year program alternatives.
7) Promote new sources and opportunities to grow incomes and build wealth
Greater ownership in common assets (e.g., the Alaska permanent fund). Develop a "data dividend" where people are paid for sharing their personal data. More widespread adoption of employee stock and profit-sharing plans.
8) Support family caregiving
Increase and support better paid family leave. Improve income support for low-wealth families. Develop a universal family care system.
These are a few of the ideas offered by the report. But as Reid Cramer points out, the broad idea is to reinforce the pillars of our society to support everyone.
"In order to fashion a policy response to the emerging millennial wealth gap, it is instructive to acknowledge the pillars that historically have anchored the ladder of economic opportunity," Cramer writes. "For some, these pillars were never there at all; for others, they have weakened in the years since the Great Recession."
- Millennials are poorer than their parents - Big Think ›
- Student debt is keeping millennials single - Big Think ›
- How bad is income inequality? Millennials may be the new peasants. ›
- Stress levels affect Gen X the most, study finds - Big Think ›
Join Radiolab's Latif Nasser at 1pm ET on Monday as he chats with Malcolm Gladwell live on Big Think.
A vertical map might better represent a world dominated by China and determined by shipping routes across the iceless Arctic.
- Europe has dominated cartography for so long that its central place on the world map seems normal.
- However, as the economic centre of gravity shifts east and the climate warms up, tomorrow's map may be very different.
- Focusing on both China and Arctic shipping lanes, this vertical representation could be the world map of the future.
The world, but not as we know it<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMDU1Nzg1NS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYzNTkwMjIyNn0.qmQfwUdjQka8JX6q4KGANagleiuucpWay5ytMenZxUU/img.jpg?width=980" id="b95e4" class="rm-shortcode" data-rm-shortcode-id="ac088ec55c0585a93a9a310faab9a4c7" data-rm-shortcode-name="rebelmouse-image" />
A Chinese 'vertical world map,' showing the world in a different perspective from the one we're used to.
Image: Prior Probability<p>Europe is tucked away in a corner, an appendage of Asia dwarfed by neighboring Africa. North America is stood on its head, facing the rest of the world from the top of the map — cut off from South America, which cuts a solitary figure at the bottom. Africa is justifiably huge, but equally eccentric. </p><p>The eye scouts elsewhere for a place to land: not the Indian Ocean, which dominates the middle of the map, but some terra firma. Antarctica and Australia are too small, mere stepping stones for the land mass of Asia. Ultimately our gaze is drawn toward China, the lynchpin of this unfamiliar world. </p><p>Managing to leave both poles intact, this "vertical" world map is about as far away as you can get from the classic Mercator projection – which slices up both, giving center stage to a puffed-up Europe. Perhaps this new map will become more familiar soon: It may do more justice to the world of the near future, dominated by China and determined by shipping routes across the iceless Arctic. <br></p>
China's 'ten-dash line'<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMDU1Nzg1Ni9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY1NTI4MzQyNn0.sBe0oFTif4Jef1vWh1kAnUylU_QMPXT5xQjm-5aA3sA/img.jpg?width=980" id="a3b81" class="rm-shortcode" data-rm-shortcode-id="80fc6e4f5c9c1c978f698be2c8de5484" data-rm-shortcode-name="rebelmouse-image" />
'China without any part left out': includes Taiwan and the islands and atolls in the South China Sea, surrounded by a ten-dash line
Image: Global Times<p>While there's no indication that this map represents the Chinese government's "official" worldview, it is no secret that China has a thing with maps – and more specifically, the country's representation on them. </p><p>In China, the country's current economic success is seen as a redress of the unequal treatment meted out by western superpowers in the 19th century. China's world dominance is a return to a more natural state of world affairs, many feel. Cartographic rectifications are a symbolically significant corollary of that sentiment.</p><p><a href="https://www.citylab.com/equity/2015/12/china-cracks-down-on-politcally-incorrect-maps/421032/" target="_blank">Fines are regularly imposed</a> on companies – domestic and foreign – that fail to represent China to the fullest extent of its external borders, disputed though they may be by others (e.g. India, Taiwan and any of the countries with claims overlapping China's in the South China Sea). But the People's Republic's cartographic obsession doesn't end at China's territory itself. It also includes the country's position on the world map. <br></p>
The Kingdom at the Middle of the World<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMDU1Nzg2MS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYyOTkwODEzMX0.SGrAZBH6iJVggFYSaIahzv9GvfEh17y1SwUNINbVicQ/img.jpg?width=980" id="1774c" class="rm-shortcode" data-rm-shortcode-id="99790d80a909d17a948f7c5d463d7d98" data-rm-shortcode-name="rebelmouse-image" />
Early Japanese color copy of Ricci's world map
Image: public domain<p>China's name for itself is <em>Zhōngguó</em>, which means 'Central State' or 'Middle Kingdom', reflecting its ancient self-image as the civilized center (<em>Huá</em>) of the world, with wild tribes (<em>Yí</em>) at the edge. That view is not unique to China. Vietnam, for example, at certain times also styled itself as the "central state" (<em>Trung Quóc</em>) – considering the Chinese in turn as the uncouth outsiders.</p><p>It may be surprising to recall, but Europeans themselves once considered their own continent a relative backwater, viewing Jerusalem as the true center of the world. That changed with the Age of Discovery, which placed Europe at the center of an ever-expanding world. Maps reflected that worldview, and largely continue to do so. That's why today's standard world map still has Europe at its center – with China off toward the periphery on the map's right-hand side. </p><p>The most notable feature of the very first major modern world map produced in China, the <em>Kunyu Wanguo Quantu</em> (1602), is that it places China firmly at the center of the world. Produced for the Chinese emperor by Jesuit missionary Matteo Ricci, it was the first map ever to combine that perspective with modern western knowledge: it was the first Chinese map to show the Americas, for instance. </p><p>That representation may not have taken off elsewhere, but it will be instantly recognizable to Chinese students, as it's the standard format for world maps in China's schools today.<br></p>
America on its head<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMDU1Nzg2My9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYwMzQ5NTc0MH0.EqadI2Yp-2dPwi3VccFZelIDK4V9t0ZOfTfHjdB6wVw/img.jpg?width=980" id="97104" class="rm-shortcode" data-rm-shortcode-id="2b66e8de389b3d736bc28e019e445cd0" data-rm-shortcode-name="rebelmouse-image" />
Upside down you turn me: North America on its head, in Chinese characters
Image: Prior Probability<p>For those used to "classic" Eurocentric world maps, Europe's marginalization may come across as a bit of an upset. America's new position on the horizontal Chinese world map is less jarring: It merely moves from the left- to the right-hand side of the picture. But then there's this vertical world map, which deals a similar blow to the American land mass: divided in two and pushed to the upper and lower edges of the map.</p><p>Unfamiliar? Sure. Shocking? Perhaps. Wrong? Not really. First off, no world map is totally right, since it's mathematically impossible to transfer the surface of a three-dimensional object onto a flat surface without some distortion. And since the world is a globe, where you center that map is a matter of purely subjective choice.<br></p><p>Those choices have historical reasons. Mercator's map was not specifically designed to put an inflated Europe at the center of the world. That was just a side effect; its main purpose was to aid shipping: Straight lines on the map correspond to straight lines sailed on the seas.</p>
By 2050, a completely melted Arctic could enable the Transpolar Passage, shortening trade routes between Asia and Europe and boosting business for Alaskan ports like Nome and Dutch Harbor.
Image: The Maritime Executive<p>The vertical world map, showing the relative proximity of China (and the rest of Asia) to Europe and (even the East Coast of) North America, has a similarly maritime <em>raison d'être</em>, or it will have by mid-century. <a href="https://www.maritime-executive.com/editorials/the-arctic-shipping-route-no-one-s-talking-about" target="_blank" rel="noopener noreferrer">Experts project</a> that by 2050 (if not sooner), the Arctic will be sufficiently ice-free to enable the so-called Transpolar Passage, i.e. shipping straight across the North Pole. </p><p>That would shave more than three weeks off a traditional sea voyage between Europe and Asia, via the Suez Canal – and even be significantly faster than other northern alternatives like the Northwest Passage (via Canada) or the Northern Sea Route (hugging the Siberian coast). Since ships would not need to go through locks or pass over shallow waters, it would also remove current restrictions on tonnage per ship. <br></p><p>The only country seriously preparing for such a future: China. None of the other Arctic powers is giving the Transpolar route any strategic thought. On the other hand, China's Arctic Policy document, released in January 2018, already matter-of-factly refers to the Transpolar route as the 'Central Passage' – one of several 'Polar Silk Roads' that China seems to want to develop. And they already have the world map to go with it.</p>
The Labour Economics study suggests two potential reasons for the increase: corruption and increased capacity.
Cool hand rebuke<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQyMTIyNy9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY0NjY1NTYyOH0.0MCPKN3If94mYCNf3mMNrnTvJXjXN_bKLhgk9203EXk/img.jpg?width=917&coordinates=0%2C0%2C0%2C0&height=453" id="1627b" class="rm-shortcode" data-rm-shortcode-id="6d76421ba1ea0de4b09956b97e80c384" data-rm-shortcode-name="rebelmouse-image" />
A chart showing prison population rates (per 100,000 people) in 2018. The United States has the highest rate of incarceration in the world.
Who profits with for-profit prisons?<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="97ac37e6c7f6f22ec130ea2d56871701"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/dB78NV2WpWc?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>The Labour Economics study suggests that privately-run prisons do convicts a few favors at the moment of sentencing. However, proponents of private prisons often point to other benefits when making their case. Specifically, they argue that private prisons reduce operating costs, stimulate innovation in the correctional system, and reduce recidivism—the rate at which released prisoners are rearrested and return to prison.</p><p>In regard to recidivism, the research is mixed. <a href="https://journals.sagepub.com/doi/abs/10.1177/0011128799045001002" target="_blank">One study</a> compared roughly 400 former prisoners from Florida, 200 released from private prisons and 200 from state-run facilities. It found the private-prison cohort maintained lower rates of recidivism. However, <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1745-9133.2005.00006.x" target="_blank" rel="noopener noreferrer">another Florida study</a> found no significant rate differences. And two other studies—one from <a href="https://journals.sagepub.com/doi/abs/10.1177/0011128799045001002" target="_blank" rel="noopener noreferrer">Oklahoma</a> and another out of <a href="https://journals.sagepub.com/doi/abs/10.1177/0734016813478823" target="_blank" rel="noopener noreferrer">Minnesota</a>, both comparing much larger cohorts than the first Florida study— found that prisoners leaving private prisons had a greater risk of recidivism.</p><p>The research is also inconclusive regarding cost savings. <a href="https://www.hamiltonproject.org/assets/files/economics_of_private_prisons.pdf" target="_blank" rel="noopener noreferrer">A Hamilton Project analysis</a> noted that such comparisons are difficult because private prisons, like all private companies, are not required to release operational details. In comparing what studies were available, the authors estimate the costs to be comparable and that "in practice the primary mechanism for cost saving in private prisons is lower salaries for correctional officers"—about $7,000 less than their public peers. They add that competition-driven innovation is lacking as the three largest firms control nearly the entire market.</p><p>"We aren't saying private prisons are bad," Galinato said. "But states need to be careful with them. If your state has previous and regular issues with corruption, I wouldn't be surprised to see laws being more skewed to give longer sentences, for example. If the goal is to reduce the number of incarcerated individuals, increasing the number of private prisons may not be the way to go."</p>
What exactly does "questions are the new answers" mean?
- Traditionally, intelligence has been viewed as having all the answers. When it comes to being innovative and forward-thinking, it turns out that being able to ask the right questions is an equally valuable skill.
- The difference between the right and wrong questions is not simply in the level of difficulty. In this video, geobiologist Hope Jahren, journalist Warren Berger, experimental philosopher Jonathon Keats, and investor Tim Ferriss discuss the power of creativity and the merit in asking naive and even "dumb" questions.
- "Very often the dumb question that is sitting right there that no one seems to be asking is the smartest question you can ask," Ferriss says, adding that "not only is it the smartest, most incisive, but if you want to ask it and you're reasonably smart, I guarantee you there are other people who want to ask it but are just embarrassed to do so."