SOUTH MILWAUKEE, Wis. - Baby Boomers: your millennial children are worse off than you.
With a median household income of $40,581, millennials earn 20 per cent less than boomers did at the same stage of life, despite being better educated, according to a new analysis of Federal Reserve data by the advocacy group Young Invincibles.
The analysis being released Friday gives concrete details about a troubling generational divide that helps to explain much of the anxiety that defined the 2016 election. Millennials have half the net worth of boomers. Their home ownership rate is lower, while their student debt is drastically higher.
The generational gap is a central dilemma for the incoming presidency of Donald Trump, who essentially pledged a return to the prosperity of post-World War II America. The analysis also hints at the issues of culture and identity that divided many voters, showing that white millennials — who still earn much more than their blacks and Latino peers — have seen their incomes plummet the most relative to boomers.
Andrea Ledesma, 28, says her parents owned a house and were raising kids by her age.
Not so for her. Ledesma graduated from college four years ago. After moving through a series of jobs, she now earns $18,000 making pizza at Classic Slice in Milwaukee, shares a two-bedroom apartment with her boyfriend and has $33,000 in student debt.
"That's not at all how life is now, that's not something that people strive for and it's not something that is even attainable, and I thought it would be at this point," Ledesma said.
Her mother Cheryl Romanowski, 55, was making about $10,000 a year at her age working at a bank without a college education. In today's dollars, that income would be equal to roughly $19,500.
Romanowski said she envies the choices that her daughter has in life, but she acknowledged that her daughter has it harder than her.
"I think the opportunities have just been fading away," she said.
The analysis of the Fed data shows the extent of the decline. It compared 25 to 34 year-olds in 2013, the most recent year available, to the same age group in 1989 after adjusting for inflation.
Education does help boost incomes. But the median college-educated millennial with student debt is only earning slightly more than a baby boomer without a degree did in 1989.
The home ownership rate for this age group dipped to 43 per cent from 46 per cent in 1989, although the rate has improved for millennials with a college degree relative to boomers.
The median net worth of millennials is $10,090, 56 per cent less than it was for boomers.
Whites still earn dramatically more than Blacks and Latinos, reflecting the legacy of discrimination for jobs, education and housing.
Yet compared to white baby boomers, some white millennials appear stuck in a pattern of downward mobility. This group has seen their median income tumble more than 21 per cent to $47,688.
Median income for black millennials has fallen just 1.4 per cent to $27,892. Latino millennials earn nearly 29 per cent more than their boomer predecessors to $30,436.
The analysis fits into a broader pattern of diminished opportunity. Research last year by economists led by Stanford University's Raj Chetty found that people born in 1950 had a 79 per cent chance of making more money than their parents. That figure steadily slipped over the past several decades, such that those born in 1980 had just a 50 per cent chance of out-earning their parents.
This decline has occurred even though younger Americans are increasingly college-educated. The proportion of 25 to 29 year-olds with a college degree has risen to 35.6 per cent in 2015 from 23.2 per cent in 1990, a report this month by the Brookings Institution noted.
The declining fortunes of millennials could impact boomers who are retired or on the cusp of retirement. Payroll taxes from millennials helps to finance the Social Security and Medicare benefits that many boomers receive — programs that Trump has said won't be subject to spending cuts. And those same boomers will need younger generations to buy their homes and invest in the financial markets to protect their own savings.
"The challenges that young adults face today could forecast the challenges that we see down the road," said Tom Allison, deputy policy and research director at Young Invincibles.
In short, the government cannot use the pretext of clamping down on an industry which is presently illegal by claiming the cash transactions facilitates the existence and growth of it when it is the government’s own criminalisation policy which brought it into existence.
So, despite the government’s incessant pressure for recipients [of welfare programs] to work, people either remain unemployed on welfare, or work and have their payments severely cut or ended. Recipients can escape this by working in the cash economy and not declaring their earnings.
Other problems abound if the government were to abolish high-denomination bank notes and restrict cash payments above a specified amount, such as $1,000.
One is privacy. By forcing the public to use electronic payments, their activities and whereabouts can be tracked. Given the growth of the surveillance state and intelligence-industrial complex, this is a real infringement upon freedom and privacy if the authorities access this bank data.
This policy is also designed to generate inefficiency by forcing dependence on the banking and financial system. Where previously transactions may have been efficiently conducted in cash, the public are forced to use electronic payments, inserting a third party into the transactions: banks – to their benefit.
Worse, this move against cash makes it easier for the RBA to implement negative interest rates in a significant economic downturn to bail out the banking system. It would become almost impossible for the public to take their savings and other liquid assets out of the banking system as cash to protect themselves from being charged for having savings.