Right after the Great Recession, it was a little hard to tell who had it worse: Millennials or Gen X. On the one hand, those of us in our twenties and early thirties faced the dire prospect of starting our careers amid the worst economy in modern memory. Graduating back then felt a bit like leaping off a high dive only to realize someone had drained the water out of the pool. But at least most of us hadn’t gotten caught up in the housing bubble. Gen Xers, in contrast, had just watched their home equity get demolished and had children to worry about, making the prospect of unemployment all the more terrifying.
A decade later, though, it appears Millennials are in the much deeper financial hole. In a new study this month, economists from the Federal Reserve Bank of St. Louis examined whether Americans are now wealthier or poorer than previous generations were at their age. It turns out that older households (those headed by someone born before 1960) are a bit better off than those their age had been in the past, while younger households (those headed by someone born after 1960) are generally worse off. And 1980s babies are in the most dire shape of all: As of 2016, the median net worth of those born around the Reagan years was 34 percent lower than what past trends would predict for their age group. Those born in the 1970s, the GenXers, were just 18 percent behind.
Why are younger families so far behind the curve? According to the Fed report, the problem is not what they’re earning, nor their savings habits (the researchers find that, contrary to popular belief, Americans born in the ‘80s actually put away money at higher rates than Boomers or Gen Xers did at their age). Instead, the problem boils down to “houses and debt.” Americans born in the 1960s and ‘70s were up to their necks in mortgage debt when the housing bust hit, and their net worths plummeted with housing prices. But now that home values have recovered, their finances are healing. “Families whose heads were born in the 1980s are different,” the report states. Loaded down with student debt, auto loans, and credit card balances, less than half own homes and relatively few hold assets like stocks, meaning they’ve missed out on the runup in asset prices of the last few years, and it’s possible they’ll never be able to build wealth fast enough to match previous generations.
Technically, ‘80s babies don’t have the heaviest debt burden ever; they’re still behind the standard set by those born in the ‘70s. But the difference, again, is that Gen X levered up to buy actual assets. Millennials are paying for their diplomas. The Fed staffers hold out a sliver of hope that, as the most educated generation yet, those born in the ‘80s will earn enough to dig themselves out of the pit they’re currently in. But otherwise, it’s possible they’ll “become members of a lost generation for wealth accumulation.”
Here, I’d just like to end on a personal mea culpa. A few years ago, I co-wrote an article for the Atlantic that asked whether Millennials would ever buy houses or cars quite the way their parents did, and spent a bit too much time focusing on cultural explanations for their changing consumer habits rather than focusing on the obvious financial challenges my cohorts were facing. It was titled “The Cheapest Generation.” In retrospect, a more appropriate title would have obviously been the “The Brokest Generation.”1