Millennials born between 1981 and 1996 are often less well off than their Baby Boomer parents born between 1946 and 1964. According to some observers, they are “the first generation that is worse off than their parents.”
Given the mushrooming costs of buying an apartment in Israel that were reasonable decades ago, the same thing seems to be happening to Millennials here.
Now, a study of over 12,000 Americans that compared Baby Boomers and Millennials, raises concerns about Millennials’ diverging financial gains. They are not uniformly poorer but many are coping with a vast and increasing wealth gap, due to the increasingly uneven financial rewards reaped from different life and career paths, compared with their Boomer predecessors. This creates the impression that as a generation, they are losing out.
The study, by researchers from the University of Cambridge in the UK, Humboldt University in Germany, and the French research university Sciences Po, examined the work and family life trajectories of more than 6,000 Baby Boomers and 6,000 Millennials in the US. It evaluated and compared the impact of these work and life choices on their wealth by the age of 35.
They used sequence analysis and unconditional quantile decomposition to analyze the work and family trajectories of late-Baby Boomers (born between 1957 and 1964) and early-Millennials (born between 1980 and 1984) and relate them to wealth holdings at age 35.
The widening wealth gap
Whether western Millennials are doing better or worse than previous generations is widely debated. Millennials are often positioned as the victims of social changes that have made employment and family life less stable. A recent article challenged the “myth of the broke Millennial”, however, claiming that they are actually thriving.
The new study suggests that the answer depends on which Millennials are being discussed. It found that Millennials were statistically more likely to work in low-paid service jobs or live with their parents as they entered middle age. Most of these individuals were economically worse off at 35 than Baby Boomers with comparable careers and lives. Millennials with typical middle-class life trajectories accumulated substantially more wealth than their Baby Boomers counterparts, however.
The research, published in the American Journal of Sociology entitled “Life Course Trajectories and Wealth Accumulation in the United States: Comparing Baby Boomers and Early Millennials” describes this widening wealth gap as “a fundamental moral and political challenge” that will shape the future of the US.
The lead author, Dr. Rob Gruijters of Cambridge, said: “The debate about whether Millennials are worse off is a distraction. The crucial intergenerational shift has been in how different family and career patterns are rewarded. The wealthiest Millennials now have more than ever, while the poor are left further behind.”
This divergence in financial rewards is worsening extreme levels of wealth inequality in the US, he said. Those with typical working-class careers like truck drivers or hairdressers used to be able to buy a home and build a modest level of assets, but this is more difficult for the younger generation. The solution lies with measures such as progressive wealth taxation and policies like universal health insurance that give more people basic security.”
Instead of using broad averages to compare the generations, the study mapped each individual’s life trajectory from 18 to 35 as a sequence of changes in their work, family, and living arrangements. Individuals with similar trajectories were then clustered together, enabling the researchers to compare the net worth of Millennials and Boomers with similar life experiences.
The data revealed striking intergenerational shifts in career patterns and family dynamics. By age 35, 17% of Baby Boomers had followed a path in which they progressed from college into prestigious professional careers like law and medicine, whereas only 7.3% of Millennials did the same. Millennials were, on the other hand, more likely to be engaged in other professional roles like social work and teaching, or in service sector jobs like retail, serving in restaurants and caregiving. Additionally, Millennials tended to postpone marriage and prolong their stay in the parental home. Early marriage and parenthood characterized the lives of 27% of Boomers, but just 13% of Millennials.
In terms of financial security, the study found that wealth inequality is much more pronounced among Millennials than it was for Boomers. While 62% of Boomers owned homes at 35, for example, only 49% of Millennials did. Around 14% of Millennials had negative net worth, meaning their debts outweighed their assets, compared with 8.7% of Boomers.
There was limited evidence that this gap is intrinsically driven by changing work and family patterns; rather, the economic rewards for secure, middle and upper-class lifestyles have increased, while those for less stable, working-class trajectories have either stagnated or declined.
The authors argue that these challenges not only foster intergenerational tensions but have also contributed to other social problems like the rise of populist authoritarianism. Coping with this problem, they continued, will require big solutions – principally wealth taxes and policies that offer financial security to the less advantaged. Such measures might, for example, include access to stable housing, universal health insurance, and a higher minimum wage.
Co-author Prof. Anette Fasang stressed the importance of urgent public intervention. “We need to make it easier for those who are currently being left behind to accumulate wealth in the first place,” she said. “A slow and tentative approach won’t suffice. Significant action is needed to build a more equal society, where more people can experience some form of prosperity.”