The Graying of Wealth... in One Picture. NewsWire

NEWSWIRE: 12/16/19

• A new chart using Federal Reserve data spotlights the stark wealth gap between older and younger generations. By the time Boomers had reached a median age of 35, they collectively owned 21% of the nation’s wealth—versus just 8% for Gen-Xers at age 35 and maybe even less for Millennials when they reach that age. (The Washington Post)

• NH: Here's a chart designed to provoke generational war! It was originally composed and tweeted by economist Gray Kimbrough. And then it was picked up as a lead for this WP story.
• The underlying numbers come from the the Fed's new "Distributional Financial Accounts" (DFA) which I described in some detail back in June. (See "The Richest 10% of Households Now Represent 70% of All Wealth.") The DFA is a wonk's delight because it combines all the various Fed's household survey and institutional balance numbers into a comprehensive database that is consistent with U.S. national accounts and can be updated quarterly. The Fed also offers a wonderful query-driven graphical interface for the DFA which can be accessed here. The Fed already calculates total household net worth by generation. All Kimbrough did was take each generation's share per the DFA estimate and re-arrange the numbers according to each generation's median age on the x-axis.
• As the WP rightly cautions, these aggregate generational share numbers can be a bit misleading because some generations can include more birth cohorts than others (Boomers here are born 1946-64; Xers 1965-81; and Millennials 1981-96) and because some generations have smaller numbers per birthyear (Xers, for instance).
• Still, even after standardizing the figures into per-capita equivalents, the generational wealth gap is very impressive. In 1990, for instance, Boomers comprised 31% of the population and owned 21% of the nation's wealth--for a wealth-to-population ratio of 0.68. In 2008, Gen Xers--at the same median age--comprised 22% of the population and owned just 8% of the wealth--for a ratio of 0.36.
• I write often about this growing shift in income and (especially) wealth toward older age brackets. (See "The Graying of Wealth.") And IMO both the WP and Kimbrough overplay the Boomers-are-so-rich and Millennials-are-so-poor angle. (On his twitter site, Kimbrough brands himself as a "serial Millennial myth debunker.")
• Yes, Boomers have done relatively better (by age) than today's younger generations. But this good fortune applies mostly to the Boomers' first half, born in the 1940s, and not so much to the second half, born in the 1950s. Americans born in 1960 are doing no better, relative to their parents, than the Xers born after them. And if you count early-1960s cohorts as Boomers (as I do not), well, then you're talking about no good fortune at all. The luckiest generation, in terms of upward mobility in income and wealth, is not the Boomers, but rather the Silent Generation, Americans now in their late-70s to early 90s. (See my Forbes' piece, "The Silent Generation, 'The Lucky Few'.")
• As for Millennials yes, they are behind in net worth--but they are still young and a lot can change politically and economically to improve their situation between now and their retirement (which is when net worth really matters). So which generation faces the biggest challenge? Not Millennials, but Gen-Xers. Unlike Millennials, Xers don't have much time left to catch up. And their wealth gap with Boomers remains wide, indeed, pretty much unbridgeable.
• For the long version of how I assess the economic prospects of each of today's living generations, take a look at this article I co-authored for the Fed ("A Generational Perspective on Living Standards").

• Consumer culture is becoming as polarized as the rest of America, with brands increasingly being sorted according to political affiliation. While some of this is due to brands taking social stances, it’s also a byproduct of stronger geographic sorting among Democrats and Republicans. (The Wall Street Journal)
• NH: Gone are the days when a pair of jeans was just a pair of jeans. Now consumer brands are tied to ideology. Wearing Levi's jeans? You must be a Democrat. Wearing Wranglers? Must be a Republican.
• The WSJ analysis of data from MRI-Simmons found brands are becoming tied to political parties. Out of the 2,528 brands and stores studied, the number of entities deemed Democratic rose from 192 in 2004 to 309 in 2018. But the number of products deemed Republican shrank from 214 to 153.
• Curious what your favorite brands say about your politics? Here is quick guide. Democratic: Levi's, Volkswagen, NBA, Starbucks, and Jose Cuervo. Republican: Wrangler, GMC, NASCAR, Arby's, and Coors.
• Ideological polarization has been growing for a couple of decades. And since Trump's victory in 2016, the trend has accelerated. See, for example: “Politics-Related Stress Worse Since Last Election,” "Polarization Soars in Trump's America," and "Growing Polarization Driven by Age."
• Accompanying this rising polarization, there is an oscillation between blue zone and red zone depending (mainly) on who holds power in Washington, DC. With Trump  now in the White House and with Democrats gaining in three consecutive off-year elections, blue-zone brands are now ascendant. That explains why the MRI-Simmons data finds rising identification with "Democratic" brands. We see this especially in youth-oriented brands like Nike, Target, and Facebook. Consider, for example, Chick-fil-A. In the past, this brand--highly ranked among Millennials--proudly donated to Christian charities that took conservative stances on social issues. But recently they announced an end of donations to anti-LGBTQ groups.
• With brands having a regional concentration of consumers or outlets, the red-zone v blue-zone orientation literally comes with the territory. Levi's, for example, is based in San Francisco and takes an activist anti-gun stand, while Wranglers is based out of North Carolina and donates heavily to rodeos. The affiliation of regional eatery chains is thus not hard to guess: Starbucks v Dunkin Donuts, Chipotle v Cracker Barrel, Whole Foods v Piggly Wiggly. Oh, and because blue-zone regions are wealthier, it should be no surprise that their food brands are pricier.

• A new report estimates that by 2021 the number of surveillance cameras in use globally will hit 1 billion. More than half of these cameras will be in China, but the U.S. isn’t far behind in surveillance intensity, with roughly the same number of cameras installed per person (4.1 vs. 4.6). (CNBC)
• NH: There are now over 770 million surveillance cameras around the world. China has 54% of these cameras, and the United States has 18%. While China far surpasses America in absolute terms, the two countries have nearly the same ratio of surveillance cameras per person (see first chart below). By 2021, the global number of cameras is set to rise to 1 billion.
• Boomers and Gen-Xers will be the most troubled by the report--jealous as they are of their individualism, privacy, and civil liberties. (See “The Rise of ‘Total Tech’.”) Millennials, on the other hand, are more likely to welcome the surveillance state's promise of order and safety. For all generations in the western world, China offers a dystopian image of how this surveillance state could evolve. From the Hong Kong protests to the troubling NYT report on Uighur internment camps, China is the future we want to avoid.
• The IHS Report makes a revealing distinction in the camera numbers. While most surveillance cameras in China are owned and operated by the government, most cameras in the U.S. are owned and operated by the retail industry. In America, to be sure, public agencies can get hold of commercial surveillance footage--but only after due process involving a court and some sort of rule of law. The ACLU may be all hot and bothered about the fact that the FBI possesses 640 million facial recognition impressions of U.S. citizens. But America has no plans yet to construct a wall-to-wall "social credit system" controlling most aspects of every citizen's life. In China, that system already exists--and central and regional governments are actively expanding its scope.

• New financial incentives in Hungary have helped push the number of marriages up by 20% in the first nine months of 2019. A program offering subsidized loans to couples who marry before the bride turns 41 has attracted 50,000 applicants, but it’s still too early to tell if these marriages will result in more babies. (Reuters)
• NH: Hungary has been one of the leading countries rolling out a kitchen sink of “baby bonuses” aimed at boosting its ailing birthrate. (See “Bold New Policies to Encourage More Births” and “Nations Labor to Raise Their Birthrates.”) This new scheme, which launched earlier this year, might be Orban’s biggest and boldest. Unlike previous measures, it’s not aimed at families that already have children. Couples that marry before the bride’s 41st birthday can receive subsidized loans of up to 10 million forints, or $33,000. A third of the loan will be forgiven if the couple goes on to have two children, and the entire debt will be forgiven if they have three.
• By and large, these types of pronatalist policies amount to a huge ongoing experiment. They’ve delivered mixed results in different countries—and even in the countries where fertility has risen, it has been impossible to isolate these policies as the cause. But here, there’s a pretty direct link between this policy and the wedding boom. The country’s central statistics office has recorded its highest number of weddings since 1990, so that’s a promising first step: getting more couples to the altar. Of course, let’s not forget the sticking point: This isn’t free money. They need to actually have those kids. And the jury’s still out on this. Hungary’s birthrate fell slightly this year.
• “Adulting” classes are increasingly popular among 20- and 30-something Millennials eager to learn the art of budgeting, meal planning, and other post-grad life skills. Once-common classes like shop and home ec are no longer taught at most high schools, leaving college students who may be high achievers in the classroom clueless when it comes to navigating adulthood. (Los Angeles Times)
• NH: "Adulting" skills--aka, "Life101" curricula--are highly prized by today's late-wave Millennials. Adulting classes on college campuses frequently have waiting lists. A large share of these youths were sheltered by helicopter parents who routinely did things for their kids so that their kids wouldn't have to do them. And as these kids prepare to leave college and enter the workforce, they are painfully aware of their inadequacies. Of greatest interest are practical skills (home and car maintenance, home accounting, finance, taxes, job markets) and "soft skills" (meeting people, dressing, interviewing, shaking hands, writing polite emails or letters).
• We have written often on this topic. (See "To Learn a Life Skill, Click Here.")
• Back in the late '60s and '70s, most young Boomers chafed at how they were being hurried into "adult" life roles like marriage and career. (Recall the plot line of "The Graduate.") They famously rebelled against an establishment that couldn't wait--in Mario Savio's words--to "fold, spindle, and mutilate" them. Boomers demanded more time to grow up on their own schedule. And later on, when they had kids, they wanted to give them plenty of time as well. Now those Millennial kids are demanding crash courses in all the adult skills their parents never taught them. They also want instructions on how they can join the "middle class"--another life goal their parents disdained.
• Ironically, one of the popular "adulting" classes described in this story is being offered by UC Berkeley's free DeCal program, which was originally set up to commemorate Savio's Free Speech Movement. How times have changed! Back in the heyday of the FSM, "adulting" either mean a one-way ticket to Vietnam or lobotomizing yourself in some Pleasant Valley suburb. If offered, such a class would have been boycotted.

• According to a new analysis from Redfin, homeowners today are staying in their homes for an average of 13 years—five years longer than they did in 2010. This trend, which is being led by Boomers aging in place, has helped drive housing inventory to near-record lows and pushed up prices nationwide. (The Wall Street Journal)
  
• NH: Last week I wrote an extensive piece on Census data showing that Americans are moving less than ever before (see “America's Steep and Troubling Decline in Geographic Mobility"). This week, Redfin released data showing how low mobility has affected the housing market. The data show that homeowners in 2019 are staying in their homes 5 years longer than they did in 2010. In turn, there are fewer houses for sale.
• Geographic mobility is slowing for a host of reasons. The population is aging. Young adults are more risk averse. Wealth is graying, and families are anchoring themselves around parents and grandparents. Regional policies are discouraging new housing. Localism is rising. Trust in strangers is falling. Business dynamism and job turnover are on the decline.
• The Redfin analysis sheds new light on how the decline in mobility feeds on itself. When fewer people are moving, there are fewer houses for sale. Fewer houses for sale, in turn, means a less liquid housing market--that is, a market in which it's harder to find a suitable home, harder to reach an acceptable price, and--once the house is bought--harder to resell it. Fewer homes for sale, in other words, raises the cost of moving, which by itself discourages moving.
• Yes, lower interest rates raise the equilibrium market price of a home. And this undoubtedly spurs new housing starts--in those regions where they are allowed. But lower rates by themselves do little to increase mobility or housing turnover and therefore do not add to the liquidity of the market. Only some exogenous lift in geographic mobility would do that. In recent years, unfortunately, most of the exogenous drivers have been pushing the other way, that is, downward.
• In interviews with teen girls, U.S. researchers find common threads: Girls today are anxious, close to their families, and struggling to manage the demands of social media. The girls “articulated many of social media’s drawbacks even as they declared that they can’t live without it”—but for the sake of their health, they need to learn how to unplug. (The Wall Street Journal)
• NH: This is a perceptive essay on today's teenage girls--late-wave Millennials and first-wave Homelanders. On the positive side, they are fond of their families and close to their parents (and often confide in them). They are risk averse, study hard, and try to plan for their future. On the negative side, they don't socialize as much in person with friends as earlier generations of teen girls. They spend vastly more time on social media. They put off acquiring practical life skills (like getting a real job or a driver's license). And they are increasingly prone to anxiety, depression, and attempted suicide.
• We have already written about many of these trends. The dramatic rise in social media use by teens, girls especially, has recently been flagged by the American Association of Pediatrics as a mental health threat deserving intervention by parents and schools. (See "Tech-Lash Batters Silicon Valley.") Half of teens admit they "feel addicted"' to their smart phones.
• Meanwhile, starting with late-wave Millennials born since the early 1990s, suicide rates are indeed on the rise at every age. (See "America's Suicide Rate--Up One-Third Since 1999.") Yet keep this rise in perspective: The teen suicide rate is still below what it was for late-wave Gen-Xers back in the early 1990s. Don't believe the needlessly alarmist views of Jean Twenge. (See "Homelanders Stunted by Smartphones and Social Media.")

• Stents and bypass surgery are no more effective than pills and lifestyle improvements at preventing heart attacks in patients with stable heart disease, according to a landmark new study. This study was intended to put to rest a longstanding debate over stent overuse and could change how tens of thousands of patients are treated annually, saving the health system billions. (The Washington Post)
• NH: The high cost of America's healthcare system is due, in part, to rampant over-treatment. Time and again, specialists develop invasive surgeries or high-tech tests that are used routinely for years--at a cost of billions of dollars--before anyone bothers to conduct a rigorous test showing that the expense was largely a waste.
• The latest example is this massive, randomized, and controlled study on stents and bypass surgery (entitled "Ischemia"). For a large share of patients undergoing this surgery, those with stable heart disease, it turns out that treatment with surgery did nothing to reduce 5-year mortality or incidence of heart attack versus treatment without surgery. Treatment means lifestyle counseling (diet, exercise) plus low cost medications like statins and aspirin. In some patients, episodes of angina were worse among those not having surgery--but angina alone can be treated with generics (like nitroglycerin) costing only pennies per tablet.
• Let's cut to the bottom line. Roughly half a million coronary stent and bypass surgeries are performed each year in the United States, at a cost of over $50,000 each. A cardiothoracic surgeon earns around $750,000--and this amount has been rising at double-digit rates in recent years. The total annual cost of all these surgeries, including follow-up care, is well over $20 billion. The economic implications are obvious.
• Some surgeons, confronted with such incontrovertible evidence, say that inadequate "patient compliance" with diet, exercise, or even drugs means surgery cannot be compared to treatment alone. So that's how far our standards have fallen: Expensive and invasive intervention is justified for everyone if it is merely better than nothing for the uncooperative patient unmotivated to do anything for his or her own health.
• In 2018, the fertility rate in the U.S. fell for the fourth straight year, hitting a new low of 59.1 births per 1,000 women. The birthrates among women under 35 just keep falling, with the steepest declines last year seen among teenagers. (Centers of Disease Control and Prevention)
• NH: The CDC final report for 2018 shows a total fertility rate pretty much identical to the provisional rate announced in May (see "U.S. Fertility Passes Another (Ominous) Milestone"). The TFR was adjust upward slightly from 1.728 to 1.730. This means it still qualifies as the lowest in U.S. history--way under its earlier historical lowpoint in 1976, the Xer "baby bust" nadir (at 1.765).
• The ethnicity and geography of fertility remains unchanged in 2018. Whites in 2018 continue to have the lowest TFR; blacks are still in the middle; and latinos are the highest. Over the last decade, though, latino TFR has fallen the most. By state, the most rural and politically "red-zone" states still have the highest TFR. And the most urban or politically "blue-zone" states still have the lowest TFR. The TFR in North and South Dakota, for instance, is nearly 50% higher than the TFR in New England. (On the association between state fertility and partisanship, see "Will the Religious Outnumber Nonbelievers in the Long-Run.") See charts below.
• As I reported earlier, the published data continue to show show annual YoY declines in the fertility rate for women age 30-34. The online CDC dashboard, on the other hand, is indicating a promising YoY uptick Q2 of 2019. We'll have to wait to see if this signals a sustained turnaround. The 30-34 fertility rate is a critical tripwire. If Millennials ever do start catching up on lifetime births by having children at an older age (what demographers call a "tempo effect"), it will have to show up here first. Later rises in the 35-39 bracket, while helpful, are unlikely to be large enough to make a difference.

DID YOU KNOW?

College is Losing Its Shine. According to a recent Gallup poll, just over half of Americans (51%) believe that a college education is “very important.” This is down from 70% in 2013.  Over the past six years, the perception that a college education is very important has declined among all age groups, but the drop has been especially steep among 18- to 29-year-olds: 33 percentage points. As a result, young adults (41%) are now less likely than 30- to 49-year-olds (51%), 50- to 64-year-olds (55%), and adults 65 and older (55%) to consider a college education very important. Opinions are also split by gender and race. As was the case in 2013, women (57%) are more likely than men (45%) to say that college is very important, and blacks (65%) and Hispanics (66%) are more likely to believe this than whites (44%). There’s a similarly large gulf in opinion by political party: Only 41% of Republicans consider a college education important, compared to 62% of Democrats.