|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 "Trendspotting: 06/10/19.") 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. 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").
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ABOUT NEIL HOWE
Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.
A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.
Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."
Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.
Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.
Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.