A few weeks ago, economist Jeremy Horpedahl looked at generational wealth and how today’s young people are faring compared with previous generations. His findings are surprising. After all the talk about how Millennials (born between 1980 and 1989) are the poorest or unluckiest generation yet, Horpedahl’s data show that they are dramatically wealthier than Gen-Xers were at the same age. And this wealth continues to grow.
These findings are similar to those described in this new article by the Federal Reserve Bank of St. Louis. Using the latest Survey of Consumer Finances data, this piece, too, reveals remarkable gains in median wealth for older and younger Millennials alongside older Gen-Zers (born between 1990 and 1999). The average and the median only tell you part of the story, to be sure. And previous studies, from 2016 and 2019, had showed that the median wealth of older Millennials was significantly below expectations because of the Great Recession’s impact. Here is what the St. Louis Fed paper reminds us:
Six years ago, we published a similar analysis using data from 1989 through 2016 in which we looked at how the Great Recession had impacted young families. As it turned out, older millennials had median wealth that was 34% below expectations in 2016 (which we have since revised to 38% given a slightly different method).
At the time, we wondered if these older millennials would be part of a “lost generation” financially, or if their wealth would eventually converge to that of other generations. Three years later, in 2019, they had begun to catch up to other generations, but their median wealth was still 11% below expectations (revised to 9% given the latest method).3
However, by 2022, there had been a dramatic turnaround, with Millennials’ wealth surpassing expectations based on historical data for all generations at the same age.
Time and more data will tell whether this trend continues. However, this analysis underscores a significant shift in the financial standing of younger generations, highlighting a recovery from previous setbacks and pointing towards a potentially brighter economic future.
What about income? It follows the same trend. Horpedahl reports on a new paper by the American Enterprise Institute’s Kevin Corinth and the Federal Reserve Board’s Jeff Larrimore, which looks at income levels by generation in a variety of ways. They find that each of the past four generations had higher inflation-adjusted incomes than did the generation that preceded it. Further, they find that this trend doesn’t seem to be driven by the rise of dual-income earners. Horpedahl writes:
One other great thing about this paper is that we can answer the question of whether rising median incomes are driven by the growth of dual-income families. The authors look at total working hours for the household (covering both spouses). The finding is interesting, because it’s the reverse of what you often hear: for the Silent Generation and Baby Boomers, part of the increase in household income is from working more hours. But for the more recent generations (Gen X and Millennials), that’s not the case: younger households have roughly the same number of working hours as Boomers did during prime working years.
The whole thing is here.