By Janet Adamy
American millennials are approaching middle age in worse
financial shape than every living generation ahead of them, lagging
behind baby boomers and Generation X despite a decade of economic
growth and falling unemployment.
Hobbled by the financial crisis and recession that struck as
they began their working life, Americans born between 1981 and 1996
have failed to match every other generation of young adults born
since the Great Depression. They have less wealth, less property,
lower marriage rates and fewer children, according to new data that
compare generations at similar ages.
Even with record levels of education, the troubles of
millennials have delayed traditional adult milestones in ways
expected to alter the nation's demographic and economic contours
through the end of the century.
Millennials helped drive the number of U.S. births to their
lowest levels in 32 years. That means fewer workers in the future
to support Social Security and other public programs for the
ballooning population of retirees.
Social Security last month estimated that in 2035, after nearly
all baby boomers retire, there will be 2.2 workers per beneficiary.
Last year, there were 2.8. The current birthrate of around 1.8
children per woman is expected to create a Social Security deficit
of nearly $2 trillion over the next 75 years.
Prospects for a quick turnaround aren't good. Men and women in
their 30s are marrying at rates below every other generation on
record.
"We'll have to rethink a lot of things about taxation and how
social programs are funded if fertility is really on a more
permanent decline," said Anqi Chen, assistant director of savings
research at the Center for Retirement Research at Boston
College.
Growth in property values and the stock market this past decade
helped older households regain ground since the recession.
Millennials, though, have made little headway.
"If I can't afford a home, I definitely can't afford kids," said
Joy Brown, 32 years old. She is a renter who is single and earns
$75,000 a year. She also owes $102,000 in student loans and $10,000
in credit-card debt.
"Myself and a lot of my peers still feel like we're playing
catch-up in the game of life," said Ms. Brown, a compliance officer
for the city of Chicago
More than half the 72 million American millennials are now in
their 30s. The oldest will turn 38 this year, when their generation
is expected to surpass the number of baby boomers.
Their slow start has been well-documented in the first years
after the recession. New data show that millennials may never catch
up with the generations of Americans that preceded them.
A generation apart
"Their economic fundamentals are fundamentally different," said
Christopher Kurz, an economist at the Federal Reserve.
Mr. Kurz and his colleagues last year analyzed income, debt,
asset and consumption data to figure out how millennials compared
at similar ages with Generation X, people born between 1965 and
1980, as well as baby boomers, those born from 1946 to 1964.
They found that millennial households had an average net worth
of about $92,000 in 2016, nearly 40% less than Gen X households in
2001, adjusted for inflation, and about 20% less than baby boomer
households in 1989.
Wages didn't look much better. At the same ages, Gen X men
working full time and who were heads of households earned 18% more
than their millennial counterparts, and baby boomer men earned 27%
more, when adjusting for inflation, age and other socioeconomic
variables.
Among women, incomes were 12% higher for Gen Xers and 24% higher
for baby boomers than for millennials, using the same measures.
One explanation for their slow progress is bad luck. Economists
have found that entering the workforce during a downturn yields
lower earnings for life.
Till von Wachter, an economics professor at the University of
California, Los Angeles, found that Americans who entered the labor
market when unemployment rates rose by five points -- about the
same as in the 2007-09 recession -- saw their cumulative earnings
fall by 10% over the first decade of a career.
"The effects have health and lifestyle consequences well into
middle-age, " said Prof. von Wachter. He reviewed four decades of
earning data in his study, which was conducted with Hannes Schwandt
of Northwestern University.
The disappearance of manufacturing jobs, which in postwar years
paid middle-class wages to high-school graduates, is another
misfortune. Those who lack a college degree are at the biggest risk
of falling behind.
Median household income last year was about $105,300 for
millennials with a bachelor's degree or higher, more than twice
that of households headed by high-school graduates, according to
the Pew Research Center.
Many millennials couldn't afford to buy houses or invest in the
stock market early enough to profit from the sharp escalation of
prices over the past decade, said William Emmons, an economist at
the Center for Household Financial Stability at the Federal Reserve
Bank of St. Louis.
About one third of millennials owned homes in 2016, compared
with half of Gen Xers at similar ages in 2001, and just under half
of baby boomers in 1989, according to Mr. Kurz's findings. Even if
millennials close the gap as they age, "asset prices are so high,"
Mr. Emmons said, that their expected return on real estate is
lower.
Losing out on a decade of gains in the stock and housing markets
hurt the financial standing of millennial households. Between 2010
and 2016, Gen Xers, baby boomers and the older silent generation
all recouped some of their recession losses, while the average
family headed by someone born in the 1980s fell further behind the
older groups, in relative terms.
The St. Louis Fed found the median wealth of a family headed by
someone born in the 1980s was a third below the level that they
would expect, compared with earlier generations at the same age and
adjusted for inflation.
The regional Fed bank concluded that people born in the 1980s
are at risk of becoming America's lost generation, Mr. Emmons said,
men and women who feel an almost insurmountable burden to catch up
financially.
For richer, for poorer
Millennials, as a group, are better educated than any generation
before them. About four in 10 ages 25 to 37 hold at least a
bachelor's degree compared with about a quarter of baby boomers,
and three in 10 Gen Xers when they were the same age.
Those college diplomas have come at a high price. The average
student-loan balance for millennials in 2017 was $10,600, more than
twice the average owed by Gen X in 2004, according to Mr. Kurz and
his Fed colleagues.
For the Cochrans, the price was personal. Joseph Cochran, a
real-estate manager, proposed to Tasha Brown in 2012. She said yes.
Then Ms. Brown, a consumer finance attorney, realized that
combining their salaries as a married couple could drive up their
income-based student-loan payments.
They ditched their wedding plans but forged a life together.
Each wear wedding rings. Ms. Brown, 36, legally changed her name
and became Ms. Cochran. The couple run a financial-advice website,
whittling away at their combined student debt of $377,000.
"If we had zero student loans we'd be married," Ms. Cochran
said. "We have to be far more strategic and creative in order to
try to fit everything in around our student loans."
Their strategy included moving from Philadelphia to Maryland
four years ago. Ms. Cochran struggled to get pregnant, and the
couple chose a state that mandated insurance coverage of in vitro
fertilization, she said. The Cochrans now have a 3-year-old
son.
Ms. Cochran also has a 17-year-old daughter from a previous
relationship and has promised to pay for college as long as the
teenager studies at an in-state school. Last fall, the young woman
enrolled in community college to get a head start.
Her teenager "likes the idea of being able to graduate without
having any student loans," Ms. Cochran said.
The family takes a more practical view of higher education,
based, in part, on hard-won experience with jobs and school loans.
"We tell her to think a lot about how much is a given major going
to pay," Ms. Cochran said.
The financial strain faced by many American millennials is
driving shifts in their political views, reflecting a "feeling that
as a citizen the system is not really operating as you expect it
to," said Mohamed Younis, editor in chief of Gallup.
A Gallup poll last summer found that millennials were the only
generation that favored socialism over capitalism by a slight
margin. The survey didn't include Generation Z, people born in 1997
or later, and who are mostly too young to vote.
Tough times for millennials struggling to reach a more
comfortable middle-class life have triggered support for populist
candidates and promises of universal health care and free college
education.
Tony Mancilla, a 31-year-old hospital maintenance technician in
American Falls, Idaho, voted for Hillary Clinton, a Democrat, in
2016. Now, he is interested in Sen. Bernie Sanders, of Vermont, a
self-described democratic socialist.
Mr. Mancilla, who earns about $35,000 a year, said he can't
afford the more than $600 a month it costs to insure his wife and
two children on his employer plan. His children rely on a publicly
subsidized plan. His wife is uninsured.
These health-care worries pointed Mr. Mancilla to Mr. Sanders's
Democratic Party primary campaign and "his way of looking at health
care, trying to get that for everybody, taxing the rich," he said.
"He might have the best interest for the American people rather
than just one class."
As millennials approach middle age, more are asking for help
from their employers. Ford Motor Co. two years ago expanded its
financial-planning services after internal surveys found that the
top monetary concern of millennials was saving for retirement.
Ford's planning services include one-on-one reviews of employee
investments. All 80,000 U.S. workers are eligible.
"A good number of them are in their 30s and are thinking about
longer-term planning," said Julie Lodge-Jarrett, chief talent
officer at the Dearborn, Mich., auto maker. "While they want to
save, and they inherently get the importance of saving and
planning, they don't know how to do it."
Zillow Group Inc., the Seattle real-estate company, earlier this
year began offering a student-loan repayment program, contributing
$25 a month toward the employee's balance. The benefit was
initiated after workers asked for help tackling college debts, said
Dan Spaulding, the company's chief people officer.
About 580 workers have signed up, the company said, and they
carry an average loan balance of about $28,000.
Mike Maughan, head of global insights at Qualtrics in Provo,
Utah, which researches millennials, said the financial picture of
the generation is rosier than it appears: "Millennials are much
scrappier than we give them credit for."
Employers have told Mr. Maughan that the desire of millennials
for on-the-job feedback shows they are eager to improve their
skills.
One other bright spot: Millennials are entering their prime
earning years just as baby boomers retire. That should fuel demand
for their skills and lift their earnings. "The job market is so
much better, so much stronger than it was 10 years ago," said Mr.
Emmons, of the St. Louis Fed. "That's a huge benefit."
Write to Janet Adamy at janet.adamy@wsj.com
(END) Dow Jones Newswires
May 19, 2019 14:50 ET (18:50 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.