Are Millennials A Lost Generation Financially?

from the St Louis Fed

-- this post authored by Ana Hernandez Kent, Policy Analyst; William Emmons, Lead Economist; and Lowell Ricketts, Lead Analyst, Center for Household Financial Stability

Millennials are the largest adult generation in the U.S. and make up the largest share (38%) of the workforce.[ 1] Yet, the wealth accumulated by the median (or middle) millennial family is much lower than what we would expect based on previous generations.

Because of this worrisome trend, we at the Center for Household Financial Stability have questioned whether a significant share of older millennials will be able to meet long-term financial goals or if they will become part of a “lost generation."

Indeed, we published a chapter in New America’s recently released book, The Emerging Millennial Wealth Gap, to excavate some of the causes of the growing generational wealth gap. We focused on one short-term cause - the Great Recession - and two long-term causes of secular wealth redistribution from younger to older families and from less- to more-educated families. We also highlighted the millennial racial and ethnic wealth gaps.

Great Recession and Younger Families

First, the Great Recession was devastating to many families, but younger families were hit harder and lost a larger share of their wealth than older families.

To dive deeper, we looked at families grouped by the decade in which the family head was born. We define older millennials (our focus group) as families headed by someone born between 1980 and 1989. We also focus on the median (or typical) family of each group.

The horizontal line in the figure below shows what we would expect income and wealth to be for a typical family based on previous generations at the same age:

  • If the bars are above that line, the typical family in that generation was doing better than expected.
  • If the bars are below, that generation was doing worse than expected.
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Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

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