Fed Report Says Millennials Are Poorer Than Other Generations — But Fed Policies Made It Happen

One of the challenges in looking at income and wealth data is getting a sense of how different demographic groups are affected.

It's relatively easy to find median income and wealth data over time for the entire population, for example. But then problems of interpretation immediately present themselves. For example, if the data is household data, what are we to make of things if the household compositions has changed over time?

And what if the demographics of the individuals within the households themselves have changed? For example, if a larger proportion of all households are now younger households, perhaps that could have an effect on the income and wealth data overall.

After all, younger heads of household tend to have lower incomes and less wealth than older heads of households.

This problem of measuring workers and incomes over time has been the challenge that presents itself to anyone trying to figure out if so-called millennials are richer or poorer — as a group — than other age cohorts.

To do this, researches must find some way to estimate wealth and incomes for different age cohorts at similar ages or at similar points in their careers. Otherwise, characteristics we think we are attributing specifically to Millennials may really be characteristics that are just common to people of a certain age.

Last week, the Board of Governors of the Federal Reserve released a new report that attempts to address the issue of whether or not Millennials really are worse off at the same point that other age cohorts have been at similar ages.1

Federal Reserve Board, Washington, D.C. (https://www.federalreserve.gov/econres/feds/files/2018080pap.pdf)

This will no doubt be the first of many that attempt to answer this question. At this early stage, however, we can say that the data leans toward concluding that yes, Millennials are, in fact, less wealthy, and are lower-income than previous cohorts.

Some conclusions in the report include:

  • "Specifically, the real average full-time labor earnings of a millennial male household head in 2014 were about the same as those for a comparable male Generation X household head in 1998 and over 10 percent lower than those for a comparable male baby boomer household head in 1978."
  • "For female heads of all households, real average full-time labor earnings increased moderately between 1978 and 1998 and between 1998 and 2014, reflecting, in part, rising female educational attainment. However, the median labor earnings of female millennial household heads in 2014 were about 3 percent lower than those of comparable female Generation X household heads in 1998."
  • "[A]verage real labor earnings for young male household heads working full time are 18 percent and 27 percent higher for Generation X and baby boomers, respectively than for millennials after controlling for age, work status, and a number of demographic variables. For young female heads of household working full time, these generational gaps in labor earnings are in the same direction but somewhat smaller—12 percent and 24 percent, respectively. For family income, the regression shows that Generation X and baby boomer households have a family income that is 11 percent and 14 percent higher, respectively, than that of demographically comparable millennial households."
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