Millennials are in the spotlight of a lot of topics lately. The segment of the population that are today aged between 20 and 32, are all grouped under the umbrella of “Millennials”. This generation is being protagonists of various current social and economic crises, changes in the market, lifestyle, and industries. Millennials are being criticized for some aspects while praised for their innovative contribution to the world of entrepreneurship. You might be surprised (or not) to learn that today Millennials are earning 20% less than baby boomers at the same point of life.
Despite better education, which is getting increasingly accessible to a vast majority of Millennials, they are still facing a shortfall in a paycheck when comparing them with the previous generations. Even though opportunities seem to have multiplied over the past few years, the reality shown by the investigation is a lot different than what we might expect.
Statistics resulting from the studies conducted by The Emerging Millennial Wealth Gap show that Millennials today earn around 20% less than a baby boomer in the same sector at the same stage of life.
Median earnings are lower than those that the same age group (20-32) had during the 1980s. This disparity was first noticed in 2017 by the non-profit organization called Young Invincible.
Also, another thing that has changed is the stability of the flow of income. Today paychecks are a lot less predictable than before due to the effects of the crisis but also because of the rise in freelance positions that allow a less consistent work pace in terms of working hours and pay.
Education levels are higher than ever before. More than 40% of Millenials are in possess of at least a bachelor’s degree, compared to the fact that only 25% of baby boomers had continued the path to higher education.
The effect of lower wages might result in long-term problems.
For example, they are already affecting Millennial’s ability to accumulate wealth in savings or home equity. The figures suggest that Millenials will experience a generational wealth gap of historic proportions. The accumulated wealth for a Millennial, on average is 41% less than Baby Boomers of the same age during the late 1980s. Millennials hold per average assets for a value of $162,000 while Generation X had an average of $198,000 in accumulated assets at the same age.
Many attribute the causes of this wealth gap to the effects of the Great Recession. Entering the workforce following the recession is harder and fewer opportunities are available, which puts whoever tries to enter the job market at a significant disadvantage.
Furthermore, education has indeed improved, but tuition costs have also increased. Today students need to face enormous student loans and debt rates that they carry for years after having completed their studies.
The recovery from the Great Recession did not have the same effects on everyone. Research suggests that wealthy families recovered more quickly at the expense of other lower-income families. In 2016, the top 10% of US highest income earnest received half of the total revenue generated by the whole country.
These trends have resulted in other trends among Millennials. For example, there is a tendency not to get married. Starting a family or buy a house requires the uptake of a lot of responsibilities both socially but more importantly economically that few Millennials are ready to face.
There is a general delay in some common “life milestones”: Marriage rates have dropped and are estimated to drop at an increasing rate which might reach 70%. Many will be unmarried aged 40, according to research.
With income getting more volatile than the past, making important commitments about the future is getting increasingly hard for many Millenials.
All these factors affect the ability of Millennials to retire comfortably and pass wealth to the next generation. The ownership of houses is regarded as one of the most secure ways to secure and build wealth but Millennials are not buying houses anymore because of the high impact that has on their financial situation. With less financial resources for investment for the future generation, there will be negative implications for the new generations which will affect their education levels and wealth.