Millennials Have Caught Up to Boomers: Generational Wealth Update (2022q2)

Last week I wrote about wealth growth during the pandemic, but my favorite way to look at wealth data is comparing different generations. Last September I wrote a post comparing Boomers, Gen Xers, and Millennials in wealth per capita at roughly the same age. At the time, Millennials were basically equal to Gen X at the same age, and we were a year short of having comparable data with Boomers.

What does it look like if we update the chart through the second quarter of this year?

I won’t explain all of the data in detail — for that see my post from last September. I’ll just note a few changes. We now have single-year population estimates for 2020 and 2021, so I’ve updated those to the most recent Census estimates for each cohort. Inflation adjustments are to June 2022, to match the end of the most recent quarter of data from the Fed DFA. We still have to use average wealth rather than median wealth for now, but the Fed SCF is currently in progress so at some point we’ll have 2022 median data (most recent currently is 2019, and there’s been a lot of wealth growth since then).

What do we notice in the chart? First, we now have one year of overlap between Boomers and Millennials. And it turns out… they are pretty much at the same level per capita! Millennials have also now fallen slightly behind Gen X at the same time, since they’ve had no wealth growth (in real, per capita terms) since the end of 2021 to the present.

But Millennials have fared much better in 2022 with the massive drop in wealth: about $6.6 trillion in total wealth in the US was lost (in nominal terms) from the first to the second quarter of 2022. None of that wealth loss was among Millennials, instead it was roughly evenly shared among the three older generations (Boomers hid hardest). This difference is largely because Millennials hold more assets in real estate (which went up) than in equities (which went way down). The other generations have much more exposure to the stock market at this point in their life.

You can clearly see that affect of the 2022 wealth decline if you look at the end of the line for Gen X. You can’t see the effect on Boomers, since I cut off the chart after the last Gen X comparable data, but they saw a big decline since 2021 as well: about 6% per capita, along with 7% for Gen X. Even so, Gen X is still about 18% wealthier on average than Boomers were at the same age.

Of course, even since the end of the second quarter of 2022, we’ve seen further declines in the stock market, with the S&P 500 down about 4%. And who knows what the next few months and quarters will bring. But as of right now, Millennials don’t seem to be doing much worse than their counterparts in other generations at the same age.

Wealth Growth During the Pandemic

In the US wealth distribution, which group has seen the largest increase in wealth during the pandemic? A recent working paper by Blanchet, Saez, and Zucman attempts to answer that question with very up-to-date data, which they also regularly update at RealTimeInequality.org. As they say on TV, the answer may shock you: it’s the bottom 50%. At least if we are looking at the change in percentage terms, the bottom 50% are clearly the winners of the wealth race during the pandemic.

chart created at https://realtimeinequality.org/

Average wealth of the bottom 50% increased by over 200 percent since January 2020, while for the entire distribution it was only 20 percent, with all the other groups somewhere between 15% and 20%. That result is jaw-dropping on its own. Of course, it needs some context.

Part of what’s going on here is that average wealth at the bottom was only about $4,000 pre-pandemic (inflation adjusted), while today it’s somewhere around $12,000. In percentage terms, that’s a huge increase. In dollar terms? Not so much. Contrast this with the Top 0.01%. In percentage terms, their growth was the lowest among these slices of the distribution: only 15.8%. But that amounts to an additional $64 million of wealth per adult in the Top 0.01%. Keeping percentage changes and level changes separate in your mind is always useful.

Still, I think it’s useful to drill down into the wealth gains of the bottom 50% to see where all this new wealth is coming from. In total, there was about $2 trillion of nominal wealth gains for the bottom 50% from the first quarter of 2020 to the first quarter of 2022. Where did it come from?

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Who is the Wealthiest Generation?

Have you seen this chart?

I have seen it many times. It comes from this Washington Post article, but it seems to go viral on Twitter about every 6 months or so.

The implication of the chart seems to confirm what many young people feel in their bones: Boomers had it much easier, and it’s getting harder and harder for later generations to catch up and build wealth. For many the graph… explains a lot, as one recent viral Tweet put it (in the weird world of social media, 5 short words and a recycled chart are all it takes for 20,000 retweets).

But wait. A few questions probably come to mind. For example, when Boomers were young they comprised a much larger share of the population. The original article makes an attempt to adjust for this, by calculating a few ratios towards the end of the article. However, there’s a much more straightforward way to adjust for this, which also nicely fits into a chart: put wealth in per capita terms!

If we do that, here’s the chart we get (also, of course, adjusted for inflation).

Data is for 1989-2021 from the Federal Reserve’s Distributional Financial Accounts, but only the first quarter is available right now for 2021. For 1989, it is the average of the third and fourth quarters. Population data comes from Census single-year of age estimates for various years. 2020 and 2021 population estimated using growth rate from 2010-2019.
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OK, Millennial?

How do young people fare when it comes to household wealth? The recently released Survey of Consumer Finances from the Federal Reserve provides some insights. One major takeaway: the much-maligned Millennials are doing pretty good! Ernie Tedeschi created this informative chart on Twitter:

Looking at household net worth at roughly the same age, Millennials today have roughly the same household wealth as Boomers did in the past. And both of these generations beat the generation between them, Gen X, as well as the “microgeneration” creatively labeled Oregon Trail.

And it’s something of a running joke on Twitter, but I must add: Yes! It’s adjusted for inflation!

Part of this may be driven by the increase in dual-income households. Certainly that matters. While wealth data by number of earners is harder to track down, income data is more readily available. What if we look at single-income households? Millennials are still in the lead! (Once again, the chart comes from Ernie Tedeschi.)

And before you ask: Yes! It’s adjusted for inflation!

None of this means that Millennials don’t face challenges, including financial ones. This data is current through 2019, so 2020 will almost certainly make these numbers look worse, for a time. But all things considered and anecdotes aside, the kids today seem to be as well or better than past generations.

(Oh, and before you ask: Yes! It’s adjusted for housing, medical, and education costs! In fact, these three factors make up half or more of most inflation adjustment indices.)