December 5, 2019, Hillary Hoffower writes on Business Insider:
- When boomers were roughly the same age as millennials are now, they owned about 21% of America’s wealth, compared to millennials’ 3% share today, according to recent Fed data.
- Baby boomers are outpacing the Silent Generation in terms of wealth as they age into retirement, while millennials and Gen X are lagging behind boomers as they age.
- Millennials are financially behind as they struggle with increased living costs, the fallout of the recession, and student-loan debt, but it’s possible they can catch up.
The generational wealth gap continues to look bleak.
In 1989, baby boomers (defined in a recent Federal Reserve report as Americans born between 1946 and 1964) were roughly the same age millennials (born between 1981 and 1996) are today. But boomers held 21% of America’s total net worth in 1989 — seven times millennials’ paltry 3% share in 2019, wrote Alex Tabarrok in the blog Marginal Revolution.
The chart below shows what percentage of total US wealth each generation has held since 1990, according to Fed data that extends through 2019 Q2. Over time, the Silent Generation has seen a decline from 80% to 25% of total US wealth, presumably because they’ve begun to pass away and exhaust their retirement accounts and pensions.
As baby boomers age, their percentage of total US wealth has increased from 20% to nearly 60%.
Gen X and millennials haven’t even reached these wealth levels. Thus far, Gen X only comprises about 16% of US wealth. And perhaps most strikingly, the line for millennials is almost completely flat: They’ve barely seen any increase in net worth, coming in at less than 5% of total US wealth in 2019.
It’s worth noting that these generations are younger, so comprising a smaller percentage of US wealth is expected. However, the chart below, which highlights the percentage of US wealth held by age, shows that the young are still financially behind: Their wealth levels are below where they should be.
Wealth for those above age 70 has increased, but it’s not as significant as the increase in wealth for those in the 55 to 69 age group. This indicates that boomers are outpacing Silent Gen in wealth accumulation as they enter retirement.
Meanwhile, wealth for those in the 40 to 54 age bracket and for those under age 40 has decreased, which indicates that millennials and Gen X are lagging behind boomers as they move into those age brackets.
Millennials are financially behind, but it’s possible they can catch up
These findings underscore a MagnifyMoney study of Fed data on household assets and liabilities from earlier this year.
The study (all values are adjusted for inflation) found that in 1998, the average household aged 20 to 35 had a net worth of $103,400. Today, the average household in the same age range has an average net worth of $100,800. Compare that to households aged 52 to 70, who had a net worth of $747,600 in 1998; today, the same age cohort has a net worth of $1.2 million.
That means the wealth gap between older households and younger households has nearly doubled in the past 20 years, climbing from seven to twelve times the net worth. In that time frame, the average net worth for households ages 20 to 35 has declined by $2,600, while households ages 52 to 70 have seen a $452,400 increase in net worth.
The generational wealth gap increase is ultimately an effect of The Great American Affordability Crisis, in which rising living costs such as housing, increasing student-loan debt, and the ongoing fallout of the recession are creating serious financial struggles for millennials, Business Insider previously reported.
But it’s not all bad news. Jason Dorsey, president of The Center for Generational Kinetics, previously told Business Insider it’s possible for millennials to catch up financially thanks to a baby-boomer inheritance, low unemployment rates, and good savings habits.
Gary Reber Comments:
What is not addressed here is the reality that, under the present system, to accumulate ownership stakes in wealth-creating, income-producing capital assets, and thus accumulate “wealth” requires either savings (the denial of consumption) or inheriting valuable possessions from a family member.
In both scenarios, the vast majority of Americans will not succeed. They will not be able to reduce their funds for consumption (savings) to purchase significant productive capital asset stakes, nor will they be on the receiving end of any significant inheritance.
As consumers, the vast majority of Americans have gone into consumption debt in order to provide for themselves and their families. Americans increasingly do not feel secure and are being challenged as to how to survive, faced with mounting over-extended consumer credit as well as less and less job security to earn sufficient income to pay off their debt. Unnecessarily, millions of Americans are faced with losing their savings and homes, and their jobs –– and their dreams for a better life –– with no way to earn, as the wealthy do, through owning the wealth-creating, income-producing productive capital now formed and that which will be formed in the future.
The poverty situation will dramatically get worse as the vast majority of the American population do not earn enough as employed workers in jobs, their ONLY source of income. They are forced to spend their earnings on the necessities of life and live day to day, week to week and month to month, while also struggling to pay every month rent and the interest on their credit cards. At the end of the day, there is virtually nothing left to save.
We are in a crisis and our so-called leaders, economists and academia just don’t comprehend what is transpiring in the productive world where the corporations active in the economy are using threats of further automation to keep labor costs as low as possible or deciding to invest in sophisticated and efficient “machine” automation to replace workers altogether in order to maximize profits for their owners and produce consistent and reliable quality products and services.
Of course, the questions should be who owns the non-human “things” (in economics, capital assets) and who should own the “things” of the future that more efficiently produce or eliminate the necessity for mass human labor and degrade the worth of labor as there are more workers than jobs in which one can earn a livable wage?
Less than 10 percent of the American population own productive capital assets, and less than 1 percent are the controlling owners with vast capital wealth accumulations.
While the national focus is always on job creation instead of ownership creation, our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success –– always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work –– the wealthy capital asset ownership class –– as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent is not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the goods, products, and services produced as a result of substituting “machines” for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.”
The purpose of production in a market economy is the consumption of goods, products, and services by the consumers who make up the economy. But without income, the non-capital ownership class, the 99 percent, cannot afford to purchase the products and services they desire. But when incomes rise among consumers who have the need and desire to improve their material standard of living, the market demand for goods, products and services strengthens, which in turn increases production and results in a growth economy that, as a byproduct, creates livable wage jobs, not the government-style make-work.
Ideally, with everything else being equal, supply and demand should always be in balance, with everyone producing as much as he or she consumes, and consuming as much as he or she produces. There is only one way to be able to consume, and that is to produce. (The other ways enable someone to consume without producing.)
Sadly, academia, the wealthy capital ownership class, and politicians have failed to educate the American people through our schools, even at university levels, and the national media dialogue to teach effective financial means to acquire productive capital with the earnings of capital, simultaneously with economic growth.
Unfortunately, the vast American majority only understand earning an income via employment and are unable to make reductions in consumption to accumulate savings for their retirement and speculate via purchasing existing stocks (legalized gambling), hoping for a financial gain when they sell the stock.
Significantly, they are excluded from purchasing new stock issues, representing new capital asset formation, with the earnings generated by the investment, without the requirement of past savings.
To prevent a future of greedy rich people manipulating the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership resulting in not only elderly paupers but the young, able bodied as well, living homeless on our streets and in our parks, we must embrace policies and system reforms necessary to create inclusive prosperity by universally broadening the ability to generate income through personal ownership of productive capital and the inclusive opportunity to become a capital owner. We must reform the system and empower EVERY child, woman and man to acquire productive capital with the earnings of capital using insured, “pure” interest-free capital credit, without the requirement of past savings.
The Center for Economic and Social Justice’s (www.CESJ.org) proposed system reforms would begin to empower and benefit every child, woman and man by equalizing future capital ownership opportunities from the bottom-up. The JUST Third WAY Agenda addresses solutions to current trends that are expected to use robotics and artificial intelligence, as well as outsource production to low cost foreign countries to eliminate jobs for a significant percent of our work force. What makes CESJ’s system more just is that it would enable every citizen to benefit by simple but sound monetary and tax reforms that would lift unjust barriers to enabling every citizen to become an owner of productive capital. And it would not violate property rights or take rights away from current owners. It would also make the government economically dependent on the economic empowerment of its citizens, reversing today’s current dangerous trends in which citizens are dependent on the State.
The following are resources to learn more about how to solve the growing problem of economic inequality and create a future environmentally responsible growth economy that can support general affluence for EVERY citizen.
For an in-depth overview of solutions to economic inequality, see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.
Follow the Center for Economic and Social Justice at www.cesj.org and http://capitalhomestead.org/. Also see The Kelso Institute at http://www.kelsoinstitute.org/. Like the Just Third Way Group at http://www.facebook.com/groups/Justthirdway/.
Support the Agenda of The JUST Third WAY Movement (also known as “Economic Personalism”) at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/ and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Support the enactment of the proposed Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/. And The Capital Homestead Act brochure, pdf print version at http://www.cesj.org/wp-content/uploads/2014/11/C-CHAflyer_1018101.pdfand Capital Homestead Accounts (CHAs) at http://www.cesj.org/learn/capital-homesteading/ch-vehicles/capital-homestead-accounts-chas/
