Commentators have long theorized about what makes Millennials different from past generations. Finally, a new paper by the Federal Reserve Board may put at least some of their questions to bed by elucidating economic trends that have affected Millennials’ real incomes and net worth and informed their financial decisions.
According to the paper, “the real average full-time labor earnings of a Millennial male household head in 2014 were … over 10% lower than those for a comparable male Baby Boomer household head in 1978.” That’s a significant drop.
Luckily, women entering the labor force are making up some of the difference. The paper attributes the growth in real income for young married couples to dual incomes as more women pursue education and careers. But even as female professionals make gains in their labor force participation rate and their real average full-time labor earnings are on the rise, they’re experiencing the effects of a changing economy: “the median labor earnings of female Millennial household heads in 2014 were about 3% lower than those of comparable female Generation X household heads in 1998,” according to the paper.
All of these earnings losses have to be considered in context: The real average total debt balance for Millennials is around $44,000, $5,000 lower than their Generation X counterparts at a similar age, but still a high sum. And there’s one category in which Millennials outpace Generation X in: debt. In 2017, 33% of Millennials had student loans, and their median balance was more than $18,000.
All of these trends cumulate in one unforgiving reality: “In 2016, the average real net worth of Millennial households was about $92,000, around 20% less than Baby Boomer households in 1989 and nearly 40% less than Generation X households in 2001,” according to the paper.
When Millennial assets and debt are all taken into account, the end result is they, as a generation, have less value to their name. And a lot of that has nothing to do with the matcha lattes or oat milk they enjoy; instead, it’s a product of lower earnings and more spending on education.
As fun as it is to make fun of Millennials for their dwindling savings accounts and lack of financial stability, the truth is some of their economic situation is a product of a system that has not worked as well for them as it has for past generations. It’s not that they’re all irresponsible with their money. It’s that some didn’t have the same funds from the get-go.