Unless something happens soon to shift the trend, stagnant wages, shrinking job opportunities and depreciating home values could morph into a monstrous future for Americans under 40, according to a recent brief issued by the Urban Institute.
Commonly referred to as Gen X and Gen Y, Americans under 40 have accumulated less wealth than their parents did at their age more than 25 years ago, according to the brief titled Lost Generations? Wealth Building Among Young Americans.
"Their average wealth in 2010 was 7 percent below that of those in their 20s and 30s in 1983," said the brief authored by Eugene Steuerle, Signe-Mary McKernan, Caroline Ratcliffe, and Sisi Zhang.
The normal trend for wealth building has always been that as society gets wealthier, children are typically wealthier than their parents and each generation is wealthier that the previous one at any age. For Americans under 40, however, says the brief, this pattern doesn't hold true.
"People born starting in 1952 no longer find their wealth above the prior cohort by 2010. Nor is the most recent 1970–78 cohort's average above prior cohorts. Younger cohorts' average wealth is simply no longer outpacing older cohorts," it said.
"In both the private and public sectors, the younger generations have been hardest hit, whether looking at their share of private wealth or the additional student and government debt with which they are being saddled."
The brief points out that education, homeownership, and pensions for the young are all in danger. "Education has declined in importance in public budgets, post-recession policy has tended to discourage access to homeownership, and pensions and retirement plans still prove inadequate if not in decline for substantial portions of the population."
The authors said the current level of attention paid to the condition of younger Americans reflected in government policy is a worrying pattern that needs to be addressed.
Hundreds of billions of dollars are spent annually to support long-term asset development like homeownership through mortgage interest deduction and retirement savings through preferential tax treatment of money saved in 401 (k) and retirement accounts, say the authors. These subsidies which go mainly to wealthy families could be shared with the young to improve their lifetime wealth accumulation.
"The reduced status of education in federal and state budgets, limited private and state government pension contributions to the young, and a post-recession subsidy system with a great deal of ambiguity toward new homeowners are among the many wealth related policies worthy of examination and possible reform," they argue.
"If current trends for younger generations are not reversed, within a few decades they may become more dependent than older Americans today, especially in retirement, upon safety net programs less capable of providing basic support," warn the authors.