Born to Be Better Off Than Your Parents? A Recap (Part 6 of 7)

September 17, 2014 | By Neil Howe

This editorial originally appeared in Forbes.

This is part seven of a seven-part series examining the rising (or falling) living standards of successive U.S. generations. Read part one here.

Let’s step back. What can we learn from these generational narratives?

First, the declining generational trend in median affluence is not a new development.

Media stories often imply that post-2008 Millennials are the first generation of young adults to experience “downward mobility.” Most Xers already know that’s BS. Some have penned eloquent and barely printable responses pointing out that not only did Xers get “f—d over,” but that—unlike Millennials—“Generation X wasn’t surprised. Generation X was kind of expecting it.” Which is why so few of them complained, except maybe in an old Winona Ryder movie.

Yet, as we’ve seen, even Xers get it wrong: The first cohort group to fall behind was not the Breakfast Club (born in the early ‘60s), but the Madonna- and Michael Jackson-age kids at the tail end of the Boom (born in the mid-to-late ‘50s). As youth, they got buffeted young by the turmoil of the ‘60s. Coming of age, they got slammed by the Ford-Carter stagflation and ultimately started careers much later than first-wave Boomers. More recently, they’ve become 50somethings aiming to retire later in hopes of retiring comfortably—or, abandoning hope, “retiring” early in record numbers on Disability Insurance.

Five years from now, this leading edge of generational downward mobility will begin hitting retirement age. More than a decade ago, Craig Karpel foresaw that many former yuppies were destined to become “dumpies” (downwardly mobile urban middle-aged people). That era dawns. According to Pew, “early Boomers may be the last generation on track to exceed the wealth of the cohorts that came before them and to enjoy a secure retirement.”

Second, the relative affluence of today’s elderly is historically unprecedented.

Behold the flip side of the declining lifecycle fortunes of younger generations. Never before have Americans age 75+ had a higher median household net worth than that of any younger age bracket. And never before have poverty rates among seniors been so much lower than among the young. In 1985, 12% of Forbes’ richest 400 Americans were under age 50—and 4% were under age 40. Today those figures are 8% and 2%, respectively. In fact, though Xers today outnumber the Silent by over 3-to-1, the Silent collectively possess nearly twice as much wealth.

Household Net Worth and Population, by Generation

Household Net Worth and Population, by Generation

Understandably, today’s elders have become economic backstops for their grown kids and grandkids—subsidizing them, housing them, co-signing their loans, funding extended-family vacations, and setting up college trust funds. The Silent Generation came of age in an era (the early 1960s) when the elderly were vastly more impoverished than younger Americans—hence the need to declare a federal “war” on their destitution. Today, many Silent find themselves waging their own campaign against youth poverty within their own families.

Third, Generation X is currently in the greatest danger.

I began this series by asking which generation is worst off economically. The answer, I think, isn’t Millennials. Few were old enough to lose much wealth in the recent crash. And though they’re encountering a very rough start, they have decades to make up lost earnings and savings. Barring a catastrophic national future, they should be OK.

I’m more worried about Gen Xers, who were hit harder and at a more vulnerable stage in their lives—considering that a large share were not doing well to begin with. Many have become detached from the labor force. Most are used to getting by on their own without recourse to safety nets. And the oldest Xers don’t have much time left to repair their balance sheets before retirement.

Policies targeted at this generation (Americans today aged roughly 35 to 55) should therefore be a national priority—and should emphasize self-help and labor force reattachment. Such policies, at relatively modest cost, might include enlarging the EITC, expanding refinancing options for underwater homeowners, allowing the nondisabled employed to buy in to Medicaid coverage, and slashing student-loan interest rates on continuing education for older adults. We need to help millions of Xers save more, find jobs, and even re-engage with our political system.

Finally, the American Dream is reimagined by each generation.

There was a time when young adults defined the Dream as a bigger home and a bigger pension for everybody. Millennials don’t talk as much about homes and pensions— and certainly not for everybody. They’re more drawn to social networks and peer-to-peer sharing—things that they like, yes, but also that they know they can all afford. In recent decades, Boomers and Xers have gradually redefined the Dream as more qualitative than quanti­tative—and more private than public. As goes the Dream, so goes the direction of our nation. We’ve become an economy less focused on building things for our collective future and less interested in the prosperity of younger generations. Remarkably, despite the unprecedented relative wealth of today’s seniors, Congress continues to spend massively on them: Over one-third of the federal budget consists of benefit payments to 65+ Americans. That’s well over $1 trillion, or about $25,000 per person—mostly without regard to financial need. Meanwhile, future-related spending is getting all but squeezed out of public budgets, causing infrastructure to rust and an alarming share of today’s college students to drop out or rush to food banks out of dire need.

As a brute economic proposition, the prospects for America’s younger generations are unlikely to improve until our nation invests as much in the young for what they will do tomorrow as it rewards the old for what they did yesterday. A half-century ago, we were such a nation. Might we become one again? I expect that, in time, the American Dream will shift back again. I already see many signs of this happening among Millennials—in their higher savings rates, desire for community, and closer connection to family life. As voters and leaders, this rising generation will sooner or later galvanize a change in that direction.

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