Generation X: Once Xtreme, Now Exhausted (Part 5 of 7)

Last Updated: Aug. 29, 2014

August 27, 2014 | By Neil Howe

This editorial originally appeared in Forbes.

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

Generation X (born 1961-81) today comprises roughly 87 million adults in their 30s and 40s. The very name “X” has an identity-cloaking quality, reflecting the fact that many Xers feel little generational center of gravity. They are, first of all, the most immigrant generation per capita born in the 20th century. They are also the most unequal—that is, the most spread out in terms of income and wealth.

Let me reference this famous 1990 Time Magazine cover photo because it illustrates, early on, how many Xers entering adulthood were likely to see themselves—dressed in black, certainly not euphoric, and all looking in different directions, as if to advertise that they have nothing in common. In the early 1990s, I found in extensive interviews with young Xers that many of them associated themselves with collective failure, as if their generation were a gigantic auto accident. This meant that to be successful you had to take plenty of risks and be different from your peers.

Gen Xers first arrived as toddlers in the early 1960s, when the increasingly indulgent parenting style enjoyed by Boomer kids became totally hands-off. Institutions that once protected kids no longer seemed to work in the ‘60s and ‘70s. Schools were breaking down, and the divorce rate soared. What’s more, starting in the early ‘60s, adults didn’t want to have kids anymore. Fertility rates plummeted, hitting an all-time low in 1976, making this known as a “baby bust” generation.

Xers learned young that they couldn’t trust older people and institutions to look out for their best interests. They needed to be resilient survivors who could trust their own instincts. While Boomers have always focused on their inner lives, Gen Xers tend to focus on bottom-line outcomes.  For the last several decades, the UCLA college freshman survey has been asking students what life goals they consider important. Through the early 1970s (when Boomers were college freshmen), a three-to-one majority said “developing a meaningful philosophy in life” rather than “being very well off financially.” When Xers entered college in the late 1970s, those priorities reversed.

Entering the workplace in the 1980s and ‘90s, young Xers encountered a generally buoyant economy that held lopsided rewards. At the high end, there was Wall Street and the allure of the entrepreneur in a newly deregulated economy. At the low end, entry-level union jobs began instituting two-tier wage scales and legislators began scrap­ping job training programs and welfare benefits that had remained in place during the Boomer youth era. Raised as kids to take care of themselves, most young Xers embraced the high-turnover, no-safety net, free-agency lifestyle. Many gladly cashed out their workplace benefits, triggering the recent trend toward opt-in “cafeteria” and “total rewards” pay packages. At an early age, they dominated temp work—a sector which today is beginning to age with them.

The first wave of Generation X (born in the 1960s, the so-called “Atari” or “Reagan” Xers) started out at a tough time, in the grim shadow of the Volcker recession. By contrast, the last wave (born in the 1970s, the so-called “Nintendo ” or “Clinton” Xers) entered the workforce during the Roaring ‘90s, giddy years of “irrational exuberance” in which market valuations hit preposterous peaks. Millions of first-wavers at age 35 could at last hope that maybe the future wouldn’t totally suck after all. Millions of last-wavers at age 25 started out daydreaming about seven-figure stock options.

Yet despite all the “end of history” talk, precious few Xers—first wave or last—actually struck it rich. Under the impact of successive booms and busts, most struggled to afford a family or keep their home. While aspiring to become the capitalist “rich dad” they wished they had, most could not keep up with the actual wage-slave “poor dad” they sometimes had to boomerang back home to.

Change in Real Median Household Net Worth by Age (2007-2010)

Change in Real Median Household Net Worth by Age (2007-2010)

Then came the Great Recession, which hit Xers much harder in percentage wealth and income declines than any older generation. And no wonder. They had invested aggressively in stocks with the highest P/E ratios, the ones that crashed hardest. More than Boomers, Xers had bought late into the real-estate boom at punishing prices—and in exurban regions where the price declines were steepest. Since the crash, Xers in their 30s and 40s have experienced the biggest decline in homeownership—and to this day are the most likely to be underwater on the homes they still own.

Real Median Family Income by Cohort: Generation X

Real Median Family Income by Cohort: Generation X

There is some truth to the benign view that many Gen Xers are willingly choosing to downshift, work less, and lead a more DIY lifestyle. In an era when steady employment is a struggle to find, more Xers are prioritizing time with their families over longer hours at the office. They see traditional full-time positions as a burden rather than a benefit. This is especially true for Xer men who are seeking to be much more involved fathers than their own parents were. These forces are encouraging many of them to withdraw from the labor market.

But for millions, we’re talking about involuntary un- or under-employment leading over time to loss of skills and detachment from the labor force. This especially true for minority, immigrant, or low-skilled Xers, who were most likely to have lost most or all their wealth since 2008 and who have been the slowest to recover any of it. The aggregate statistics read like the gigantic auto accident Xers always feared lay somewhere in their future. While the number of (mostly) Boomers age 55 and over with full-time jobs has risen by over two million since the fall of 2007, the number of (mostly) Xers age 25 to 55 with full-time jobs has declined by nearly seven million.

Helping this generation get back on track economically is one of most important policy challenges America faces over the next decade.