The Wealth of Generations
Does Increasing Intergenerational Inequality Matter?
Trying to gauge the economic conditions of US adults born after the 1970s has become a delicate endeavor.
has written optimistically about the topic, even citing some data and claiming that “wealth for the younger generation is doing far better than for previous generations at a similar age.” Smith admitted that those data were averages (so inequality among Millennials could undermine them a bit), but he also mentions that wealth inequality has been declining lately. This was my response:Worth noting that the share of US wealth belonging to millennials is way down compared to when boomers were that same age, so that's an interesting dynamic even if the average is improving. I'm also curious whether millennials have greater wealth inequality within their cohort versus when boomers or gen X were that age.
It turns out my suspicions were confirmed: intra-generational inequality is worsening. Of course, it’s also worth arguing that Millennials are accruing graduate degrees, living in high-cost cities, relying on dual-income households, living with their parents, and postponing life milestones to compete for this newfound wealth, and maybe these lifestyle considerations remove some shine from those figures, too.
Smith also contends that Millennials’ diminishing share of wealth is a regression to normalcy and that Boomers’ wealth share was anomalous—a byproduct of their predecessors being sidelined by the Great Depression and therefore unusually incapable of accumulating wealth. I’m not sure whether that’s right or whether there’s good data on whether that’s right. It’s plausible to some degree, but it’s not completely persuasive given the rampant poverty among seniors (over 50%) during the 1930s motivating the establishment of Social Security.
Regardless, I’m skeptical that such a comparison is instructive, given how little overall wealth there was a hundred years ago—basically everyone was poor, and the machinery and attitudes of society were completely different. If elderly wealth were modest or rare enough that it didn’t materially differentiate their life from the conditions of others in a similarly broad and salient way, then that situation wouldn’t really be analogous. Plus, historical precedent for a situation doesn’t establish it as a bright idea anyway.
Economic Implications
Even if the median Millennial has more wealth than Boomers did at that age, however, my initial counterpoint is probably more significant—viz., it’s a much smaller fraction of society’s wealth overall: "In 1989, when baby boomers were around the same age as millennials are today, they controlled 21% of the nation’s wealth. That’s almost five times as much as what millennials own today." Some folks are tempted to overlook such gargantuan wealth disparities so long as absolute wealth levels are even plausibly unharmed, so the shrinking portion of wealth held by younger folks isn’t manifestly problematic to them. I’m skeptical of this outlook, but even if inequalities aren’t necessarily objectionable, they aren’t uniformly defensible, either. Inequalities aren’t created equally.
Systematically concentrating wealth under the direction of a specific subset of the population (rather than randomly) will entail side effects. These generational trends aren’t economically epiphenomenal (i.e., inert byproducts of our economy unconnected with the management of firms, labor markets, or investments). A society wherein every tenth person is arbitrarily allocated a fortune will unfold differently than a society wherein the oldest ten percent of people are given an equivalent sum. Our civilization is inexorably gravitating towards this latter scenario. This will skew the production of goods and the character of investments made by businesses and financiers towards the predilections of the elderly, which isn’t an unquestionably desirable warping of society’s resource allocation.
It’s also probably not the population you’d select, ceretis paribus, to heavily tilt the economic playing field in favor of, especially if your society was struggling to adequately incorporate the welfare of future generations into their current decision-making—for example, a society continuously overborrowing and incapable of closing budget shortfalls, wholly dismissing potential long-run environmental challenges, refusing to prioritize the construction of new housing, etc. Nor would over-weighting the economic clout of seniors stand out as a shrewd scheme if, say, technological innovation had become vital in determining a community’s comparative advantage and economic outlook. And it’d be especially counter-intuitive to unhesitatingly perpetuate an economic imbalance favoring seniors in civilization with tumbling fertility rates. In fact, given all that context, such a strategy would be unmistakably thickheaded.
Moreover, even ardent inequality apologists will admit that severe inequality is politically destabilizing, particularly when that concentration routinely disadvantages young men. And people like Jordan Peterson and Scott Galloway—public intellectuals who are popular among young men—have been warning about this. Drastic inequalities are probably inefficient; drastic inequalities favoring an identifiable group cultivate ressentiment, and drastic inequalities favoring a particular age cohort stultify the culture. But drastic inequalities disfavoring young men situated in a quasi-meritocratic system that views those penniless, lonely, disaffected young men’s hardships as corroborating their inferiority is basically a demand for turmoil.
Power, Status, and Opportunity
These are some unattractive macroeconomic implications of a society producing such lopsided resource accumulation across generations, but analyzing the situation from an individuated, socioeconomic perspective shows that the problem is even more complex. Economic inequality isn’t merely about money here. Personal finances can be a useful proxy for assessing things like status, importance, opportunity, and respect. Even if Millennials’ absolute wealth levels are undiminished and we safely ignore their increasing variance, the declining availability of these basic ingredients for esteem and satisfaction could still foster/justify widespread discontent.
Just as with the macroeconomics supra, if Boomers’ outsized fortunes were sociologically epiphenomenal—if they had no influence on social relations, community status, etc.—then their economic advantage wouldn’t be as worrisome, but these intergenerational inequalities aren’t merely financial, and Millennials’ disadvantages vis-a-vis Boomers aren’t cleanly decoupled from stuff like bargaining power and status. Burgeoning generational imbalances reflect an inequality of opportunity that’s more pernicious than the asymmetry in wealth alone.
And these economic realities have both enervated Millennials and infused older generations with overconfidence. Inflation is overly unpopular because people misinterpret their pay bumps as deserved rather than inflationary; similarly, seniors are programmed to credit their successes to their generation’s diligence, patience, or pluck rather than an accident of history. Somehow, this has caused Boomers to suffer from a peculiar delusion that they’re some ageless platonic ideal of adulthood and that they occupy the most estimable and insightful stage of life, regardless of whatever age they currently are.
I’m not alone in thinking that important facets of society are converging to generate headwinds for younger adults: Scott Galloway has really spearheaded this effort at clear-eyed assessment recently (here’s his TED Talk). He goes to bat for young people in general rather than any particular generation (the problem will continue worsening), but his more particularized data is compelling—public university costs and housing prices have exploded relative to the earnings of young people.
So, Smith's unflagging economic optimism notwithstanding, Millennials are on the wrong side of two inequality trends: both inter-generational and intra-generational. This is bad news. And when you expand the scope of analysis beyond pecuniary interests and begin scrutinizing the key checkpoints of adulthood, the justifications for concern are plentiful.