The generational wealth gap between Millennials and Baby Boomers has been a topic of extensive debate. Widespread views suggest that Millennials are faring worse financially than their predecessors.
According to some, Millennials are “the first generation that is worse off than their parents.” However, the results of a new study challenge this notion.
A team of researchers led by the University of Cambridge has found that Millennials are not uniformly worse off than Baby Boomers, but are contending with a “vast and increasing” wealth gap due to different life and career paths.
The researchers analyzed the life and career paths of over 6,000 individuals from each generation in the United States, focusing on their financial status by the age of 35.
The results show that while some Millennials have indeed amassed greater wealth compared to Baby Boomers with similar life experiences, a significant number are economically worse off.
The study suggests that Millennials were statistically more likely to work in low-paid service jobs or live with their parents as they entered middle age.
Study lead author Dr. Rob Gruijters emphasized that the real issue is not whether Millennials are worse off in general, but how varying life and career patterns are rewarded differently compared to the past.
“The debate about whether Millennials are worse off is a distraction. The crucial intergenerational shift has been in how different family and career patterns are rewarded. The wealthiest Millennials now have more than ever, while the less fortunate are left further behind,” said Dr. Gruijters.
“This divergence in financial rewards is exacerbating extreme levels of wealth inequality in the United States. Individuals with typical working class careers, like truck drivers or hairdressers, used to be able to buy a home and build a modest level of assets, but this is more difficult for the younger generation.”
“The solution lies with measures such as progressive wealth taxation, and policies like universal health insurance, that give more people basic security.”
The team compared late Baby Boomers (born between 1957 and 1964) with early Millennials (born between 1980 and 1984), using data from the National Longitudinal Survey of Youth. This allowed the researchers to map out each individual’s life trajectory from 18 to 35, considering changes in work, family, and living arrangements.
One of the striking findings was the shift in career patterns and family dynamics between generations. For instance, a smaller percentage of Millennials (7.3%) transitioned from college into prestigious professions like law and medicine compared to Baby Boomers (17%).
Millennials were more likely to be engaged in other professional roles or in service sector jobs. Additionally, Millennials tended to delay marriage and parenthood and prolong their stay at their parental home.
In terms of wealth distribution, the study revealed a stark contrast in financial security between the generations. While 62% of Boomers owned homes at 35, only 49% of Millennials did.
Furthermore, 14% of Millennials had a negative net worth, as opposed to 8.7% of Boomers. This disparity highlights a more pronounced wealth inequality among Millennials.
The experts note that these shifts in wealth distribution are not merely due to changing work and family patterns, but are the result of increased economic rewards for secure, middle and upper-class lifestyles.
Meanwhile, economic rewards for working-class lifestyles have stagnated or declined. This observation is particularly evident in the housing market, where a lower percentage of Millennials in low-skilled service roles own their own home compared to Boomers in similar positions.
The researchers argue that these challenges not only foster intergenerational tensions but have also contributed to other social problems, such as the rise of populist authoritarianism.
They say that addressing the problem will require big solutions: principally wealth taxes and policies that offer financial security to the less advantaged. Such measures might, for example, include access to stable housing, universal health insurance, and a higher minimum wage.
“We need to make it easier for those who are currently being left behind to accumulate wealth in the first place,” said study co-author Professor Anette Fasang. “A slow and tentative approach won’t suffice. Significant action is needed to build a more equal society, where more people can experience some form of prosperity.”
The study is published in the American Journal of Sociology.
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