The American Dream is Not Dead for Millennials
The financial news network CNBC has relied upon some surprisingly unsophisticated financial analysis to declare the American dream dead for millennials.
“Millennials earn 20% less than boomers did [at this stage in their life] – despite being better educated” reads their headline.
“Specifically, median earnings for those 18 to 34 are lower than they were in the 1980s, a disparity that was first noted in a 2017 report from the non-profit Young Invincibles” reports Megan Leonhardt. That’s in spite of the fact that “Nearly 40% of millennials 25 to 37 have at least a bachelor’s degree, compared to just a quarter of baby boomers and 30% of Gen X when they were the same age.”
When it comes to wealth, “The average millennial’s wealth in 2016 (ages 23 to 38) was 41% less than those who were at a similar age in 1989, the report says.”
To start with the obvious flaw in this analysis – those aged 18 to 34 today are not earning 20% less than baby boomers were at that age. This report CNBC is quoting claims that boomers earned $50,910 at that age, compared to $40,581 for millenials. This is contradicted by the Census Bureau’s income statistics (see table H-10), though their data is of 25-35 year olds. That time-frame makes more sense regardless, because it removes teenagers and college students from the sample.
Adjusted for 2018 dollars, the average household income for someone aged 25-34 earned $66,417 in 1989, with a median of $58,476. In comparison, one in the same age demographic earned an average of $84,951, and median of $65,890. The median is the relevant statistic here, as mean statistics are twisted by income inequality.
It is true that despite seeing higher pay, millennials do have net worth’s lower than baby boomers at this stage in their life. As per CNBC for the exact figures, “The average millennial’s wealth in 2016 (ages 23 to 38) was 41% less than those who were at a similar age in 1989, the report says.” This is entirely due to student loan debt, which for most does carry a return on investment.
While there’s no questioning that many go to college for pointless degrees, on average there is a nearly 60% pay jump for college grads relative to high school graduates. Would you rather be someone with $30,000 in income and a $30,000 net worth at age 30, or someone earning $48,000 and a $5,000 net worth at age 30? Assuming a constant career trajectory for both individuals, the latter will end up far wealthier by the end of his career, even if he is lagging “at this stage of his life.”
None of this is to deny that there are unique challenges that millennials do face that prior generations did not as this point in their life, such as skyrocketing college and rent/housing costs, but these are mostly the result of government intervention. What is clear is that capitalism is not failing millenials like Bernie Sanders, AOC, and their followers would have you believe.