Podcast Summary
Wealth gap between millennials and top 1% has widened significantly: The wealth disparity between millennials and the top 1% is staggering, with median net worths 70-77 times less for millennials in their 30s and 40s compared to the top 1% in the same age group.
The wealth gap between the rich and the middle class, particularly among millennials, has widened significantly. According to data from the Federal Reserve's 2019 survey of consumer finances, the median net worth of millennials in their 30s and 40s is a fraction of what the top 1% in their age group possesses. For instance, the median net worth for 30-34-year-olds was $19,000, while for the top 1% in the same age group, it was $1.37 billion. This translates to a net worth disparity of 70 times. The situation is even more dire for 35-39-year-olds, with a median net worth of $36,000 and a top 1% net worth of $2.8 billion, which is 77 times larger. These numbers highlight the stark reality of income and wealth inequality in America, particularly among millennials, with the US having the 4th highest Gini coefficient among 35 OECD countries. This trend is concerning as it creates a societal construct where the standard of living for one generation becomes increasingly out of reach for the next, even if their professional success rivals or exceeds that of their parents.
Millennials have larger wealth disparity compared to boomers: While the median net worth of middle-aged millennials is around $125,000, many fall below this threshold, with the youngest cohort having a median net worth of around $10,000. Wealth disparity is a significant issue across generations.
Despite common perceptions, the millennial generation, which is often discussed as a monolithic economic group, actually has a larger wealth disparity compared to older generations like boomers. The median net worth of the middle class in 2013 was $98,000, and adjusting for inflation, it would be around $125,000 today. However, a significant portion of millennials, particularly those aged 30 to 34, fell below this threshold, with only 20% meeting the definition of middle class wealth. The youngest millennial cohort, aged 25 to 29, had a median net worth of around $10,000, with many having a negative net worth. These findings underscore the importance of recognizing that middle class is more of a vibe or economic feeling than a specific number in one's bank account. Overall, the data suggests that wealth disparity is a significant issue across generations, and understanding the nuances of these disparities is crucial for policymakers and individuals alike.
Millennial Economic Outcomes: Beyond Generalizations: Millennials' economic situations are complex and influenced by factors like inheritance, student loan debt, homeownership, and parental wealth. The upcoming wealth transfer may benefit some, but individual experiences vary significantly.
While the median net worth of millennials is lower than previous generations at their age, there is a subset of millennials who are thriving economically. Factors such as inheritance from the Baby Boomer generation, student loan debt, homeownership, and parental wealth play significant roles in millennial economic outcomes. The study referenced in the discussion shows that wealth is not static and that people's economic situations can change over time. Millennials, in particular, may benefit from the upcoming wealth transfer and have a better chance of aging into the middle class despite their current financial circumstances. However, it's essential to recognize that millennial economic outcomes are not uniform, and factors such as student loan debt and parental wealth can significantly impact individual experiences. The discussion highlights the complexity of understanding millennial economic circumstances and the need to consider various factors beyond generalizations.
Millennials face a significant wealth gap in Canada: Despite higher net worths for some millennials, rising costs and less inheritances widen the wealth gap between generations
While the Canadian housing market has not corrected like the US market, resulting in higher housing costs, there exists a significant wealth gap among Canadian millennials. The richest millennials have higher net worths than any previous generation, but the struggling millennials face less economic security than their parents due to rising housing and healthcare costs. The upcoming wealth transfer from baby boomers to millennials may widen this gap, as the top 10% of millennials are more likely to receive inheritances. This trend challenges the notion of upward mobility and economic security in North America.
The 'funnel of financial privilege' and its impact on millennials' financial success: Millennials who received financial support from their parents, particularly in education and housing, have a higher likelihood of accumulating wealth faster than those who didn't.
The financial position of millennials today is largely determined by the level of financial support they received from their parents, particularly in the areas of education and housing. This idea is referred to as the "funnel of financial privilege," which suggests that those who received financial advantages from their parents, such as paid tuition or down payments, are more likely to receive others and accumulate wealth at a faster rate. Millennials who were able to buy homes during the real estate market downturn in the late 2000s, with the help of their parents, have seen significant increases in net worth. Conversely, those who did not receive such support have been left behind and struggle to afford housing in inflated markets. This financial divide among millennials has led to two distinct classes of experience, with many feeling they will never be able to afford a home.
Millennials' Wealth from Real Estate and Tech: Millennials benefit from real estate and tech, with 92% owning property, an average of 3 properties, and a $1.4M portfolio. Tech startups and online businesses also contribute to rapid wealth creation.
Real estate and technology have significantly contributed to the wealth accumulation of millennials. According to a Coldwell Banker report, 92% of millennial millionaires own property, with an average of 3 properties and a portfolio value of $1,400,000. Real estate, being an asset class often purchased with leverage, can lead to owning multiple properties once you have one. Additionally, the rise of the internet and social media has opened up opportunities for millennials to build wealth through tech startups and online businesses, some of which have led to rapid wealth creation, such as the case of Mark Zuckerberg who reportedly owned 2% of all millennial wealth before Meta's meltdown in 2021. These factors, combined with the luxury of early entry into these opportunities, have given millennials unique advantages in wealth accumulation that were not present in previous generations.
Millennials: Beyond Entitled and Struggling: Millennials face a class divide, with a small percentage thriving while most struggle economically. Ignoring this divide risks economic stagnation and civil unrest. Policymakers must address this issue through large-scale changes to support those in need.
The millennial generation, despite common stereotypes, is not monolithic when it comes to economic success. While a small percentage of millennials have achieved significant wealth, the majority is struggling. This class divide within the generation has severe consequences, including economic stagnation and potential civil unrest. The media's portrayal of millennials has shifted from entitled and distracted to sympathetic, acknowledging the impact of structural factors on their economic prospects. To address this issue, large-scale policy changes are needed to support those who are struggling economically. Ignoring the severity of this class divide risks stalling the economy and leading to civil unrest. It's crucial that we recognize and address the disparities within the millennial generation to ensure economic security and stability for all.
Focusing on income and skills for financial growth: Millennials must work hard to increase income, learn new skills, and engage politically to create opportunities for saving and investing due to rising costs and financial insecurity.
As a millennial, focusing on increasing income and developing marketable skills is the highest point of leverage for getting ahead in today's economy. With the rising costs of education, housing, and other expenses, financial literacy is crucial, but it's not enough on its own. External factors like family wealth or inherited property can provide advantages, but for many young people, increasing income is the best way to create opportunities for saving and investing. This requires hard work, determination, and a willingness to adapt and learn new skills. The speaker also emphasizes the importance of political engagement and community care in addressing larger societal issues like wealth inequality and the need for social supports like universal healthcare and education. While it's statistically likely that more millennials will age into the middle class over time, the previous generations had more financial security, making financial literacy, political engagement, and community care more crucial than ever before.
