New research from the University of Cambridge challenges the notion that millennials, often portrayed as financially disadvantaged compared to their Baby Boomer parents, uniformly face worse circumstances. Instead, they grapple with a “vast and increasing” wealth gap stemming from the uneven financial outcomes tied to diverse life and career paths, compared to their Boomer predecessors. This disparity creates an impression of overall generational loss.
The study scrutinized the work and family trajectories of over 6,000 Baby Boomers and 6,000 Millennials in the United States. It assessed and compared how these choices influenced their wealth by the age of 35.
Poor millennials
Debates on whether Western Millennials fare better or worse than past generations are ongoing. Millennials are often portrayed as victims of societal shifts, experiencing less stable employment and family lives. Some argue they are “the first generation that is worse off than its parents.”
Contrary to the popular belief in the “broke Millennial” myth, the paper suggested that Millennials are actually thriving. The new study, however, highlights that the situation depends on which Millennials are considered. Those statistically more likely to engage in low-paid service jobs or live with their parents as they age into the middle bracket tended to be economically worse off at 35 than Baby Boomers with similar careers and lives. Nevertheless, Millennials with typical middle-class life paths amassed significantly more wealth than their Baby Boomer counterparts.
The research portrays this growing wealth gap as “a fundamental moral and political challenge” that will shape the future of the United States.
“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 researchers explain. “The wealthiest Millennials now have more than ever, while the poor are left further behind.”
A growing gap
“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 study, using data from the National Longitudinal Survey of Youth, compared late Baby Boomers (born 1957-64) with early Millennials (born 1980-84). Instead of relying on broad averages, the researchers tracked each person’s life from 18 to 35, noting changes in work, family, and living situations. Similar life paths were grouped together to compare the net worth of Millennials and Boomers with comparable experiences.
The data unveiled significant shifts in career paths and family dynamics between generations. By age 35, 17% of Baby Boomers had moved from college to prestigious professions like law and medicine, while only 7.3% of Millennials did the same. Millennials, on the other hand, were more likely to work in professions like social work and teaching or in service jobs like retail, waiting, and caregiving.
Delaying marriage
Millennials also tended to delay marriage and stay longer in their parents’ homes. Early marriage and parenthood were characteristic of 27% of Boomers but only 13% of Millennials.
In terms of financial security, wealth inequality is more pronounced among Millennials. While 62% of Boomers owned homes at 35, only 49% of Millennials did. About 14% of Millennials had negative net worth, meaning debts exceeded assets, compared with 8.7% of Boomers.
The wealth gap isn’t solely due to changing work and family patterns; it’s driven by increased rewards for secure, middle-class and upper-class lifestyles, while less stable, working-class trajectories face stagnation or decline.
The wrong track
For example, 63% of low-skilled service workers among Baby Boomers owned homes at 35, compared to 42% of Millennials in the same roles. The poorest Millennials in service jobs often have negative net worth, which was less common among Boomers.
The authors argue that these challenges not only create intergenerational tensions but also contribute to social issues like the rise of populist authoritarianism. Addressing this, they propose significant solutions like wealth taxes and policies providing financial security to the less advantaged, such as stable housing access, 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,” the authors conclude. “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.”
