Young Americans Have Less Wealth Than Their Parents, No Matter How You Measure
My colleagues and I recently published research showing that younger age groups are falling behind their parents in wealth accumulation and explaining the story behind our numbers. Some have raised questions about how we use our data, and I want to take some time to further explain our research.
Our study shows that the average wealth, or net worth, of these younger age groups has fallen fairly dramatically relative to older age groups. In response, some have said that median wealth is more important than average wealth. In fact, both are important. Average wealth tells us how a group is prospering as a whole relative to other groups; median wealth tells us how some “typical” person might be doing. One complication with focusing on median wealth is that it doesn’t show where all the remaining wealth goes. In a similar vein, if you were studying small business ownership by age or race, the median value might be zero for all groups. The average values would be greater than zero and thus would allow comparisons by groups.
Consider the median household age 56–64 in 2010. True, it is only slightly richer than the median household of a similar age in 1983 ($179,400 versus $143,150). Still, the median household age 29–37 in 1983 had $46,234 in wealth, but the median household in that age group in 2010 had only $15,900, less than half compared to their parents.
Median and average net worth by age is reported here. Come to your own conclusion.
Another footnote: Our study did not look at the decline in defined benefit wealth. However, the availability of such wealth has declined more for younger than older groups. Moreover, the valuation of defined benefits and annuities goes up for those who have them when interest rates go down. Older individuals with more defined benefit wealth technically saw the value of wealth go up after the Great Recession.
You can slice and dice these data in many ways, but the empirical data speak for themselves: younger age groups have fallen behind in relative terms. All sorts of factors are involved: the Great Recession and its impact on housing, student debt, wages, and so forth. Each is worthy of our attention.