Millennials doing worse than their parents is a real thing. At 75 million, they make up the largest living generation in the U.S. today. As a group, however, they have not kept financial pace with their Baby Boomer parents at a similar stage in their lives.

Why Millenials Are Doing Worse Than Their Parents

Boomer parents, like their parents before them, expected life for their children to be better than theirs. The fact that this hasn’t happened has led to broad national discussion regarding both causes and possible solutions to this phenomenon. So what’s going on here?

The Young Invincibles Study

A recent study titled “Financial Health of Young America” by an advocacy group known as the Young Invincibles provides analysis of Federal Reserve data in an attempt to examine the financial challenges facing young people. These key findings of the study help to illustrate the problems with which Millennials struggle:

  • The net wealth of Millennials is half that of their parents when they were young adults. In addition, wages are 20% lower.
  • Millennials are more educated than their Boomer parents were, but that has not resulted in more wealth.
  • Student loan debt is a significant millstone around the necks of Millennials. Those with debt have retirement accounts half the size of those without it.
  • Race also plays a role in financial standing, with African-American and Latino Millennials earning 57 cents and 64 cents respectively for every dollar earned by young white Millennials.

Income and Net Worth

Median Millennial net worth at $10,090 is 56% lower than the net worth of their Boomer parents at the same stage in their lives. College-educated Millennials today earn only slightly more than their high-school educated parents did in 1989 (adjusted for inflation). Those same college-educated Millennials have the additional burden of student loan debt. 

Home Ownership

In 1989 46% of Baby Boomers owned their own home. The overall home ownership rate for Millennials is 43%. Millennials with a college degree have shown improvement, but, in general, as the study concludes, “Student loan borrowers retreat from the housing and auto markets.”

How Millennials Affect Everyone Else

By 2025 75% of the workforce will be made up of Millennials. Not only is that statistic arresting, it demonstrates a problem for everyone, including Boomers, most of whom will be retired or near retirement by then. Payroll taxes from Millennials will help to finance Social Security and Medicare benefits. Boomers will also be counting on Millennials to buy their large homes so that the older generation can downsize or move to a warmer climate.

If the financial picture for Millennials doesn’t improve, the entire entitlement system could be in trouble. President  Trump has pledged not only to keep entitlements intact but also to return the country to prosperity and additional job growth. Unfortunately, he has yet to offer any specific, detailed proposals as to how to accomplish these goals. 

Caveats to Consider

Not everyone agrees with how the Young Invincibles interpreted these findings. Forbes suggests alternate explanations in three areas:

  1. The fact that college-educated Millennials earn less than their parents did with a high-school diploma fails to consider that blue-collar workers in their 20s would have had several years of experience, including raises and promotions, versus a recent college grad starting at the bottom of the pay ladder.
  2. The discrepancy in net wealth between Millennials and Boomers does not take into account the impact of student loan debt shouldered by Millennials. In addition, thanks to the Great Recession, lack of home ownership clearly would have an effect on net worth.
  3. Finally, Forbes points out that by adjusting for inflation using the consumer price index (CPI), as the study did, could make inflation numbers overly high by as much as 1% to 2%. (For more, see Is the consumer price index (CPI) the best measure of inflation?)

The Bottom Line

The caveats may help explain differences in income and net worth, but they don’t erase them. Student loan debt is a significant factor weighing on Millennials, and any relief in that area would be a big help. (For more, see Trump’s Student Loan Repayment Plan: Could It Help You?)

The increased level of education enjoyed by Millennials will also help, as long as there are jobs available once their education is completed. One thing Millennials can do is to make sure that they are using their education to prepare themselves for the kinds of jobs that will be open to them. (For more, see Outsource This! The Top 10 Jobs for Millennials.)

Providing the bulk of the workforce, including serving as a major source of payroll taxes, is only part of the important role Millennials will play moving forward. They will soon become this country’s leaders and top thinkers. America’s success depends upon their success.