The Old Get Wealthier And The Young Get Poorer


This recession has been unmercifully brutal on younger Americans.  Many are entering the most difficult employment market in generations with a flood of low wage jobs saddled with record levels of student debt.  Many have never even witnessed how it is to live in a bull stock market.    Of course this is assuming they had money to invest since 37 percent have no net worth or even worse, a negative net worth.  Even for the cautious minded, they are only able to garner a 0 percent savings rate as the Federal Reserve continues to implement a quantitative easing policy to rescue the banking sector.  The data on net worth for US households is disturbing since it highlights a deterioration of the middle class.  It is no surprise that this recession has caused many younger Americans to move back home with parents primarily because of the inability to find work and many that do find work find that it is part of the low wage growth sectors.


The young get dramatically poorer

This recession has been particularly tough for younger Americans.  Adjusting for inflation, those under 35 are worse off today financially than those in 1984:

net worth excluding home equity

From 1984 to 2009, the median net worth of younger households declined by 68%.  Older households did better seeing their net worth rise by 42%:

median net worth by household

Source:  Pew   

The above is somewhat skewed however because it includes home equity.  The first chart we highlighted excludes home equity.  What this shows is that many younger Americans don’t own homes and for those that do, many have zero to negative equity.  So not only did they enter the worse employment market in a generation, they entered the worst housing market ever.  Yet excluding home equity for older Americans we see that they didn’t do as well either:

net worth households excluding home equity 65 and older

This is an interesting point to the 42 percent rise.  What we find is that excluding housing, many are doing worse off.  It just happens that they bought at the right time during a boom and even with the bust, they have netted out a gain.  Yet removing housing from the equation, net worth has fallen by 32 percent for those 65 and older as well.  What does this mean for the middle class?  What we can gather is that most Americans that bought in say the 1970s and 1980s (and even 1990s) still benefitted from the home equity they built over the years.  Younger Americans that likely bought in the 2000s have seen no equity gains and in fact, might have seen their equity disappear.

Read the rest at My Budget 360