Millennials are facing a shortfall compared to other generations when it comes to their paychecks.
Overall, millennials earn 20% less than baby boomers did at the same stage of life, according to “The Emerging Millennial Wealth Gap,” a recent report from the nonprofit, nonpartisan think tank New America. Specifically, median earnings for those 18 to 34 are lower than they were in the 1980s, a disparity that was first noted in a 2017 report from the non-profit Young Invincibles. And the flow of today’s paychecks is less predictable due, in part, to the effects of the Great Recession and a rise in contract and freelance positions that may be less consistent in hours and pay.
That’s in spite of overall higher education levels. Nearly 40% of millennials 25 to 37 have at least a bachelor’s degree, compared to just a quarter of baby boomers and 30% of Gen X when they were the same age, Pew Research Center found.
These lower wages may lead to long-term problems for this generation, experts say.
Lower pay slowing long-term wealth
Lower income levels are already having a long term impact on millennials’ ability to accumulate wealth, either through savings or home equity. “Millennials are going to be on a completely lower trajectory than previous generations,” says Reid Cramer, director of the Millennials Initiative at New America.
The generational wealth gap has reached “historic proportions,” Cramer says. The average millennial’s wealth in 2016 (ages 23 to 38) was 41% less than those who were at a similar age in 1989, the report says.
It’s also true among young families. Households headed by someone under 35 in 2016 had an average net worth of $10,900, which is $8,000 less than it was in 1995.
Part of that can be attributed to the Great Recession and its aftereffects. Those who entered the workforce following the recession had fewer job opportunities and lower wages, starting them off at a disadvantage. At the same time, many faced higher college tuition costs, leading to higher student loan and personal debt rates, the report finds.