The Great Recession hasn't been kind to young people. In a new study, the Urban Institute examines how wealth accumulation has stagnated for younger generations as a whole host of factors has suppressed their net worth, ranging from higher unemployment and depressed wages to rising entitlement costs.
"Even after the Great Recession, 65- to 73-year-olds today have far greater wealth than 65- to 73-year-olds did in 1983. Younger age groups, however, aren’t better off," explains the Urban Institute in its study. "From 1983 to 2010, the total net worth of those in Generations X and Y...stayed about the same as their predecessors more than a quarter-century earlier. The net worth of baby boomers and older generations (47 and older) roughly doubled as compared with their predecessors."
Eugene Steurle, one of the co-authors of the study, points to a host of reasons for young people's low net worth. Yes, they took a hit during the recession, but they've also been in less of a position to benefit from the recent recovery as they're less likely to own houses or hold lots of stocks. Instead, Steurle lists other longer-term factors that have contributed to the trend:
a lower rate of employment when in the workforce;
delayed entry into the workforce and into periods of accumulating saving; reduced relative pay, partly due to their first-time-ever lack of any higher educational achievement relative to past generations;
their delayed family formation, usually a harbinger and motivator of thrift and homebuilding;
lower relative minimum wages; and
higher shares of compensation taken out to pay for Social Security and health care, with less left over to save.
What to do? The Urban Institute doesn't offer many specific prescriptions—but it does want the government to reconsider making the tax code more favorable to lower-income homeowners and strengthening pension contributions for young people, among other changes.