Are we creating a lost generation?

For some time, I’ve been writing about how the Great Recession and its tepid recovery have hit young adults hardest. I’m not dismissing the distress of older age groups. Almost anyone who has lost a job in this harsh economy has faced a long, uncertain struggle to find a new one. Americans on the edge of retirement have often reeled from large income and savings losses. It’s rough for almost everyone. But the young seem to have been hurt disproportionately. Getting a job isn’t easy; for those who do, the pay may disappoint.

It’s not surprising that Americans under 35 have suffered the largest income decline of any age group in the past decade, according to Census Bureau statistics. From 2001 to 2011, their median household incomes fell 13 percent, or $6,816. (The median is the exact halfway point in any distribution; figures are in inflation-adjusted 2011 dollars.) Other working-age groups did slightly better: The drop for households 35 to 44 was 9 percent, or $6,137; the cut for households 45 to 64 was 11 percent, or $7,426. Interestingly, households 65 and over had higher incomes. Their median income rose 13 percent, or $3,810, over the decade.

A new report from the nonpartisan Pew Research Center confirms this picture. More than other groups, the young have “deleveraged” — reduced old debt and not taken on new. From 2007 to 2010, the debt of households younger than 35 fell 29 percent, compared with a decline of only 8 percent for older (35-plus) households. The chief consequences have been a sharp drop in large credit-financed purchases: Vehicle ownership fell from 73 percent of Americans under 25 in 2007 to 66 percent in 2011; homeownership dropped from 40 percent of households under 35 in 2007 to 34 percent in 2011.

“There’s been a lot of deleveraging. I wanted to find out who’s doing it,” said economist Richard Fry, the report’s author. “It’s young adults.” Only one type of their debt increased in the recession: student loans. From 2007 to 2010, the share of under-35 households with student loans rose from 34 percent to 40 percent, though the median amount owed fell slightly from $14,102 to $13,410. By contrast, only 39 percent of young households had a credit card balance in 2010, down from 48 percent in 2007; median balances decreased from $2,100 to $1,700.

To some extent, the retreat from credit partially reverses what seems — at least in retrospect — an unsustainable binge. In 1983, households under 35 had 73 cents of debt for every dollar of income, an already hefty burden that would more than double. By 2007, it reached a peak of $1.63 of debt for every dollar of income, a trend that stemmed from rising homeownership. By 2010, it had subsided to $1.46, and that level was propped up by the young’s lower incomes.

Someday, young Americans may regard their present economic challenges as useful, even character-building learning experiences. But for now, their struggles seem an endless streak of bad luck.

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