Today's Young Adults Suffering More Financially than Older Generations

Student loan debt and a bad housing market hurt young Americans' net worth.

By SHARE

Young Americans, take heart; there is empirical evidence that your parents' "When I was your age..." diatribes are currently meaningless.

According to a new report from the Pew Research Center, today's younger Americans are doing significantly worse economically than those of earlier generations. Meanwhile, the economic situation of older Americans continues to improve.

The report suggests that this growing gulf is the result of deeper, long-term societal changes, not simply the recent recession.

[Read about Americans' ever-increasing student debt burdens.]

The real median net worth of households headed by someone younger than 35 fell 68 percent from 1984 to 2009, whereas for households headed by someone 65 or older, net worth grew 42 percent over that 25-year period. The age gap holds across numerous other metrics, too: the poverty rate for households headed by adults 65 and older fell from 33 percent to 11 percent between 1967 and 2010, whereas that rate jumped from 12 to 22 percent over the same period for homes headed by Americans under 35. And while median adjusted household income grew by 27 percent for the younger group from 1967 to 2010, it grew by 109 percent for those 65 and older.

"Today's young are doing much less well than yesterday's young across all the dimensions that we measured," says Paul Taylor, executive vice president of the Pew Research Center and the report's co-author.

An array of sociological factors may be behind these changes, says Pew. Younger people are entering the workforce later and marrying later, two key factors traditionally connected to financial well-being. Young adults are also more likely to be minorities and single parents, "characteristics that have been linked with lower economic well-being," according to the report.

And older adults are staying in the workforce longer, helping them vault ahead of younger Americans financially, the research shows.

On the other hand, these trends in income and wealth have occurred at the same time the number of working young women has grown, and those young women are postponing the costliness of childbearing.

While these changes are long-standing, the numbers suggest that the Great Recession made these disparities worse. From 2005 and 2009, the median net worth of those under 35 fell 55 percent, while for those 65 and older it only fell 6 percent.

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One major contributing factor to that economic backsliding is student debt.

"Young adults' net worth is reduced by 27 percent as a result of unsecured liabilities," like credit card and student loan debt, says Taylor. "It's much bigger than is the case for any other age group."

According to the Project on Student Debt, college seniors who graduated in 2010 with student loans owed an average of more than $25,000—up 5 percent from 2009. According to a November 2010 Pew report, that figure grew by roughly 35 percent from 1996 to 2008.

The housing market is also hitting young Americans hard. Between 1984 and 2009, home ownership dropped slightly for households headed by adults under 35, from 40 to 38 percent, while for those over 65 it grew from 73 to 79 percent.

But home ownership is contributing far less to younger Americans' wealth than it once did. In 2009, home equity made for 31 percent of the wealth of those under 35, down 15 percentage points from 1984. For older Americans, that figure grew by 5 percentage points over the same period, to 44 percent.

Because of the recent housing bust, says Taylor, many younger homeowners have negative equity on their homes. This contributes to high debt levels and makes their home ownership situations, as America's newest homeowners, particularly precarious.

The report adds to a spate of indicators showing the particularly difficult situation that young adults are in right now. They are facing high unemployment, for example, and are increasingly likely to live with their parents. At the very least, as the Pew data suggests, their parents are gaining wealth—and the means to support them.