Millennials Love Life, But They're Broke and Living at Home

New research by the Pew Center indicates that things aren't getting any better for the most talked-about generation.

by Stephen Marche

A little more than three years ago, I argued that the war against youth was not an economic accident but the conscious result of American policy over the course of 50 years — policy that included divestment from university education, the creation of massive entitlements for senior citizens, and a permissiveness towards the exploitation of the young by corporations. If you follow the money rather than the blather, it's clear that the American system is a bipartisan fusion of economic models broken down along generational lines: unaffordable Greek-style socialism for the old, virulently purified capitalism for the young. Both political parties have agreed to this arrangement: The Boomers and older will be taken care of. Everybody younger will be on their own. The German philosopher Hermann Lotze wrote in the 1870s: "One of the most remarkable characteristics of human nature is, alongside so much selfishness in specific instances, the freedom from envy which the present displays toward the future." It is exactly that envy toward the future that is new in our own time. These policy decisions eventually have wide-reaching consequences. But I wrote that in the heart of a recession, when it was possible to argue that the problem with the growing gap between poor youth and rich old was simply timing: The young entered the marketplace at the worst possible moment and thus were hapless victims of the cycles of the economy—it sucked, but nobody was to blame. Unfortunately, new research from St. Louis Fed's Center for Household Financial Stability and the Pew Research Center extinguishes that last glimmer of counter-argument.
From the Pew Center report:

In terms of sheer numbers, there are more young adults today than there were when the recession hit – the 18- to 34-year-old population has grown by nearly 3 million since 2007. But the number heading their own households has not increased. In the first third of 2015 about 42.2 million 18- to 34-year-olds lived independently of their families. In 2007, before the recession began, about 42.7 million adults in that age group lived independently.

The St. Louis Fed Paper explains exactly why millennials, despite improving job prospects and a slight increase in real wages, are not moving out of their homes. They are still broke. Young people, for obvious reasons, have always been poorer than older people. But after rooting out idiosyncratic variations and compensating for other variables, the St. Louis researchers came to the following, bleak conclusion:

Beginning with the 1950 cohort (i.e., families headed by someone born between 1948 and 1952), successive cohorts through 1970 (born between 1968 and 1972) had statistically significantly lower incomes than those of the 1940 cohort. Moreover, the estimated magnitudes are economically significant: between 13 and 25 percent lower than the 1940 cohort. Finally, all five-year cohorts that began in 1975 or later had estimated income shortfalls of 12 to 18 percent.

Those shortened incomes mean that the wealth gap is only set to increase. Cohorts with lower incomes obviously cannot save as much and therefore cannot accumulate as much capital over the course of their lives. Which means that the problem is accelerating quite outside the minor turbulence of the rise and fall of recession and growth.
The new research shows that the problem of the growing gap between the young and the old is not the economy but policy.  The Federal Government spends 2.4 dollars on every citizen over 65 for every dollar spent on a child. That makes a difference. Unfortunately, that difference is only set to grow.