Tag Archive for personal debt

The Generational Wealth Gap

IOU in a piggy bank
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There’s been a social storm of intergenerational conflict on the horizon for a long time. Some say it’s merely hype meant to undermine Social Security and Medicare; others believe it’s the likely battlefield of future class conflict. I think it’s somewhere in the middle, but new research suggests the real-world rupture may be more severe than most of us have feared. That doesn’t mean we’re headed for a war between the ages; it just means we should pay attention and try to avert one.

study released last week by Pew suggests there’s been a drastic shift in the intergenerational wealth gap. Under an economic system like capitalism, which permits the accumulation of wealth, it’s only “natural” that older generations would accumulate greater net worth. But these figures point to a serious shift in that ages-old paradigm.

Pew doesn’t put it so bluntly, but basically what we’re looking at is a significant transfer of wealth from young to old in a way atypical of human history.

chart of generational net worth by age group, comparing 1984 to 2009.

Make sure you take a good, long look at those figures. Occupy Wall Street folks clamoring about how the so-called 1% are the only ones to have gained as a class in recent decades might want to take note: Baby Boomers and older folks did better as a class, too. And they seemingly did it on the backs of younger generations. They’re not alchemists, so their wealth came from somewhere, and it’s no coincidence that younger generations have less relative to what their elders had when they were young. Make no mistake, the super-rich capitalist class did way better than the “elderly” class has done over these same years. But these findings are still alarming.

Pew produced few hard figures detailing what’s behind the shift. I suspect much if not most change in the gap can be accounted for by debt; mainly student loans and relatively new mortgages. The benefit of this widened predation disproportionately went to the ultra-rich, of course, but pretty much anyone with 401k or pension fund investments was likely gaining off the trend of more young people getting into more debt. (I do not have data on hand to back this up, so I’d love to hear if I’m wrong.)

During the period in question, elites among Baby Boomers and their parents, the so-called Greatest Generation, managed to undermine blue collar labor across North America, which forced more and more young people to seek college educations. These elites were meanwhile hurting their own age peers, but overall the impact was far greater on those who had little or no established wealth to speak of. They emerged with crippling debt that their degrees aren’t paying back so quickly, and now the white collar jobs and wages they were seeking are basically going the same way or aren’t as secure as promised. They bought homes to provide financial security, but a housing bubble stripped them of equity.

It has long been accepted that each generation is supposed to leave the following generation better off in every possible way; it’s supposed to be “the American way”. That trend has ended. Wealth has been shifted in the wrong direction, as has the burden.

In case the above isn’t staggering enough, look at this switcheroo.

poverty shifts from old to young over the decades

Now, the progressive line on this is that these figures are inaccurate/relatively meaningless and being spun as a case against Social Security and Medicare. (Actually, I haven’t seen much addressing the poverty factor illustrated above, but I’m talking about the more widely publicized Pew findings about net worth and income.)

Well, I’m certainly not trying to start an “intergenerational war” (talk about overhyping; folks, nobody said leftists don’t know how to use alarming language), and I’m certainly not against Social Security or Medicare, and I don’t fall for the bullshit conservative arguments against them. But that doesn’t mean these findings are not significant and illustrative of a real social problem.

My point in reporting and analyzing these figures is not to engender intergenerational animosity. I certainly don’t think this was a plot by the older generations. If anything, it represents the results of a values split that probably started during the early postwar era, when commercialism and an erosion of interpersonal class solidarity redefined what Americans care about. I’m not saying my generation has been or will be any different in this regard, which is to show a severe disregard for those coming up behind us.

I don’t even think older folks are aware of this apparent shift. More research needs to be done on it. But if it is as real as it seems (and as frankly logic dictates it would be), then it’s something that needs to be addressed along with pressing the 1%. Those in the more politically influential generations need to reverse the shift by investing accumulated wealth in younger generations. There doesn’t need to be a war; once the misplaced burden is identified, redistributing it fairly would be a way to alleviate any bubbling resentment.

photo by: Images_of_Money
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