I don’t know that I’m trying to convey any particular message with this post other than that the life expectations of the last four cohorts of Americans are probably pretty different from one another. The graph above was taken from an excellent post by sociologist Lane Kenworthy who remarks:
The lower line shows median income among families with a “head†aged 25 to 34. The top line shows median income among the same cohort of families twenty years later, when their heads are aged 45 to 54. Consider the year 1979, for instance. The lower line tells us that in 1979 the median income of families with a 25-to-34-year-old head was about $58,000 (in 2013 dollars). The data point for 1979 in the top line looks at the median income of that same group of families twenty years later, in 1999, when they are 45 to 54 years old. This is the peak earning stage for most people, and their median income is now about $91,000.
In each year, the gap between the two lines is roughly $33,000. This tells us that the incomes of middle-class Americans tend to increase substantially as they move from the early years of the work career to the peak years.
Should this reduce our concern about the over-time pattern shown in figures 4 and 5 above? No, it shouldn’t. Look again at figure 6. Between the mid-1940s and the mid-1970s, the median income of families in early adulthood (the lower line) rose steadily. In the mid-1940s median income for these young families was around $27,000; by the mid-1970s it had doubled. Americans during this period experienced income gains over the life course, but they also tended to have higher incomes than their predecessors, both in their early work years and in their peak years. That’s because the economy was growing at a healthy clip and the economic growth was trickling down to Americans in the middle.
After the mid-1970s, this steady gain disappeared. From the mid-1970s to 2013 the median income of families with a 25-to-34-year-old head was flat. They continued to achieve income gains during the life course. (Actually, we don’t yet know about those who started out after the mid-1990s, as they’re just now beginning to reach age 45 to 54. The question marks in the chart show what their incomes will be if the historical trajectory holds true.) But the improvement across cohorts that characterized the period from the mid-1940s through the 1970s — each cohort starting higher and ending higher than earlier ones — disappeared.
I’ve annotated the graph to highlight the last four cohorts: Silent Generation, Baby Boomers, Generation X, and Millennials. I won’t belabor the point by explaining in tedious detail how very different the experiences of the four cohorts are. The graph really says it all.
I don’t believe that either demographics or economics are destiny but I do believe that they can tell you a lot. It’s too early to know what the courses of life for Millennials will be—they’re only represented by the very tail end of the chart. However, we can speculate, as this USA Today article suggests:
SOUTH MILWAUKEE, Wisconsin (AP) — Baby Boomers: your millennial children are worse off than you.
With a median household income of $40,581, millennials earn 20 percent less than boomers did at the same stage of life, despite being better educated, according to a new analysis of Federal Reserve data by the advocacy group Young Invincibles.
The analysis being released Friday gives concrete details about a troubling generational divide that helps to explain much of the anxiety that defined the 2016 election. Millennials have half the net worth of boomers. Their home ownership rate is lower, while their student debt is drastically higher.
It would be interesting to know what has happened over the last four or five years. My guess is that gap between the lines will narrow.
If home ownership is lower, would it be correct to assume that they are carrying less mortgage debt?
And much more educational debt
And educational debt, unlike a house, cannot be liquidated. If the education costs are not, or cannot, be recouped by income gains, then they are just a huge financial drag – one that is difficult to get rid of through bankruptcy.
I haven’t seen any decent data yet, but it looks like income inequality is worse among members the millennial generation than other generations. As they age, that will likely only get worse and, given they are a large cohort, it likely means that income inequality in the US generally is going to get worse.
I’m not justifying high levels of student debt, but no, it does not only make sense if it is recouped in later income, not if it leaves the individual better-educated, more aware, more involved. I despise this notion that education exists solely for the purpose of creating a better worker. Education is good per se. If I spend 20 bucks to spend a few hours perusing the Louvre do I need to justify that in capitalist terms?
I’d also point out that a fair bit of that student debt is not spent on education alone, but on living expenses for four years. (That’s what I did with my one semester of student loan.) Someone is paying for dorm rooms, and it’s either the student (via debt) or the parents (also likely via debt.) The average student debt is around $30,000. How much of that was four years of living expense?
I don’t think a lot of this is avoidable. I don’t see anyway we can realistically avoid paying low skilled people in the US a lot more than low skilled people in the rest of the world earn. They will largely not have the productivity to merit higher pay. Also, while some of this is clearly US policy which has favored the wealthy since about 1980, some is just because the rest of the world has begun to catch up.
Just a bit OT, but those who claim education is NOT the way to better paying jobs often advocate for more vocational training. IN case you missed it, Cowen recently linked to this article (just the abstract) suggesting that also has issues.
http://jhr.uwpress.org/content/52/1/48
Steve
Michael,
“I despise this notion that education exists solely for the purpose of creating a better worker. ”
I agree but choices depend on goals. If one wants to become enlightened, educated, more aware, etc., then one doesn’t need to borrow several tens-of-thousands of dollars to do that. Self-discipline, the internet, travel and part time work would be a much better path in that case. But the educational-industrial complex doesn’t like that, and neither do most employers, so most people are pushed to get a degree because they want work that requires it. And to get that degree most people have to go into significant debt. Unless you’re a Bill Gates or Steve Jobs, the self-taught, self-educated and worldly experience path doesn’t work in today’s environment that values connections and machine-read resumes to have a chance at employment in a middle-class job.
I could be the poster boy for that. I have a running battle going with the kidlit diversity priesthood who are very upset with me for just going ahead and doing what they claim to be teaching people to do. They are to a man or woman college educated, most with MFAs and have generally written 3 books each, and more often than not support themselves with gigs in academia. I get lectured by people who’ve written – literally – 3% of what I’ve done with my 10th grade education. (And I not only outproduce and outsell them, I’m generally better-reviewed.) I doubt there are a dozen people who’ve supported themselves purely off their kidlit writing for the 27 years I’ve managed so far, and my wife and I are two of them. We don’t work like academics, we work like the former waiters we are, pulling a double shift.
But the odds of me getting some soft ‘writer-in-residence’ gig or being tapped to teach at a college? Zero. Of course I would turn them down, that goes without saying, but in academia a writer with an MFA and three books with zero starred reviews is qualified, and the writer with 150 books, too many starred reviews to remember, and no degree is not.
I agree, and by insisting on credentialing business creates the higher costs borne by the student. Business refuses to pay for training and they refuse to find a more sensible approach to hiring. Money they might use to pay for training or a better HR operation goes into the pockets of CEOs and board members, and the costs are shifted to students. And when business can’t find workers for what they’re paying, they demand H1B’s and shift the costs to Korean, Chinese and Indian educational systems and betray the American student.
But this being America where all that ever matters is how much richer a rich man can get, we blame the students for taking on too much debt. God forbid we demand business weasels stop plundering.
Of course. Colleges are in the education-selling business. You gotta sell the product.
My answer would be to a) stop importing low-skilled workers; and b) start paying wage subsidies.
Indeed. Probably doesn’t help that I go into high schools and tell kids I’m a drop-out. It has taken me a while to realize that many of my conflicts with other kidlit people comes down to them not much liking the fact that I’ve succeeded where they, with their excellent formal educations, fail. It’s gown vs. town.
Michael,
I wonder how many successful authors have MFA degrees – I’d guess probably few to none. Some things just can’t be taught.