Has intergenerational progress stalled?
A new study helps us to answer this question
Recently a new research article was published that helps to answer a controversial question:
“Are today’s younger generations worse off than older generations?”
“Has the American Dream ended?”
The paper is entitled “Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans.” It was written by Kevin Corinth (Univ of Chicago) and Jeff Larrimore (Board of Governors of the Federal Reserve System). Below I will add my summary of key points and direct quotes from key passages in this important study.
Key points
Where most studies of intergenerational mobility compare individual parent-child income changes, this study examines all households.
The study uses median household post-tax, post-transfer income at age 36-40 for each generation indexed for inflation.
Using this metric, each generation saw a substantial increase in material standard of living:
The Silent Generation (born 1928-45) saw a 34% increase.
The Baby Boom Generation (born 1946-1964) saw a 27% increase.
Generation X (born 1965-80) saw a 16% increase.
The Millennial generation (born 1981-96) saw an 18% increase.
The lower increase for Gen X and Millenials is largely due to a slowdown in the growth of work hours. When work hours are controlled for, Millenials experience larger income gains than Gen X and Baby Boomers.
Gen Z is too young to be measured by this metric.
Accounting for race, education, college debt, health insurance, and differing household types does not change the outcome.
Abstract
We find that each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963-2022 based on the Current Population Survey Annual Social and Economic Supplement. At age 36–40, Millennials had a real median household income that was 18 percent higher than that of the previous generation at the same age. This rate of intergenerational progress was slower than that experienced by the Silent Generation (34 percent) and Baby Boomers (27 percent), but similar to that experienced by Generation X (16 percent). Slower progress for Generation X and Millennials is due to their stalled growth in work hours—holding work hours constant, they experienced a greater intergenerational increase in real market income than Baby Boomers. Intergenerational progress for Millennials under age 30 has remained robust as well, although their income growth largely results from higher reliance on their parents. We also find that the higher educational costs incurred by younger generations is far outweighed by their lifetime income gains.Introduction
A defining aspect of the American Dream is that the economic wellbeing of each generation should surpass that of the previous one. Whether this condition holds for younger generations has recently been called into question. A 2022 Gallup poll found that just 42 percent of Americans expect that today’s youth will have a better life than their parents—down from 71 percent who felt that way in 1999 (Brenan 2022). Similarly, headlines in recent years have called Millennials (born from 1981–1996) the “unluckiest generation in U.S. history” (Van Dam 2020) and claimed that “many Millennials are worse off than their parents—a first in American history” (Luhby 2020).We address these questions by evaluating whether each generation as a whole has surpassed the previous one, comparing individuals from across seven generations—from the Lost Generation (born 1883–1900) to Generation Z (born 1997–2012)—using the Current Population Survey Annual Social Economic Supplement (CPS ASEC) from Flood et al. (2022).
Data and Methodology
We use the CPS ASEC to construct our various income measures for each year from 1963 to 2022Conclusion
We confirm that there has been a slowdown in intergenerational progress, except for Millennials who saw their incomes grow slightly faster than Generation X but still more slowly than Baby Boomers and the Silent Generation. Intergenerational progress has remained positive for all generations. Positive growth has been maintained for Generation X and Millennials in spite of their stalled growth in hours worked.
So a couple notes on the study:
1. Only considers adults in age band 36-40
2. Doing this definitionally excludes Zennials / gen after Millennials
3. I wanted to specifically see how they accounted for housing, and they're not really. They're looking at median incomes at each generation in the 36-40 age band, and seeing an overall rise in median income for each gen, although the increase is decreasing for each generation. Expenses really aren't taken into account. They use the PCE inflation measure, which theoretically includes a 17-18% component of "housing and energy," but how accurately this reflects the steep rise in housing and rent prices we saw 2018+ is anyone's guess. Because of their age band, even for the Millennial gen, they're only looking at 5 years out of 15, and specifically looking at Millennials born 1982-1986 only. How representative this slice is is probably up for debate, because a lot of those are of an age to have bought housing before the huge increases in house prices and rent post 2010.
4. The age band 36-40 seems oddly narrow to me, particularly when other papers like Chetty 2017 find clear declines in intergenerational mobility at the earlier age of 30. Here's their take on it: "They calculate in each year the share of adults aged 30 whose income exceeds that of their parents when their parents were around age 30. Whereas around 90 percent of 30-year olds born in the early 1940s had higher incomes than their parents at the same age, this was true for just over half of 30-year olds born in the early 1980s. This decline in absolute mobility is consistent with our finding of slowing intergenerational progress from the Silent Generation (born 1928–1945) through Generation X (born 1965–1980). But our results suggest that intergenerational progress is no longer slowing and may instead be picking up again for Millennials in their late 30s."
5. And indeed, if you look younger than 30: "First, we find that the higher household incomes of Millennials relative to Generation X, through their 20s, is a result of dependence on their parents rather than a rise in their own market incomes."
So like most "intergenerational mobility" papers, the data is mixed and highly dependent on specific choices like age band, inflation measure, and other choices, and doesn't really merit a strong conclusion either way, and is probably excluding huge increases in housing and college education costs post 2010, costs that materially affect younger generations, who even with higher "on the face of it" median incomes are facing significantly higher expenses.