Even though America is just beginning to repair the damage from the recession, belief in the American Dream remains strong, including among the unemployed. The idea that hard work can earn you a higher standard of living than your parents is, it seems, ingrained in our nation’s culture.
But while rising wealth across generations is in fact a documented phenomenon in the United States, it’s a different story for those under 40.
According to a recent report from the Urban Institute, while the average net worth (adjusted for inflation) of Americans over the age of 47 has roughly doubled since 1983 (with the largest increase going to the oldest demographic), the net worth of members of Generation X and Y—people between the ages of 20 to 46 in this study—have had much smaller gains. The current 29-37 demographic actually has 21 percent less net worth than their counterparts from three decades ago.
This comes as no surprise in the wake of the past decade’s unprecedented skyrocketing of student debt. The Federal Reserve of New York released a report this year showing that total student debt had nearly tripled just since 2005. College graduates and young professionals desperate to work off that mountain of debt are accepting jobs with stagnant wages, despite a massive uptick in productivity over the past few decades.
Young people face extreme financial pressure that Americans who were their age in the 1980s simply did not have to deal with. With ever-increasing frequency, today’s young people lack the resources to start a family and purchase their first houses. Home ownership has always been not only a central piece of the American Dream, but also the most surefire way to accumulate wealth.
However, with mortgage rates slowly climbing again on the tails of the recovery, more and more young people are finding home ownership out of reach, and are opting instead for renting shorter-term housing that gives them nothing in return. As a result, U.S. homeownership is at its lowest mark since 1995.
Without the early base of home equity to build upon, it seems likely that, for the first time in generations, Millennials and other young people will not surpass the wealth of their parents. The Urban Institute report suggests that as the Millennial generation ages, they may grow more dependent than ever on Social Security and other safety net programs—just as those programs are in danger of becoming underfunded.