youíre a baby boomer or a member of Generation X,
consider yourself unlucky.
two generations of Americans, born between the late
1940s and the early 1980s, have earned less money and
accumulated less wealth than their parents and
grandparents enjoyed at the same age, William Emmons and
Bryan Noeth of the St. Louis Federal Reserve Bank
conclude in a new study.
older Silent Generation, born before and during World
War II, won the birth lottery in several ways. Birth
rates were low during the Depression and the war, so a
scarcity effect helped push up wages when the war babies
entered the workforce in the 1950s.
also were lucky enough to come of age when American
industry dominated the world and unionization rates were
rising. And they were lucky enough to retire after the
introduction of Medicare in 1965 and inflation-indexed
Social Security benefits in 1975.
of them were out of the workforce by 2008, when the
Great Recession hit. Heavily indebted Gen Xers saw their
home equity evaporate, and many younger people who lost
their jobs still havenít recovered.
not just being hit by shocks, but also about your
ability to bounce back from shocks," said Emmons,
an economist at the St. Louis Fed. "Older families
as a rule were more resilient in that they had more
liquid assets and much less debt."
one telling comparison from the study: In 1989, the
median older American (age 62 and up) had about four
times the wealth of someone under 40. Now, the older
generation is nine times as rich as the younger.
said he was surprised to find such a large birth-year
effect. He and Noeth sorted out the effects of race,
education, health, marital status and other factors, and
were left with a big difference that could only be
explained by when a person was born.
big? At a similar age and education level, someone born
in 1970 earns 27 percent less and has 43 percent less
wealth than a person born in 1940.
who got more education than their parents, of course,
probably out-earn them, and many boomers and Gen Xers
are in that category. For much of the 20th century,
though, parents assumed that prosperity would make their
children better off than they were, and thatís no
longer automatically true.
a country that prides itself on being the land of
opportunity, itís jarring to think that much of your
wealth depends solely on when you were born. When you
add in the luck of being born into a certain ethnic
group, and being born to highly educated parents, the
birth lottery plays a big role in inequality.
we debate the fortunes of the 1 percent versus the 99
percent, as the Occupy movement posed the question, does
it make a difference that the 1 percent got there
largely through luck?
isnít suggesting any policy answers, but he is hoping
to inform the debate. "Our approach to the
inequality question is to look at the demographic
factors that are determining income and wealth," he
leaders also might want to keep this finding in mind as
they debate the scope and function of government. Is it
fair to spend more money on the elderly at the expense
of programs that serve young families?
the answer to that question changes when we think of
older Americans as the Lucky Generation.