Why Twenty-Somethings Aren't Doomed to Be Poor (but Thirty-Somethings Might Be)

It all comes back to the housing bust.

As we're all too aware by now, it's been a raw decade for young Americans. The job market still has a giant, recession-shaped crater in it. A college degree is more expensive yet more essential than ever. Wages are stagnant.

All of this adds up to a single sad possibility, according to the New York Times' Annie Lowrey: Today's twenty- and thirty-somethings may never end up as rich and financially secure as their parents. Lowrey's story points to a recent study by the Urban Institute, which suggests that Americans under forty, financially wracked by student debt and the housing bust, have saved up much less wealth than the generations before them. Because wealth compounds over time, there's a strong chance they won't ever catch up.

But the Times misses something key, I think, which is that not everybody under 40 is in the same boat. As this graph from the Urban Institute's study shows, it's mostly Americans in their thirties (in red) who have seen their net worth collapse compared to 30 years ago. The quarter-life set are actually doing a bit better.


And there's a simple reason for that: the housing market crashed just as today's thirty-somethings were getting into it. As a result, they found themselves in lots of debt and with very little to show for it. As the real estate researchers at Zillow reported in August, homeowners in their thirties are still the most likely to be underwater on their mortgages.


Most of today's twenty-somethings don't have any financial scars from the housing collapse. Rather, their collective finances (shown in light blue below) look more or less as they always have: piddly.   


In some senses, twenty-somethings are collectively even better off than that blue line suggests. The fraction of 25-to-29-year-olds with a bachelor's degree has grown by almost 40 percent since early 80s, and while today that means more of them are saddled with student debt, in the long-run, it means they'll likely have higher earning power.

To be sure, these averages obscure as much as they reveal: wealth is distributed wildly unequally, both between age groups, but also within them. Some twenty-somethings are thriving in well-paid, white-collar jobs, some are bouncing between unpaid internships, some are struggling to find work that doesn't require a college degree. Overall, wages are up for 25-to-34-year-old women since the early 1980s, but down for men.

But granting all that, I think it's fair to say this: today's thirty somethings are climbing out of a deep enough hole that they may never become as wealthy as the boomers unless home values rebound dramatically, and then, many might only be getting back to even. Their younger siblings in Gen Y, however, are better educated and not perceptibly worse off, in the aggregate, than their parents were at this age. They've had a rough start, and it remains to be seen whether they will get the benefit of massive bull markets in stocks or housing that helped pad their parents' bank accounts. But they're not doomed yet.