Millennials! Stop texting for a moment, and consider your older friends (maybe even your parents), the people who still think email is the best way to communicate. We need your help.
"If I were to choose a generation that was most in danger and most in need of public policy assistance, it's not millennials. The generation I worry about is Gen X-ers."
That statement comes from demographer Neil Howe, who ought to know. He has made a career of studying generational differences and is credited with coining the term "millennial" to describe the group of young adults between the ages of 15 and 34. He founded the consulting group LifeCourse Associates to help marketers and policymakers understand generational differences. He says that Generation X, ages 34 to 54, is less prepared than previous generations for the expenses of aging—retirement, health declines, etc.
New, unrelated research from the Pew Charitable Trusts bears this out. The researchers' intricate study of Generation X-ers and their parents shows that only about one-third of Generation X-ers have exceeded the wealth that their family had when their parents were their age. This is true even though three-fourths of Generation X-ers are actually earning more than their parents did at their age. They have saved less and accumulated less property.
Even more disturbing, these comparisons don't adjust for the number of breadwinners in the families of then and now. Thus, a Generation X-er in a two-income household might be considered "upwardly mobile" by virtue of having more income now than in her one-income childhood home. But she might actually earn less on her own than the single breadwinner of her childhood. As two-income households become increasingly common, Generation X-ers may be earning more than their parents simply by working more. That concept hasn't been studied in depth, Pew researchers say. But we do know one thing: They still have less wealth than their parents did.
The biggest reason that Generation X-ers are earning more but have less won't surprise millennials. It's student loans. While student debt is most often thought to affect recent college graduates and millennials, it impacts older generations as well. Almost two-fifths of Generation X-ers who graduated from college and make more than their parents (38 percent) are still paying off student loans, and the median balance is $25,000, according to Pew's study. And these are the "upwardly mobile" ones.
"Upwardly mobile" doesn't always amount to wealth. The biggest group of Generation X-ers who have done better than their parents started off pretty poor. When their parents were in their early 30s, they had about $2,000 in household worth. For this group of Generation X-ers, it wasn't that difficult to exceed the household wealth of their childhoods. But they're still poor. Sixty-nine percent of Generation X-ers who were raised in poor households managed to surpass their parents' wealth when they hit their early 30s, yet half of them remain at the bottom of the income ladder, the study says.
It's too early to tell how the financial position of Generation X-ers will affect the younger generation behind it, but it's hard to imagine that millennials will fare better if their parents and older colleagues are struggling. "It does suggest their wealth accumulation is lower and they do have less reserves to care for the next generation," said Diana Elliot, Pew's research manager on financial security and mobility.
Of course, not all millennials have Generation X parents. But the pattern remains the same for younger Baby Boomers, according to Howe. The financial situation of late-wave Boomers, those born in the late 1950s and early '60s, is almost as bad as that of the Generation X-ers. People born between 1955 and 1964 were the first group to fall below the next older group in wealth, he said.
"Later-born cohorts at younger ages have meanwhile been falling beneath first-wave Boomers for decades—in what amounts to a horrible traffic jam," Howe wrote in a recent analysis for Forbes. The only difference is that they tend not to be burdened with student loans.
Generation X also took the biggest hit from the 2008 financial collapse, Howe says. Median household worth dropped 55 percent between 2007 and 2010 for people between 35 and 44. Older Generation X-ers, age 45 to 54, got off a little easier, losing only 40 percent of household worth. Late-wave Boomers saw a 33 percent reduction.
Howe worries about Generation X because that population is aging, but he remains upbeat about the financial fate of millennials, even though they have high student debt and high rates of unemployment. There is still time for public policy to correct for the imbalances that are more immediately impacting the next oldest generation, he says. "There are number of things that could change. There's a lot more time for that generation to recover."
Among the changes that could alter the current financial course for Generation X-ers and the younger folks behind them are an expanded earned income tax credit and some way for nondisabled people to buy in to Medicaid, Howe says. That would stabilize the poorest households. Moreover, too many Generation X-ers are underwater with their mortgages. Assistance on that front would help the economy as a whole.
It will probably be up to the millennials to push for these changes, in part because Generation X has the smallest population of the living generations and less political clout. Generation X's small numbers sometimes causes them to be overlooked by researchers, the Pew study notes. But their finanancial decisions will still impact younger generations.
Howe says millennials today are savvy enough to realize they need to prepare for their own futures. They are more cautious than Generation X-ers or late-wave Boomers. "One of the things I've noticed about millennials is this remarkable aversion to personal risk taking. Every form of indebtedness is going down except for student debt. They're not getting married. They're not having as many kids. They're putting their life on hold," he says.
The only question now is whether millennials will be able to expand on all that practicality to improve the collective financial health of their older peers. The country would be extremely grateful if they did.