Google “Generation X vs. Baby Boomers,” or “Millennials vs. Generation X” and you’ll find results that, true to the “versus,” bring to mind a boxing match. Not just in the comments sections (Millennials and Gen Xers urging Boomers to retire or die; Gen Xers and Boomers scolding Millennials for participation-ribbon entitlement), but in the articles themselves. “Who’s worse off financially – Baby Boomers, Generation X or Millenials?” asks Canada’s Financial Post. “Baby Boomers: Five Reasons They Are Our Worst Generation,” trumpets a Philly Mag listicle. “Generation X has it worse than baby boomers,” laments the Boston Globe. “Crybaby millennials need to stop whinging and work hard like the rest of us,” admonishes London’s Telegraph. The stakes of the match seem not to be a victory, but an admission of defeat: who’s been hit the hardest, and how much have they lost?
The answers aren’t easy – but they also aren’t qualitative. Though we love to throw personal accusations around (the Boomers had no foresight, the Xers were slackers, the Millennials are narcissists), the real roots of the generational divide can be traced back to hard economic truths. In Rose’s words, “It is all about fucking money.”
THE MONEY EQUATION: INPUT ≠ OUTPUT
One of the most controversial issues between Boomers and their descendants is that of government support for retirees. In 2015, a significant portion of US Government spending went towards Americans of retiring age. 24% of the federal budget went towards Social Security, and another 16% went towards Medicare. That means about 1.4 trillion dollars, or nearly 40% of the nation’s $3.7 trillion spending, went towards Americans over the age of 65 (generally speaking; 17% of Medicare beneficiaries are younger Americans with disabilities). As more of the nearly 75 million Baby Boomers age, this percentage will only increase. The rising costs are compounded by the fact that healthcare has gotten exponentially more expensive in the United States over the past century. In 1964, health care spending was about $197 per person per year, which would adjust to about $1,450 in 2012 dollars. But in 2012, health care spending per person per year was actually $8,915. The massive cost increase is the result of multiple factors, most notably waste (a 2012 Atlantic article, citing an Institute of Medicine report, estimated that the US spends about $750 billion on unnecessary healthcare costs each year). As aging Boomers encounter more health problems, their monetary strain on the system will continue to grow, and younger generations will be left paying the price.
Of course, if Gen X and the Millennials could count on similar government support in their old age, they might not mind paying their taxes towards Boomer-benefitting services. But unfortunately, younger generations can’t count on the same safety net. Workers born in the 1960s and onwards (a group that includes Rose and Jamie) have paid a higher percentage of their incomes into the Social Security tax than the Baby Boomers before them, but will receive less Social Security benefits in retirement. Baby Boomers didn’t just get their tax dollars back – they actually got more money in benefits than they’d paid for. A 2012 Urban Institute study estimated that a typical (Boomer) couple retiring in 2011 would draw about $200,000 more from Medicare and Social Security than they’d paid in taxes towards the same programs. Millennials and Xers will be lucky if they see their contributions come back at a 1:1 ratio.
THE MOBILITY TREND: UPWARD → DOWNWARD
The problem with Social Security benefits isn’t just about payout – it’s also about what higher contribution taxes, plus a myriad of other negative economic factors, means for the ability of Gen Xers and Millennials to save for retirement. When early-wave Baby Boomers (including Kenneth, Henry, and Sandra) entered the workforce, they could expect a steady upward climb in salary. They did better than their parents, and they also did better than their younger selves, seeing salary gains throughout their twenties, thirties, and forties before a wage peak (of 60-70% above their starting salary) in their early fifties. This lifelong rise allowed early Boomers to save for retirement and buy wealth-accruing assets (like stocks and houses). In retirement, Boomers could expect to live off of their accumulated wealth, in combination with employer-sponsored pensions and government-supported services. As a result, the net wealth of early-wave Baby Boomers in retirement is essentially the same as it was pre-retirement.
Richard Armitage and Zoe Kazan
(Photo by Joan Marcus)
Now, compare that to the state of mid to late Boomers, Generation X, and Millennials. While early Baby Boomers enjoyed a lifetime upswing, the following generations (those born in the late 50s and onwards) experienced downward trends across the board. A 2015 Washington Monthly article, “Wealth and Generations,” neatly lays out the contrast: “Today’s fiftysomethings may be part of the first generation in American history to experience this kind of lifetime downward mobility, in which at every stage of adult life, they have had less income and less net wealth than did people who were their age ten years before. Yet these mid-wave Baby Boomers shouldn’t feel too sorry for themselves. That’s because, as we shall see, they were far better off as twentysomethings than were subsequent cohorts of Generation X twentysomethings, and especially better off than today’s Millennials.”
Unfortunately, it’s true. Gen Xers and Millennials have had many obstacles to overcome: lower starting salaries than their predecessors, fewer wage increases in their 20s and 30s, earlier and lower earnings peaks (early Xers saw a 50% increase at their peak; later Xers and Millennials may see only a 20% increase), fewer employer-sponsored pensions, and lower rates of asset ownership. As a result, these generations have a limited ability to accumulate wealth – and a more precipitous drop in post-retirement income. While early Boomers enjoyed nearly 100% of their pre-retirement income in their golden years, Gen X will subsist on about 50% of their pre-retirement income. And even that has come at a personal price. While the typical Generation X household makes (when adjusted for inflation) about $12,000 more per year than their parents’ household did, they also do more work and have less wealth; more families have two wage earners, and the hours worked by those wage earners have increased over time. In the past, more work meant higher wages; from 1948-1973, the productivity of American workers went up 96.7%, and wages followed, increasing by 91.3%. Productivity also increased from 1973-2013 (by about 75%), but, in contrast to previous decades, wages lagged far behind, increasing only 9%. As a result, American families are experiencing downward mobility. Nearly one-third of Gen Xers born in the late 1970s to middle-class families fell out of the middle class in adulthood. And fewer than half of Gen Xers (in every income bracket) are wealthier than their parents were at the same age.
THE COMMON VARIABLES
So what happened to cause this downward spiral? Two major economic shifts are significant to the story: the 1990 Recession, and the 2008 Financial Crisis. The first occurred just as Gen Xers were entering the workforce and the latter in the midst of what should have been their peak earning years. The results were catastrophic for the total financial narrative of Xers, causing them to have low starting salaries, lesser savings, and major savings losses. Generation X lost 45% of their wealth during The Great Recession, 2007-2010 (Boomers lost only 25%). And those difficult years have had reverberations for every generation: Boomers have stayed in the workforce at unprecedented rates (keeping jobs that, in other circumstances, would have opened to Xers and Millennials), asset values have decreased, and wages have stagnated. As a result, many younger Americans have opted to delay their entry into the workforce (and up their appeal as a job candidate) by going to college – an ostensibly wise move, considering that high school graduates today make only 62% of what college graduates make (as compared to 77% in 1979).
Richard Armitage and Amy Ryan (Photo by Joan Marcus)
But college, of course, poses another set of financial problems. In the best-case scenario, college delays earnings but ultimately pays off in a more skilled (and higher-paid) job. In the worst-case scenario, which is currently playing out for many Millennials, you graduate with mounds of student debt (college costs more than doubled between 1982 and 2012, and the average student borrower graduating in 2016 will owe some $37,000) and no job openings in your field. Many Millennials are choosing to bide their time (and pay their debts) by working jobs unrelated to their degrees. What will happen when jobs return (some 30 million are estimated to open as Boomers retire over the coming years) and these Millennials haven’t been building their resumes – and a new batch of graduates is ready to hire? We’ll see.
But while Millennials are looking at an uncertain future, Xers are living in a tenuous present. Often called the forgotten or neglected “middle child” between the Boomers and Millennials, Gen X is also currently a “sandwich” generation, meaning they are paying for aging parents as well as dependent children. The results are dire for finances. A 2015 survey found that nearly 40% of Generation X respondents reported that they do not feel “at all financially secure,” and nearly as many (38%) reported having more debt than savings.
Richard Armitage, Amy Ryan and Alex Hurt (Photo by Joan Marcus)
It’s important to remember that the factors above don’t exist in a vacuum. The economy, the job climate, and the college system are maintained and shaped by policy decisions. And for the past twenty years, those decisions have been made by Baby Boomers. Boomers make up only one-third of the American voting-age population, but they the hold nearly 2/3 of the seats in the House and Senate. The Congressional Boomer legacy still has some time to change; it’s estimated that Generation X won’t gain a majority in the House or Senate until at least 2018. But the generation’s record thus far has been, in a word, contentious. Jim Tankersley, in a 2015 Washington Post article, offered a harsh view of the Boomers’ achievements: “…they cut their own taxes, they deficit-financed two wars, they approved a new Medicare prescription drug benefit that their generation will be the first to enjoy in full. Partly as a result of those policies… Boomers let federal debt, as a share of the economy, double from where it was in 1970… Every generation wants to leave a better world for the ones to follow. I truly believe that boomers had no idea, for a long time, that the sum of their choices — of their quest to make life as good as it could be for themselves — might be a worse world for their children. But it’s apparent now.” Apparent, and illustrated onstage in Love, Love, Love – though, at least in the play, the Boomers aren’t watching.
Love, Love, Love is now playing at the Laura Pels Theatre at the Harold and Miriam Steinberg Center for Theatre. For tickets and more information, visit our website.
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