Photo: Vintage of buy war bonds

Money Culture

Oldest Americans Are Lucky Generation

Americans in their 70s and 80s have earned more and are wealthier than the baby boom generation – for the simple reason they were born at the right moment in history.

It was easier for members of this older generation to get ahead, because they came of age in the aftermath of World War II, when economic and demographic trends were strongly working in their favor, contends new research by William Emmons and Bryan Noeth of the Federal Reserve Bank of St. Louis.  The emergence of a modern social safety net and the rise of unions may’ve also contributed to their relative prosperity, they said.

Baby boomers born after about 1950 do not seem to have the same income and wealth over their working and retired lives that their parents have enjoyed, even after the research takes into account numerous things that determine an individual’s prosperity, such as their level of education.  If the current trend continues, these younger boomers just won’t be as lucky.

Birth year “comes up as a significant variable in terms of influencing income and wealth,” Emmons, a senior policy adviser, said about the study, which analyzed decades of U.S. data on household finances.

By the time many boomers were entering the labor force, the gains that older Americans enjoyed had come to an end and incomes had begun to stagnate.

For example, for households who are currently at least 70 years old, inflation-adjusted incomes increased 28 percent between 1989 and 2010, and incomes rose by more than 60 percent for those in their 60s. But during that time, incomes fell slightly for younger households.

Demographics may’ve played a role in why older Americans have fared better.  A 20 percent decline in births during the Great Depression put workers in relatively short supply by the time the Depression-era babies reached working age, which may’ve pushed up their earnings, the research suggested.

Post-war, the economy was also starting to take off, creating economic opportunities for them.  The institution of Medicare and other modern social programs for these Americans, now retired, helped to stabilize their incomes during the Great Recession.

Individuals do well financially for many reasons – they work harder, save more, go to college,  or inherit money.  This makes it extremely tricky for researchers to tease out the effects of a simple birth date.  To isolate this effect, the researchers controlled for numerous factors such as education, marital status, and even whether an individual was a saver or not.

There is some evidence the erosion in incomes and wealth may be continuing for Generation X and Millennials.  But only time – and more data – will tell.

3 Responses to Oldest Americans Are Lucky Generation

  1. Right. The relative parenting received by those in younger generations, a kind of wealth in itself, was worse on average too.

    It isn’t a matter of someone’s “fault.” But what it does mean is that all the debt shifted to younger generations — on the books with regard to public and private debts as such, off the books with regard to infrastructure, underfunded pensions, the Social Security “trust fund” already in effect spent and IOUs left in its place — on the grounds that those younger generations would be better off and had “time to adjust,” was wrong.

    Also wrong — not telling those who are younger that are and will be worse off, so they can start adjusting. Unfortunately, too many are trying to match the standard of living they were accustomed to by going into debt.

  2. Kim Blanton says:

    Larry,
    Your comment is right on.
    I have also found that Millennials are very aware of this issue and more concerned about it than older people really realize.
    Kim (blog writer)

  3. Neil Rhein says:

    While I respect the “greatest generation” and all they did for this country, I think some of them are a bit hypocritical. They complain about “socialism” and high government spending, yet their generation was the biggest beneficiary of this spending, through Medicare, the new prescription drug coverage, investments in infrastructure, etc.