A recent report released by the Federal Reserve Bank of St. Louis predicts that millennials born in the 1980s were hit especially hard by the Great Recession, and may never financially recover.
The net worth of a typical family headed by someone born in the 1980s was 34 per cent below what was expected, according to the study, which is entitled “A Lost Generation.”
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Furthermore, while the Great Recession “inflicted deep and widespread losses of income and wealth on the typical American family,” which affected all ages, families younger than retirement age suffered the most.
While those born in the 1980s experienced the greatest decrease in wealth, those born in the ’70s demonstrated wealth levels 18 per cent below where they should have been and those born in the 1960s had wealth levels 11 per cent lower than they should have been.
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However, 1980s-born kids were too young to own homes prior to the Great Recession, and even by 2016, less than 45 per cent of kids born in the ’80s had purchased homes.
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While Student Loan Hero research states that millennials have benefited from an almost 70 per cent rise in wages since 1970, these rises haven’t kept up with inflated living costs. Across Canada and the United States, rent, home prices and university tuition have increased faster than incomes — especially in major cities like Toronto and Vancouver.
In addition, young families suffered a major blow to their wealth during their prime earning years, which has cast doubt on whether millennials will be able to bounce back.
“The fact that many families suffered large wealth setbacks during their prime earning and wealth-accumulation years raise the question of whether they will be able to rebuild their wealth to meet major saving goals, including for a home purchase, college tuition for their children and retirement,” the report stated.
Reports of financial woes for millennials are nothing new. Saddled with more debt than their parents while earning incomes that haven’t kept up with living costs, millennial workers have found themselves in a lurch when it comes to acquiring assets and accumulating savings.
Debt in particular, is a major obstacle to millennials trying to accumulate wealth, as the average student-loan debt owed by Canadian students was tallied at about C$22,000 in a recent poll released by BDO. In addition, only 33 per cent of respondents to the poll graduated debt-free.
While the millennial cohort has become known for financial struggles and precarious career prospects, the St. Louis study offers a light at the end of the tunnel. Millennials are generally more educated than Generation Xers, which has largely contributed to putting off major life events such as getting married or buying a house.
While this has meant entering the labour force later, it could also mean greater earning prospects later on in life, as well as the potential to build more wealth in a shorter period of time.
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