Only Gen Xers Have Gotten Richer Since the Recessionby
The recovery was a good time to be youngish. According to the Federal Reserve’s latest tri-annual survey (PDF) on American finances, Gen Xers are finally coming of age, at least in economic terms. Slackers no more, their income and wealth have increased since the recession, although the wealthiest reaped much bigger gains and inequality got worse.
The figure below shows median income for different age groups over the last 20 years.
For Americans ages 35 to 44, income still hasn’t recovered to its pre-recession levels. But unlike for every other age group, it did increase. Now Gen Xers earn as much as 45- to 54-year-olds, a reversal of fortunes for the older cohort. (The typical 35- to 44-year-old now outearns the median 55- to 64-year-old, although that’s because older people are more likely to retire or work part-time.)
The recovery may have been better, in income and wealth terms, for 35- to 44-year-olds for many reasons. People in their mid-30s to early 40s are relatively skilled compared with younger workers and relatively cheap compared with older ones. It’s also possible that the recovery favored skills more likely to be possessed by younger workers, or that younger workers were in a better position to pivot from low-opportunity fields to higher-opportunity ones.
All of these explanations are consistent with the rise in inequality. A shift to favor skills disproportionately held by younger workers would increase their earnings and wealth, especially for the most skilled. The figure below is the ratio of the 90th percentile to the 50th percentile (median) of wealth for different age groups.
Older Americans are poorer since the recession, but wealth among the richest older people fell much more, narrowing inequality. Yet 35- to 45-year-olds, the only group that saw wealth grow, also saw a rise in inequality.
This isn’t the only way to measure inequality. It’s equally valid to measure the gap between the 25th percentile and the 75th—the lower middle and the upper middle. By that calculation, the wealth gap increased for Gen Xers right along with every other group. But when you look at the ultra-rich and the middle class, the gap narrowed for middle-aged workers and widened for 35- to 45-year-olds. We still don’t know much about the relationship between economic growth and this kind of inequality. But it’s notable that the only age group whose income grew was the same one that became more unequal. It could be that the cost of slightly higher income in the new economy is much more inequality.