Americans Are Getting Richer, Just Not the Young Ones

20- and 30-somethings haven't seen the same gains that older Americans have in the past decades.

Despite the toll the Great Recession took on our finances, a recent study from the Urban Institute reveals that Americans are still significantly richer today than they were a quarter-century ago. The bad news? Those financial gains have been made almost exclusively by older Americans. If you’re under 40, you’re likely to be doing worse than someone your age was doing a quarter-century ago. Bad news in a city like Boston, where more than 65 percent of the population is under 40.

As Annie Lowrey wrote in The New York Times, “Because wealth compounds over long periods of time—a dollar saved 10 years ago is worth much more than a dollar saved today—young adults probably face less secure futures for decades down the road, and even shakier retirements.”

Lowrey explains this with economic trends that have hit young Americans especially hard: the collapse of the housing bubble, which most affected young people who started to buy as home prices declined; the rise of student loan debt, which has steadily risen through the last half-decade; and the tough job market, which has disproportionately left young people unemployed or with wages that have stagnated during the sluggish economic recovery.

The Atlantic’s Jordan Weismann pointed out that not everyone under 40 is equally bad off. While Americans in their thirties have seen their net worth collapse compared to twenty-five years ago ago, American in their twenties are doing okay. In fact, twenty-somethings today are actually doing slightly better than they were a quarter-century ago. It’s the thirty-somethings who saw the investments they made in their homes fail when the housing bubble collapsed. Most twenty-somethings hadn’t even entered the market at that point.

Weismann argues, “The fraction of 25-to-29-year-olds with a bachelor’s degree has grown by almost 40 percent since early 80s, and while today that means more of them are saddled with student debt, in the long-run, it means they’ll likely have higher earning power.”

That sounds reassuring for the more than 150,000 college and university students living in Boston, except of course that a bachelor’s degree isn’t what it was a quarter-century ago. While the cost of attaining a college education has rapidly increased, the value of the degree has actually gone down. As The New York Times’s Catherine Rampell writes, “The college degree is becoming the new high school diploma: the new minimum requirement, albeit an expensive one, for getting even the lowest-level job.”

As a result, increasing numbers of college graduates are ending up in relatively low-skilled and low-paying jobs. Nearly half of all employed college graduates hold jobs that the Bureau of Labor Statistics say require less than a four-year college education, and 37 percent of that half is made up of those that hold jobs that require no more than a high school diploma. In 1970, less than one percent of taxi drivers and two percent of firefighters had college degrees. Today, more than 15 percent of workers in both professions are college graduates.

On the whole, those with a bachelor’s degree tend to earn more than those without one—but it’s far from a guarantee that you’ll landing a high-paying job. Coupled with the rising cost of higher education and the increasing amount of debt that students are forced to take on to pay for it, a four-year degree is beginning to look less and less like a good investment.

That’s all a long way of saying that whether you’re a 20- or 30-something, you’re probably not reaping the gains in wealth that America has seen of late.