Since we are supposed to be in the midst of a big national discussion of economic inequality, it’s appropriate to take a close look at all sorts of optics showing irrational disparities in the distribution of income and wealth in the richest country on earth.
As Senior Editor Phillip Longman shows in an important article (adapted from an upcoming book) in the new issue of the Washington Monthly, once you start looking at economic trends through the optic of generations, you are introduced to a vast and disturbing set of data all pointing in pretty much the same direction: at some point mid-way through the Baby Boom generation, Americans began losing ground against previous generations and then even against their own earlier achievements. And it’s getting steadily worse.
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.
These vastly different economic trajectories experienced by today’s living generations are basically unprecedented. Throughout most of our history, inequality between generations was large and usually increasing, to be sure, but for the happy reason that most members of each new generation far surpassed their parents’ material standard of living. Today, inequality between generations is increasing for the opposite reason. Though much more productive and generally better educated, most of today’s workers are falling farther and farther behind their parents’ generation in most measures of economic well-being.
You really do need to read the whole thing. It not only consolidates and makes sense of a lot of scattered impressions we have of standards of living deteriorating despite whiz-bang technological advances and a culture of conspicuous consumption. It also makes sense of political trends, as this example about the impact of the recent housing and financial crises shows:
[The] sequence of events particularly damaged members of Generation X, many of whom took out mortgages on predatory terms at, or near, the top of the housing bubble. Largely as a result, from 2007 to 2010, Gen Xers as a whole lost nearly half (45 percent) of their wealth, or an average of about $33,000 subtracted from already low levels. Many were pushed into negative net worth, as their houses became worth less than their debts.
By contrast, those born during the Great Depression era (between 1926 and 1935) experienced zero loss of net wealth as a group during the Great Recession. Indeed, in 2010, those ages sixty-five to seventy-four had a net worth 53 percent higher than that of their same-age counterparts in 1989.
Any wonder that over-65s, who split between the two parties as recently as 2006, went flooding into the Tea Party ranks in 2010?
The hard part, of course, is determining what if anything can be done about this horrific generational trend. Longman points to health care and higher education costs (including the burden of student loans) as a major contributor to the economic problems of the more recent generations, and also to the massive and regressive subsidies for homeownership that help lock up wealth in assets disproportionately controlled by older and wealthier Americans. He also suggests that policies ranging from slack antitrust enforcement to tax laws that encourage corporations to distribute profits to shareholders instead of investing them in the workforce are reinforcing generational inequality. But the first step towards dealing with these trends is to recognize them. Phil Longman’s given us the tools to do just that.