Every generation thinks they had it the hardest. Millennials can’t afford to buy a house. Gen Z is graduating with an average of $20,900 in student debt. Boomers had to walk through the snow to school, uphill, both ways!
In what feels like unprecedented economic times, we can’t help but compare our financial circumstances to those who came before or after us. One thing we can say for sure is that the economic circumstances of young people today are dramatically different from those of their parents or grandparents.
Pinning our struggles on factors beyond our control—and commiserating with others in our age group facing similar hardships—can provide a little bit of relief when dealing with large-scale problems that we feel powerless to solve.
Looking at the macroeconomic factors of the U.S. in 2023, one can point to myriad issues—such as the sky-high cost of housing, healthcare, and education—that have made life inarguably more difficult for today’s youth, but the reality is much more nuanced. While young people today often face economic barriers that their parents and grandparents didn’t have to suffer, they also enjoy a much higher standard of living.
“Most people would say, given [the lack of] earnings growth, it doesn’t look as good for the younger generation,” said Kathryn Edwards, an economist at the Rand Corporation. “Others would come back and say there [have] been increases in the standard of living.”
Edwards believes that any generation could make a compelling case for themselves having it the hardest. Here’s why:
Amenities are cheaper. Necessities have never been more expensive
Overall, Edwards argues that young people tend to take certain amenities for granted. For example, she says that in order to listen to a new album by their favorite musician, their parents had to spend significant amounts on a stereo system and buy a physical album in an actual store. The same can be said of other electronics like cameras and camcorders, TVs, movies, and countless other conveniences that were once pretty pricey, and now come packed into a $1,000 smartphone or via a relatively low-cost streaming subscription.
Looking back even further, one could argue that young people are better off thanks to time-saving conveniences like dishwashers and washing machines, as well as home comforts like air-conditioning and microwave ovens. Then again, none of those conveniences make up for the fact that the homes they come in have never been more expensive.
Even after accounting for inflation, housing prices have increased 118% since 1965, while incomes have only increased 15%. In the last decade alone, the median home price increased by about 30%, despite incomes only improving by 11%.
“Yeah, we’re more likely to have a dishwasher and a microwave in our house now, and we can afford a TV, and all those things are relatively cheaper and better. But it doesn’t change the fact that it’s hard to find a one-bedroom apartment for less than $2,500,” says Edwards. “That price of the apartment has increased, depending on where you are, one to four times faster than wages in the same city.”
Knowledge is cheaper. Education has never been more expensive
The same pattern can be found in higher learning, where it’s easy to take our unprecedented access to information for granted, but where earning a degree has never been more difficult.
Just like housing, the cost of higher education is far outpacing income growth. According to a recent study conducted by online education platform ELVTR, tuition fees have risen at twice the pace of household income every single decade since the 1950s. The research found that, until the late ‘80s, 30% of the average household’s income was enough to cover tuition at a top institution; but today, students need to fork over 80% of their household earnings to cover the cost of the same degree.
At the same time, the study found that the return on that investment has fallen by four times over the last 70 years. In the 1950s, the lifetime return on a college education was more than 8,000%, but today it’s well below 2,000%.
“Knowledge is very cheap, if not free, these days, and that wasn’t the case 50 years ago,” says Roman Peskin, cofounder and CEO of e-learning platform ELVTR. “You can learn so much from watching free YouTube videos, you can buy cheap Coursera classes.”
Peskin explains that the return on that educational investment was once not even up for debate, but says that today’s skyrocketing cost of traditional education has caused many to question the conventional wisdom around higher learning. “Today, you can build a successful company with high school dropouts,” he says. “If they have intelligence, they can figure things out on their own.”
Earnings are up. But only for degree holders
The benefit of a bachelor’s degree isn’t what it used to be, but the numbers still suggest that it’s worth the investment for most students, and especially for men. While wages have been stagnating overall, the once sizable gap in earnings between men and women has been mirrored by a sizable gap between degree holders and those with a high school education or less.
According to data compiled by the Pew Research Center, men in the 1970s and 1980s without a bachelor’s degree could expect to earn the equivalent of about $50,000 a year in today’s dollars, largely thanks to unionized manufacturing jobs.
In fact, men without a bachelor’s degree outearned educated women right up until the ’90s. The wage gap has been closing—albeit gradually—ever since, but especially among women ages 25 to 34, who earned an average of 93 cents for every dollar earned by male counterparts in 2021, up from 67 cents in 1980.
“For young women, they’re in better shape than they were 40 years ago,” explained Pew senior researcher Richard Fry. “For young men, it very much depends on whether we’re talking about the college educated or those with less education.”
While the median household income hasn’t kept up with the rising cost of things like healthcare, housing, and education, it has been increasing steadily, from about $50,000 in 1970 to about $74,600 today, according to Pew Research. That growth, however, has primarily gone to women and the college educated.
“Among young women at any level of education, they’re typically doing at least a bit better, if not significantly better, than boomer women did back in the 1980s,” explains Fry. “The picture is considerably different for young men now because whether you’re college educated or not really makes a difference.”
According to the latest Pew data, men with a high school degree earn an average of $40,000, while those with a bachelor’s or higher earn an average of $70,000, representing a 75% earnings premium among degree holders. By comparison, in 1980, men with a college degree earned only 16% more than those with only a high school education.
When you were born matters a lot less than to whom
Economists often shy away from debating the relative fortunes and hardships of today’s youth against those of past generations because of the other variables that better determine our lot in life.
For example, studies suggest that those who graduate during a recession will likely see a downward effect on their earning potential for the first 10 to 15 years of their career. That means that millennials who graduated in the wake of the 2008 recession could have more in common, economically speaking, with boomers who graduated during the 1981 recession than members of their own generation who graduated a few years earlier.
The other key variable that does a far better job assessing our economic fortunes is the birth lottery.
“A huge determinant of how well you’re going to do is how well your parents did,” says Elise Gould, a senior economist at the Economic Policy Institute. “There is not a whole lot of economic mobility in this country, however you look at it.”
Gould explains that the economic situation for traditionally marginalized communities has broadly improved over the years, but significant gaps persist. Furthermore, the rising cost of necessities, such as housing, healthcare, and higher education, has made today’s young people more reliant on their parents than ever before, which only serves to perpetuate historic inequalities.
If your parents were unable to reach their economic potential due to historic biases and discrimination, they are less likely to be in a position to help you manage the rising cost of necessities.
“Young people today have richer parents,” explains Edwards of the Rand Corporation. “It’s a lot harder today to buy a house, but people today are much more likely to have their parents help them with the down payment.”
Edwards says the same is true of tuition, healthcare, and other necessities, which young people today largely can’t afford without tapping into the prior generation’s wealth. “This generation has a level of subsidization made necessary by the [increasing] cost of necessities that wasn’t available before,” she says. “They’re truly a generation that is a product of increasing inequality in the U.S.”
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