historically the U. S has been a symbol of financial prosperity the idea was if you went to college worked hard and saved you would be financially better off than your parents but it's not so easy anymore in recent decades wealth and upward Mobility have significantly slowed down as a result for one of the first times in history Millennials and gen Z will be poorer than previous generations the interesting thing is on paper income has been growing steadily for decades now chances are you're probably earning more than your parents did even when adjusted for inflation which sounds great but when you begin to ask yourself why a different narrative emerges why am I struggling to pay my student loans off when my parents paid theirs off by working minimum wage why am I struggling to rent a 20 square foot apartment when my parents bought their house at 21. in the 1960s the minimum wage was a dollar an hour and the price of the average U.
S home was eleven thousand dollars two high school kids could get married on graduation day start working and own a home five years today unless you're making over 25 dollars an hour you're poorer than a grocery store worker from the 1960s adjusted for inflation the reason is the difference between wealth and income wealth is what you've got and income is what you get while income has been growing over time for Millennials in gen Z wealth has been decreasing today Millennials hold 41 percent less wealth than a similarly aged adult in 1989 and it's because of this one thing economists use the cost of driving index to measure how expensive it is for individuals or families to meet their basic needs and live a decent life in 1985 the typical male worker needed 30 weeks pay to cover the 13 227 dollars in expenses required for a family of four fast forward to 2018 expenses have risen to 54 441 and a typical male worker has to work 53 weeks to get there but the problem is there are only 52 weeks in a year unless you're a time traveler over the past few decades expenses have been rising at unprecedented rates making it nearly impossible for Millennials and gen Z to build wealth so the question is what in the world are these expenses and more importantly why do they cost significantly more than before historically homeownership has been a core tenant of the American dream many of us want a home that we can call our own even if it's just to tell our terrible roommates off but in recent decades the rise in the cost of homes has outpaced inflation in the median household income since 1985. median home prices have more than doubled between 2000 and 2020 making it very difficult to afford one challenging prices are continuing to Surge Across the Nation but as many watch reporter Amy P key explains the value of real estate is soaring faster than people's incomes in many parts of the country as a result home ownership rates have trended downward specifically among Millennials in gen Z for the first time in decades the home affordability index which determines the affordability of a home based on median income and medium home prices dropped to 98. 5 meaning if you earn a median income you can no longer qualify for a median priced home nowadays living in your parents basement has become less of a meme and more of a practical reality for most Millennials in gen Z so the next time your nosy Uncle asks why aren't you married yet whip out the home affordability index or just let you suck at dating by the way if you want to build a wealthier and healthier life sign up for my free Weekly Newsletter rethinkable link below when it comes to our economy home ownership plays an essential role and not being able to afford one is a big problem so I'm moving into a new apartment in New York City and I'm actually shocked I had prepared for a moving cost some furniture and late night pizza but I wasn't expecting how much cost wouldn't add up I thought hey we'll get a nice couch add a little bit of paint add some lights the next minute our Excel budgeting spreadsheet turned into most full pages with complex formulas and calculations broker fee rental insurance amenity fee application fee for every piece of furniture we bought we'd find two more things that we needed to complement it take this couch for example so this couch was beautiful we really love the way it looks but it looks lonely we figured we needed some carpet lights and side tables to go with it when you factor in everything just moving into a new apartment can cost thousands of dollars that's money that's being funneled into the local economy and this is only renting if you're buying a house you'll have HOA fees home renovations landscaping and more all in all housing contributes to 15 to 18 percent of our nation's GDP meaning if Millennials and gen Z aren't able to buy a house mow their lawns or buy magic lamps our economy will suffer when it comes to bad debt it can be a trap that holds us back from accumulating wealth on one hand it's the engine for economic growth it helps you buy a car an education or recording equipment for your rapping career that's totally gonna take off on the other hand it can be a wealth killer that slowly strangles you for years without you even noticing for the lucky ones this Revelation comes early on their financial Journey for others it could be too late most Americans are in debt in one form or another it's not to say that baby boomers were or are debt free but the makeup of the Dead itself has shifted it used to be that Mortgage Debt was the biggest debt burden for most people which is actually pretty good as far as debt goes when you take on a mortgage you're investing in an asset that can appreciate in value over time so instead of paying rent each month you're throwing that money at your mortgage as you pay down your mortgage and the value of your property increases you build equity in the home as a result in the future you'll probably be able to sell your house for a profit but now the biggest debt burden is from credit cards the average American has nearly six thousand dollars worth of credit card debts and this number is only getting larger when prices of stuff go up without a proportional increase in income Americans might need to rely more on their credit cards to cover everyday expenses like groceries gas and pineapple pizza the problem with taking on credit card debt when you're struggling is it's just a temporary breath of fresh air before you know it that 100 you spent on groceries will show up on your credit card bill in a few weeks and if you still don't have a hundred dollars to pay it off soon that hundred dollar bill will become 120 144 and so on but it's not just credit card debt that makes Millennials and gen Z poorer than previous generations gone are the days when all you needed to get a job was to stroll into the office and give a firm handshake nowadays a college degree is a minimum requirement to even step foot into the door and it doesn't help that a college degree is more expensive than ever Millennials pay an average of twenty four thousand six hundred dollars for a year of college when baby boomers started college that number adjusted for inflation was only about ten thousand three hundred dollars and even adjusting for inflation doesn't tell the whole story basically inflation is determined by the average change prices from a defined basket of goods like food gasoline and computers the problem is big and important things like housing and education vastly outpace the average inflation rate in 1978 the minimum wage was 2.
65 cents an hour tuition for in-state public colleges cost 688 dollars a year today the minimum wage is 7. 25 an hour but tuition for in-state public college is 9 212 dollars a year so if we apply a standard inflation calculation the minimum wage of 265 an hour in 1978 is about 22 dollars an hour today but if we factor in the increased cost of college tuition today's minimum wage would need to be about 36 dollars an hour five times more than what the reality is despite this disconnect Millennials in gen Z continue to feel the pressure to get a college degree to compete in the job market the problem is unlike other expensive goods and services that Force certain people who can't afford them out of the market like a fancy car or Mrmagic lamp the pressure to get a degree means that even families that can't afford the cost of higher education will still find a way colleges know all about this willingness to pay and so they continue to freely raise their prices that's why the average annual cost of tuition at a public four-year college is 37 times higher than in 1963 and there's no sign of college costs slowing down usually the cost of stuff decreases over time as new competitors enter the market increasing the supply like TVs phones and whatever this is but higher education is an oligopoly basically a market with limited competition there are significant barriers to entry for those who want to start a new College which makes new colleges and competitors non-existent now you might think sure the current economy isn't ideal but Millennials and gen Z made their own Financial choices they chose to spend it all on Starbucks avocado toast and unnecessary smart speakers you've got to be kidding me but what if I told you that isn't the whole story and Baby Boomers actually had significant advantages that no longer exist for Millennials in gen Z in outlier author Malcolm Gladwell argues that individuals didn't become successful just because they worked hard or determined or super smart instead he says that there's this one other thing that actually makes all the difference in the 1970s the U. S witnessed one of the greatest technological revolutions pocket calculators microprocessors Apple computers and pong and from these breakthroughs many software millionaires were created Steve Jobs Eric Schmidt and Bill Gates but author Gladwell argues that these individuals only became successful because of timing bill was born in 1955 to a wealthy family who could afford to send him to a private school that coincidentally had one of the newest and fastest computers in the entire world by the time Bill was 20 years old the Altair 8800 the first do-it-yourself computer kit came out and by now Bill had thousands of hours of programming experience under his belt and he was the perfect age old enough to start businesses young and unattached enough to have the time to sink into something new and uncertain if he was born a few years later or earlier things could have been very different Gladwell says Timing is key he knew lots of people as smart as Bill Gates or Steve Jobs but many weren't able to capitalize on the computer Revolution because their timing was off alright so how does this relate to Baby Boomers first the Baby Boomers were born after the end of World War II at the same time the US was going through an unprecedented economic boom the U.
S escaped World War II relatively untouched and much stronger than before wartime production boosted the US economy creating countless jobs and raising wages Industries like manufacturing quickly grew thanks to unprecedented demand Americans wanted to buy new stuff for fun cars magic lamps and clothes while other places like Japan Western Europe and South Korea wanted American good to rebuild from the war second quantity Baby Boomers became a significantly larger share of the nation's population which gave them countless benefits Economist David Willis calls his benefit the larger cohort Theory basically being part of the largest population gives you more opportunities in political influence when baby boomers were young they voted for economic policies that benefited them low-cost or free higher education family support systems and stronger social welfare but when they became older and stopped benefiting from these programs they changed their voting patterns in favor of other things that served them at their old age retirement benefits pensions and lower taxes on wealth voting and self-interest isn't a new phenomenon but it's important to recognize that when baby boomers push for policies that primarily benefit them in their old age it greatly reduces or even completely upends the very same benefits that once helped them when they were younger as a result Millennials and gen Z are left without the significant economic advantages that the Baby Boomers had third education today nearly 40 percent of Americans over 25 have a bachelor's degree whereas only about 25 percent of baby boomers had one at a similar age on the surface this is great news more educated individuals create a better Society for all but the problem is the more people that get college degrees the less valuable each degree becomes in economics they call this supply and demand basically when the supply exceeds a demand for something the price of that something Falls although Millennials in gen Z are much better educated than their parents the share of young adults from 18 to 24 that are employed is at its lowest level since the government began collecting data in 1948.
