Last summer, while visiting my grandfather for his 80th birthday, I got into a discussion with my father about the state of the economy and the structural changes that had taken place which served to increase the gap between rich and poor. I noted that statistical measures of income inequality, such as the gini coefficient, were higher in the U.S. than in other industrialized countries; and that the there is less inter-generational class mobility now than there used to be. My father countered that there were several counter examples to that at the table where we were sitting – that all of his children were doing better than he had at our ages. That is true, but a cluster of data points does not make for a valid statistic and the facts are that mine is the first generation that is not likely to be significantly better off than its parents.
The thing that puzzled me most was that my father is living in the same economy I am, how could he not be experiencing the same economic anxiety and difficulty felt most people I know? At the time, I chalked it up to too much Fox News on his part, but now I may have a better answer. The book “Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead,†by Tamara Draut, examines a number of changes in the economy over the past 30 years and shows why these changes disproportionately affect Gen X.
Draut starts by examining the costs of education. She notes that over the past 30 years, the cost of college has increased faster than both the rate of inflation and wage increases. The result is that even though college is the “new high school†in terms of the minimum level of education needed to obtain a middle class lifestyle, fewer people can afford it without taking on a large amount of student loan debt. This loan debt plagues many people I know, even fifteen years after they graduated. Furthermore, the high cost of education, even an associates degree, keeps many qualified students out of higher education.
I mentioned that the cost of college has increased faster than wages. Draut takes this on as her second economic change that disproportionately affects Gen X. She cites a table from the National Center for Education Statistics (which used data from a variety of government sources) to show that almost regardless of sex and level of education (high school, some college, college degree), the median salary for people age 25 to 34 has fallen over the past 30 years. In some cases, e.g., college educated men, the decline has been minor; in others, e.g., high school educated men, it has been as large as 25%. The only group that has seen its wages increase are college educated women, for whom there are many more opportunities now than 30 years ago. Furthermore, there are fewer benefits including health care coverage or pensions.
Increased housing costs over the past 10 years have also disproportionately affected my generation. There are a number of changes in the housing market that are responsible. The most obvious is the dramatic rise in home prices and the corresponding increase in rents. However, other problems include the lack of “starter homes.†Most new developments are for mid-range to high-end homes. Given their school loans, which reduce the amount of money available to save for a down payment, along with the debt itself, many people in my generation find that they can’t afford a home until much later in life than their parents. If they can afford a home, they often can’t afford enough of a down payment to avoid Private Mortgage Insurance (PMI), which can eat up a several thousand dollars a year that could be used for savings or paying off other bills.
Increasing costs for housing, etc., combined with larger debt (and money spent to pay off that debt), combined with stagnant wages have a number of consequences. These include a greater reliance on credit cards, just to pay simple bill; and an increasing number of families that require two incomes just to stay afloat. These coping techniques are strained when a couple decides to have children. Draut shows that while many people in my generation want to have children, financial reasons often make them wait until later in life, i.e., it’s no longer affordable to have children at the same age our parents did. Part of the problem is that policies have not kept up with the changes in the economy. Moreso than in the 70s, today’s families need two incomes. There is no paid time off in this country for maternity/paternity. Your company (assuming it is large enough) does have to give you up to three months off for FMLA, but you have to use your own sick leave and vacation – assuming your job gives you those benefits. And when that time is up (assuming you could afford to take it), you have to find child care, which apparently comes in two types: good, but expensive centers, and cheaper, unregulated home care.
Throughout the book, Draut explains how various changes in the economy hurt young adults more than older. Along the way, she uses statistics to demonstrate that many of the insulting stereotypes that Gen X is labeled with are untrue (e.g., in spite of everything we save more than our parents did; we are more concerned with family than they were; etc.). For me personally, the book went a long way to explaining why my father does not feel the same level of stress about the economy that I do. It also explains my father’s point about my doing better than he did at my age – through dumb luck and supportive parents, I didn’t fall into any of the traps Draut describes. My parents ensured that I had no student loan debt; because I worked full time as a student, I never accumulated credit card debt; I majored in a field that is enough in demand that we don’t need two incomes to survive; K’s grandfather left her money that was enough to put a good down payment on a town home (i.e., one of the few starter homes still around); I have a job at a place known for good benefits; lack of debt has allowed me to take advantage of the retirement benefits available and to save extra on the side. Most of this was entirely out of our control and if even one of the above had not happened, we would be in the same boat as most other people in our generation: strapped.
In case you didn’t guess, I highly recommend the book.
If you haven’t seen