Lost Generation… Income and wealth building disparities in the US

The Urban Institute, founded according to LBJ ” to bridge the gulf between the lonely scholar in search of truth and the decisionmaker in search of progress” has hit on an inconvenient truth.

Generation X and Y are lost… at least financially speaking.

In a recent report, “Wealth Building Among Young Americans“, the authors start out with: “Despite the Great Recession and the fragile economic recovery, the wealth of Americans has grown significantly when a longer-term view is considered, with household wealth roughly doubling from 1983-2010.”

Then they go on: “Unless you’re under 40.”

Even before the great recession, Gen X&Y were on a downward spiral.

Old vs Young - Wealth

Encouragingly, it continues: “Despite their relative youth, they may not be able to make up the lost ground.”

As a society gets wealthier, children are typically richer than their parents, and each generation is typically wealthier than the previous one at any given age – except for this one. The impact of the recession on homes and 401k accounts looms large, but it is further heightened by fewer job opportunities and lack of educational attainment.

Add to that the main argument of “Race Against The Machine“, a fascinating and very short hypothesis by the director of MIT’s Center for Digital Business on why the future due to Asia, automation, and abundance, will depend on teamwork with computers and bring a concentration of wealth among a few superstars, and the future for Gen X&Y is not particularly rosy.

However, it is even worse when dissecting the data by race and ethnicity, as shown below.

Urban Institute - Wealth by Race

These trends make the work of John Rogers, the founder of Ariel Investments, ever more important. As I wrote about a little while ago in my post “gender and race inequalities in retirements – changing the future“, two courses of action to address the gap between race and gender are to implement policies and practices to reduce the withdrawal of funds prior to retirement and design plans to magnify the positive impact of auto-enrollment.

Let’s put things bluntly: the location of your birth, the color of your skin, and your gender are the main determinants of your success in life.

Being born white, male and in a “developed” country still gives you the most significant head-start in life imaginable. Yes, an increasing number of minorities and women are successful today (as chronicled in the larger number of powerful women in business and politics today), but they are successful against all odds, not because it is a level playing field.

John Rogers’ Ariel Education Initiative and the Urban Institute play an important role in leveling the playing field. Let’s do our part by sharing relevant data points and policies to raise awareness further.

I invite you to follow me on twitter @danenskat

(c) Enskat Associates 2013

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