Income Inequality: It’s Not Just for Older People Anymore

20-somethings are on more even financial footing than the rest of the population, but that equality is slipping

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At some point during Blake Eastman’s senior year at the University of Southern California, he stopped talking to his friends about their plans after graduation. Eastman, 22, had parlayed a summer internship into a job offer. Many of his classmates, even those with similar credentials, weren’t as fortunate. “It’s not necessarily awkward but as it gets further in the semester, some of my close friends, you can tell it’s stressing them out,” he says. “My friends don’t really ask about it anymore.”

As young millennials like Eastman enter the work force, they’re quickly discovering an uncomfortable truth: Inequality, once a phenomenon most prevalent among older Americans with longer work histories, is on the rise among young people. It used to be that all Americans new to the workforce started at the beginning and built up their financial futures over time. It took a while to see who would be a “have,” and by how much. Now, the choices—or the lack thereof—available to 20-somethings have already divided their cohort. Although 20-somethings continue to be more financially equal as a group than the general population, newly crunched census data from the public policy group Demos show that gap is closing.

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Now more than ever, the lowest-earning Americans in their 20s are making less and the top-earning ones are making more. Between 1980 and 2011, 20-somethings in the lowest quintile of earners have seen their share of all income in the U.S. decline from 3.6% to 2.9%, compared to smaller a drop (from 3.3% to 3%) in that quintile of all Americans 20 and older. Low-earning 20-somethings used to take home a larger piece of the pie than their average low-earning counterparts of all ages, but now they’ve got a smaller piece. At the same time, young Americans in the highest-earning quintile have increased their share of income more than the overall population of high-earners has.

It’s only gotten worse in the last few years—and that trend applies to income figures as well as relative earnings. The only 20-somethings making more money than their counterparts a generation ago are the highest earners. Adjusted for inflation, both median and mean incomes have increased since 1980 for every earnings group in the general population; even in the lowest fifth of earners, those figures have gone up, despite the 2008 financial crisis. But that’s not the case among 20-somethings. For the people in that age group who earn the least, median and mean incomes have dropped about 30%. Every other quintile of the young population has also seen a drop in income—except for the highest earners, who have seen their medium income increase 3.6% and their average income go up 6.1%.

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Take education into account and the disparities are even starker. Among the general population, those with no education beyond a high school diploma have seen their share of all income decrease by 12% since 1980, from about a third of all income to less than a fifth. Those with bachelor’s degrees have seen their share increase by nearly 10 percentage points, to more than a quarter of all income nationally. It’s even more extreme for those with advanced degrees. Among 20-somethings, those trends are amplified, with young college grads earning even more and those with only a high school education earning even less.

“We’ve seen a real pulling-away among the well-educated young people in terms of their income,” says Demos’ VP of policy and research Tamara Draut. “The reality is, if we remember that most young people don’t have advanced degrees, what we see here is a majority of a generation whose average earnings have seriously declined in one generation.”

It hasn’t been all good news for young Americans with college degrees: rising school costs have loaded them with debt and returns on higher education seem to be diminishing. Median income for 20-somethings with a BA declined from $35,231 in 2000 to $30,547 in 2011. As Demos analyst Robert Hiltonsmith points out, the increasing share of income going to the well-educated isn’t necessarily because they’re making more, but because others are making less.

Education isn’t the only factor at play: Timothy Noah, author of The Great Divergence, says the financial crisis is also to blame. Demand for higher education—particularly degrees beyond a BA—has been increasing for a while, helping those at the top. Meanwhile, those at the bottom were hurt most by the economic crash in 2008. The young poor who saw their incomes fall have not been able to recover in the same way that their more-established peers did. (For example, for the bottom fifth in earnings, median income adjusted for inflation peaked around 2000 but has since recovered past 1990 levels; for 20-somethings at the bottom, median income also peaked around 2000 but remained in 2011 at a dollar amount below 1980 levels.) “My guess would be that the statistics for the bottom quintile are really about the recession,” Noah says. “The recession has been devastating, and particularly devastating for young people. It’s more dramatic for young people because they’re just entering the job market.”

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The story of the numbers doesn’t foretell a bright future for Millennials. “What the data really show are that, for the majority of young people in this generation, they are currently and most likely not going to surpass the incomes of their parents,” says Demos’ Draut. That’s particularly true for young people with no higher education, facing the double whammy of a dearth of jobs and low wages in the positions that do exist.

Experts disagree on how best to help this struggling generation. Draut argues the federal government should take a larger role by indexing minimum wage to inflation, strengthening unions and expanding the social safety net to support young families. Nicholas Eberstadt, a political economist who has written about millennials and inequality for the American Enterprise Institute, says the problem is partly cultural. Failures in education and the job market have been damaging, he argues, but he also faults lifestyle changes like higher divorce rates and over-reliance on government aid.

Even if Eastman and his friends aren’t talking about their predicament, young Americans haven’t given up hope. In spite of the numbers, polling suggests that 20-somethings from all backgrounds are still optimistic about their financial futures. And that matters. “Optimism and hope are really important protective qualities,” Draut says, “and we need people to retain that optimism.”

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7 comments
sallyedelstein
sallyedelstein

The American Dream just doesn't add up. With the economic division more striking than ever,  the American Dream is divided. You don't have to do the math to see the 2 schools of thought in this matter are as stark as black and white. Take a look
 http://wp.me/p2qifI-1F8

Subprimemortgag
Subprimemortgag

We shall all live on optimism, we will eat it and build houses on it.  Capitalism is indeed flawed, until we recognized this flaws, we will not be able to move forward.  It is simple arithmetic, there is less of all to go around, so wages fall, as population grows, natural resources become more scarce, and get more expensive, inflation and decrease of purchasing power follow.  How can you divide the same pie among more and more, there is only one pie for all and the top percent have most of the pie.

ooliths
ooliths

@pattershow   what a pompous thing to say.  @DeweySayenoff  is mostly correct other than the over generalization. 

What is not pointed out is education should not be tied to economic gain. Education should be part of a social norm of a culture. 

The downplaying of knowledge & education is detrimental to a society. An ignorant & uneducated people are easily enslaved. There was a reason why slave's in the USA were not allowed to learn or be educated.  

BerkleyCarterMills
BerkleyCarterMills

...sounds like we need more illegals to give amnesty too so as to keep wages low and profits higher,,yahoo what a country and lol free capitalistic enterprise at its best,,we need to keep giving banks free money @ .005%  so they can then charge college kids 14 % to further erode higher education,,and maintain a higher poverty level,,offset it w/the visa program to bring in more foreighn workers to lower the pay for grads,,we need more trade aggrements,,lol,,those free trade agreements,,we need more offshore tax dodging banks,,after all 32 tril $ of hidden wealth from the tax man means we just get our taxes raised just to pay for their wars like 2 tril just  SO EXXON COULD GET IRAQI OIL ,,WE GOT A 100 % INCREASE IN GAS PRICES AND ITS RIPPLE EFFECT THROUGHOUT OUR eco,,but who cares as long  as the ceo gets its millions in bonus and the stockholders get more free $$,,sounds like we r just as eco suppressed or more so than pre-1770,s war for eco freedom..sounds like u need to realize that and join OWS,,or just expect even more eco disparity,,sittin on ur as with ur bundy hands down ur pants ,passing gas isn't going to make it better,remember SDS and the protest of the 60,s-70.s,,history shows that's only when our gov ever does the will of the masses,,people,,,

DeweySayenoff
DeweySayenoff

Allow me to sum this up:

If you're "connected" you will be a "have".

If you're not "connected" you will always be a "have not".

"Connected" means being born into wealth or being able to make billions for the wealthy and ONLY the wealthy.

I hope this clears up any confusion the article may have created by citing statistics that only glaze over the eyes of the "have nots" and give hard-ons to the "haves".

pattershow
pattershow

@DeweySayenoff 
Let me guess:  You're 22 with a college degree, and you're shocked and appalled that the world's not your oyster.  I guess you'll have to do what your parents did and work for a living.  Welcome to reality...


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