According to the Federal Reserve’s latest tri-annual
survey on American finances, Gen Xers are finally coming of age, at
least in economic terms. Slackers no more, their income and wealth have
increased since the recession, although the wealthiest reaped much bigger gains
and inequality got worse.
For Americans ages 35 to 44, income still hasn’t recovered
to its pre-recession levels. But unlike for every other age group, it did
increase. Now Gen Xers earn as much as 45- to 54-year-olds, a reversal of
fortunes for the older cohort.
The recovery may have been better, in income and wealth
terms, for 35- to 44-year-olds for many reasons. People in their mid-30s to
early 40s are relatively skilled compared with younger workers and relatively
cheap compared with older ones. It’s also possible that the recovery favored
skills more likely to be possessed by younger workers, or that younger workers
were in a better position to pivot from low-opportunity fields to
higher-opportunity ones.
All of these explanations are consistent with the rise in
inequality. A shift to favor skills disproportionately held by younger workers
would increase their earnings and wealth, especially for the most skilled. The
figure below is the ratio of the 90th percentile to the 50th percentile
(median) of wealth for different age groups.
Older Americans are poorer since the recession, but wealth
among the richest older people fell much more, narrowing inequality. Yet 35- to
45-year-olds, the only group that saw wealth grow, also saw a rise in
inequality.
This isn’t the only way to measure inequality. It’s equally
valid to measure the gap between the 25th percentile and the 75th—the lower
middle and the upper middle. By that calculation, the wealth gap increased for
Gen Xers right along with every other group. But when you look at the
ultra-rich and the middle class, the gap narrowed for middle-aged workers and
widened for 35- to 45-year-olds. We still don’t know much about the
relationship between economic growth and this kind of inequality. But it’s
notable that the only age group whose income grew was the same one that became
more unequal. It could be that the cost of slightly higher income in the new
economy is much more inequality.
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