Young Americans are now poorer than retired people. That's the stunning take away from a new study by The Guardian Newspaper, and they say that the problem not unique to the United States.
According to the data, unemployment, debt, and rising home prices have cut Generation Y out of nearly all the new wealth generated in western societies. In other words, in the United States and Europe, people born between 1980 and the mid '90s are earning about 20% less than the national average.
These are young individuals and families who were already lagging behind before the crash of 2008, and their low wages haven't allowed them to catch up during the recovery.
That's why the secretary general of the OECD said, “Current working-age, middle-class groups are increasingly concerned with their and their children's job prospects.” He added, “An increasing number of people think children in their country will be worse off financially than their parents.” And, that type of intergenerational inequality only makes the overall wealth divide even worse.
As Paul Johnson of the Institute of Fiscal Studies explained, that means that young people with rich parents will have an unfair advantage over their peers in the early years of their adult life. Mr. Johnson said, “I think the real unfairness issue comes in the sense that it's become more and more important whether your parents happen to have a house.”
And, he shared the sentiment of many economists who said that policymakers must do more to close the wealth divide between young and old.
If we fail to do so, we are telling an entire generation that they don't deserve the American Dream that their parents enjoyed. And, we are damning ourselves to the economic stagnation that results when too many people are too broke to spend money in their economy.
This problem may be hitting young people the hardest, but it isn't just young people who will feel the effects. It's time to bridge the generational wealth gap and make sure that the American Dream doesn't simply disappear.
-Thom
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