The St. Louis Fed Paper explains exactly why millennials, despite improving job prospects and a slight increase in real wages, are not moving out of their homes. They are still broke. Young people, for obvious reasons, have always been poorer than older people. But after rooting out idiosyncratic variations and compensating for other variables, the St. Louis researchers came to the following, bleak conclusion:
Beginning with the 1950 cohort (i.e., families headed by someone born between 1948 and 1952), successive cohorts through 1970 (born between 1968 and 1972) had statistically significantly lower incomes than those of the 1940 cohort. Moreover, the estimated magnitudes are economically significant: between 13 and 25 percent lower than the 1940 cohort. Finally, all five-year cohorts that began in 1975 or later had estimated income shortfalls of 12 to 18 percent.
Those shortened incomes mean that the wealth gap is only set to increase. Cohorts with lower incomes obviously cannot save as much and therefore cannot accumulate as much capital over the course of their lives. Which means that the problem is accelerating quite outside the minor turbulence of the rise and fall of recession and growth.
The new research shows that the problem of the growing gap between the young and the old is not the economy but policy. The Federal Government spends 2.4 dollars on every citizen over 65 for every dollar spent on a child. That makes a difference. Unfortunately, that difference is only set to grow.
Article Reprint @http://www.esquire.com/news-politics/a36773/millennials-still-struggling-post-recession/