In an economic climate where the top 1% own half the world’s wealth, a new analysis by Credit Suisse suggests that millennials in several advanced economies are likely going to face the worst income inequality of any generation in recent memory. The report, which focuses on the US, Germany, France, and Spain, shows that millennials are generally saddled with more student debt, less inherited money, and stricter mortgages than previous generations. At the same time, a lucky few are set to become spectacularly wealthy, widening the already large gap between rich and poor. Why?
College rewards a select few
Millennials, unlike prior generations, are disproportionately burdened by student debt. As of 2013, 37% of Americans in their twenties had some student debt, making up close to 20% of their total debt holdings. What’s more, members of the class of 2015 owe, on average, around $35,000, about twice the amount (paywall) of their counterparts two decades ago, after adjusting for inflation.
College education has gotten more expensive—from 1963 to 2013, the average price of college more than doubled, adjusted for inflation—but millennials are also more likely than their parents to go to college, which means, on average, they take on more debt.
Despite the cost, a college degree has its benefits: Analysis by the Economic Policy Institute shows US college graduates in 2015 earned 56% more than high-school graduates, the biggest gap between the two groups since 1973. But, in the US at least, the return on higher education is high in part because of stagnant and falling wages for low-skilled earners. Millennials may be rushing to get college degrees in part because the alternatives are getting worse.
While millennials who go into high-demand fields, like tech and finance, reap the rewards of an expensive education, many earn no more than their parents, and at a higher price. Analysis of Federal Reserve data by the group Young Invincibles shows that the median millennial household earns around $40,500, 20% less than boomers at the same point in their lifetimes.
More millennial billionaires
Meanwhile, more and more millennials are entering the ranks of the ultra-rich. In 2003, there were only 21 billionaires under 40. By 2017, the number had more than doubled, to 46. The average wealth of young billionaires is also on the rise. Seven years ago, the average young billionaire was worth $3.2 billion. Today, the richest millennials are worth some $4.1 billion.
While millennials might be perceived as an especially entrepreneurial generation—think Mark Zuckerberg or Evan Spiegel—they’re actually less likely to run their own businesses. In the US, 2% of millennials are self-employed, while 8% of Gen-Xers and boomers can say the same.
Millennials who inherit money will likely inherit a lot
In the US, France, and Germany, only 10-15% of people in their twenties and thirties have inherited wealth. While it’s possible some will come into wealth later on (by 70, 30% to 40% of adults have inherited some wealth in these countries), survey data from Credit Suisse suggests that no more than 50% of any generation inherits during their lifetimes.
The millennials that have already inherited money, however, have inherited a lot. People from the US, France, Spain, and Germany who inherited wealth in their thirties reported that it made up 40% of their total assets. In the future, millennials will likely receive substantial amounts, as their parents’ generation has experienced healthy gains from a strong stock market and, of late, high house prices.
This boon will come as the US is planning to roll back estate taxes, reinforcing disparities in income.