Today, after the so-called “jobless recovery”, we can try to see the improvements in people’s standard of living. If there were any such improvements to acually see.
According to a new report, released by the advocacy group Young Invincibles, today’s millenials (the generation of people betweent the ages of 18 and 34) are earning on average 20% less than their baby boomer parents. They also owe more than their parents did at the same stage of their lives.
All figures in the research come from data by the US Federal Reserve, and have been adjusted for inflation (for example, an annual salary of $10,000 US some thirty years ago would equal about $19,500 today). The survey focuses on people who were between the ages of 25 and 34 years in 1989, and the data for the same age group in 2013 (the last year this detaied data is available for).
Considering that, let’s take a look at the nimbers. The average salary for a person with a degree and with student debt in 1989 was $67,880 (adjusted for inflation). In 2013, it was $50,727, or $17,153 less. The average income for a person without a degree in 1989 was $49,024, while today it is $36,523, or $12,500 a year less.
The above concerns annual income, or the salary each of us gets for the work that we do. Now let us look at wealth. Wealth is determined as the difference between what you own and what you owe. That is, if you were to sell evertything that you own today – your home, your car, fruniture, computer, valuables, etc. – and you use that money to pay off your debts – mortgage, car loan, credit cards, credit lines and any other forms of debt you might have, – how much money will you be left with? This is your net wealth (also sometimes called equity). For many, the result can even be negative – they would still have debt left at the end of the day. They would have negative net wealth, also sometimes called negative equity.
The average wealth of a person between the ages of 25 and 34, with a degree and no student debt, in 1989 was $125,572, and 24 years later had fallen to $75,000. The average wealth for those who had a degree with debt, in 1989, was $86,547, while today it is only $6,600 – a whopping decrease of $79,947 (or 92%)! For people without a degree, the average net wealth in 1989 was $16,322, while today it stands at $7,750. Notice two imortant things: First, the enormous decrease in the net wealth of people who had to get student debt in order to get a degree (because of the rising cost of higher education); and, second, the fact that today, a person without a degree has a higher average net wealth than someone who has a degree and student debt!
Another fact worth mentioning is the net wealth for the entire group of people between the ages of 25 and 34, regardless of education. Today, the millenials, on average, have a net worth of only $10,900, compared to $25,035 in 1989 – or a decrease of 56%! Millenials also have significantly lower home ownership rates, and much more college debt than the baby boomers did at the same age.
So, here again, we have to go to what I had been writing about before: We cannot continue to live like it’s still 1989. Too many things have changed. We cannot continue to think that getting a degree – any degree, – will get us, or our children, a better quality of life, a better salary, or will help us build more wealth. It depends – on the subject you want to study, the availability of jobs after graduation, and especially on the amount of debt one has to incur in order to get the degree. Having a better quality if life during tough times is not impossible – with or without a degree, – but it does require a different way of thinking and a different perspective on what’s most important in life!