The Federal Reserve Says Millennials Are Broke. Pew Says Millennials Are Loaded. Which Is It?

Okay, I've yet to find a good piece of academic/governemnt research adjudicating btw the Pew and Federal Reserve analysis, this Grabar's piece was useful when the reports came out.

a) Okay will run down Strain's data. b) CBO generally uses PCE, though they may use CPI in some circumstances

"... First, “household income” is a pretty limited proxy for wealth, especially when you consider that millennials are better educated and (not unrelatedly) have a high ratio of debt to income. According to a May study from the Federal Reserve Bank of St. Louis, the median net worth of households whose heads were born in the 1980s (older millennials) is 34 percent lower than that for people their age in the past. A recent Federal Reserve Board study corroborates this, reporting that average net worth for young adult households in 2016 is 20 percent lower than that of boomers in 1989 and 40 percent lower than that of Gen X in 2001. (The saving grace for millennials: the idea that student debt will get paid off by the increased future earnings associated with a college education.)Second, while millennials’ household income is higher, it’s not great compared with what everyone else is making. In 1978, according to the Fed study from this month, young boomer households were making on average $77,500 in 2016 dollars—compared with the $88,000 national average. In 1998, the average Gen X household made $73,500 versus the national average of $103,800. In 2014, the average millennial household made $78,200—more than Gen X, but less as a percentage of the national household average of $112,000. Relatively speaking, then, millennials are underperforming. Third, household roles are changing. Millennial women work more than their Gen X counterparts did 17 years ago, and they make more money. The median income for young women is up by nearly a third since 1975, to $29,429. The median income for young men has fallen. If you isolate for female-headed households, the trajectory looks great. If you forget the household concept and just look at all young people’s individual income, the numbers were worse in 2015 than they were in 1975.(Things have improved a bit since then, granted.)Fourth, lots of millennials still live with mom and dad—somewhere between one in five and one in four young Americans live with their parents. That’s a big change from previous generations, and it means the pool of “households” is a little skewed. According to census data, nearly 75 percent of the 8.4 million millennials living at home in 2015 made less than $30,000 a year. That share drops to 63 percent among those living with roommates, and 45 percent among those living independently. In other words, there’s a whole segment of millennial households that aren’t getting counted in Pew’s sunny data, mostly because they’re too poor to move into their own place. Mom is buying the avocados...."
Henry Grabar, "The Federal Reserve Says Millennials Are Broke. Pew Says Millennials Are Loaded. Which Is It?"Slate, December 12, 2018, https://slate.com/business/2018/12/millennial-households-are-making-more-money-than-their-parents-or-grandparents-did-but-dont-get-optimistic.html

The Federal Reserve Says Millennials Are Broke. Pew Says Millennials Are Loaded. Which Is It?

On Tuesday, a Pew Research Center analysis of census data revealed a counterintuitive piece of good news about millennials: Relatively speaking, we’re in the money.

According to Pew, households headed by Americans ages 22 to 37 earn more, adjusted for inflation, than young households at any time in the last 50 years.

Avocado toasts all around!

The median adjusted income for millennial households last year was $69,000, according to Pew, putting 2017 narrowly ahead of 2000 as the best recorded year of household income for young people.

But wait: Didn’t the Federal Reserve Board just report last week that, as my colleague Jordan Weissmann put it, “millennials are, in fact, the brokest generation”? (Yes, they did.) So what’s going on here?

First, “household income” is a pretty limited proxy for wealth, especially when you consider that millennials are better educated and (not unrelatedly) have a high ratio of debt to income. According to a May study from the Federal Reserve Bank of St. Louis, the median net worth of households whose heads were born in the 1980s (older millennials) is 34 percent lower than that for people their age in the past. A recent Federal Reserve Board study corroborates this, reporting that average net worth for young adult households in 2016 is 20 percent lower than that of boomers in 1989 and 40 percent lower than that of Gen X in 2001. (The saving grace for millennials: the idea that student debt will get paid off by the increased future earnings associated with a college education.)

Second, while millennials’ household income is higher, it’s not great compared with what everyone else is making. In 1978, according to the Fed study from this month, young boomer households were making on average $77,500 in 2016 dollars—compared with the $88,000 national average. In 1998, the average Gen X household made $73,500 versus the national average of $103,800. In 2014, the average millennial household made $78,200—more than Gen X, but less as a percentage of the national household average of $112,000. Relatively speaking, then, millennials are underperforming.

Third, household roles are changing. Millennial women work more than their Gen X counterparts did 17 years ago, and they make more money. The median income for young women is up by nearly a third since 1975, to $29,429. The median income for young men has fallen. If you isolate for female-headed households, the trajectory looks great. If you forget the household concept and just look at all young people’s individual income, the numbers were worse in 2015 than they were in 1975. (Things have improved a bit since then, granted.)

Fourth, lots of millennials still live with mom and dad—somewhere between one in five and one in four young Americans live with their parents. That’s a big change from previous generations, and it means the pool of “households” is a little skewed. According to census data, nearly 75 percent of the 8.4 million millennials living at home in 2015 made less than $30,000 a year. That share drops to 63 percent among those living with roommates, and 45 percent among those living independently. In other words, there’s a whole segment of millennial households that aren’t getting counted in Pew’s sunny data, mostly because they’re too poor to move into their own place. Mom is buying the avocados.

See the attached email/link. If hourly nonsupervisory wages grew 5% from 1973 until today but 20% from 1990 until today, then wages must have fallen 12.5% (=1-) from 1973 until 1990. Is that true? I’d like to see the data he is referring too (not just a link where I have to do the work myself). Does the same data base contain benefits? If so, I’d like to see that too. How does the CBO bridge from their (pretax and transfer) data to this data? Does the CBO use CPI or PCE?

If hh incomes have grown 50ish% since their starting point as the CBO claims, it’s hard to believe that millennia aren’t earning the same or more at the same point in their life than prior generations given how large each demographic is relative to the whole. If one group’s earning are down (relative the other groups at the same point in their lifetime), the others would have to be way ahead. Does CBO decompose their data by generations?

Did you ever ask pew (and ernie), and the st louis fed why their numbers were so different? If not, you should.

We have recent stuff on this from Pew, the Federal Reserve and Ernie.

Pew's looked at household incomes in December of last year and found each new generation seems to be doing better than prior ones at most ages, at least in real household money income. "....The median adjusted income in a household headed by a Millennial was $69,000 in 2017. That is a higher figure than for nearly every other year on record, apart from around 2000, when households headed by people ages 22 to 37 earned about the same amount - $67,600 in inflation-adjusted dollars. (A recent study by the Federal Reserve, which also looked at Millennials’ income, used a different methodology and data source.)..."

Richard Fry, "Young adult households are earning more than most older Americans did at the same age," Pew Research Center, December 11, 2018, http://www.pewresearch.org/fact-tank/2018/12/11/young-adult-households-are-earning-more-than-most-older-americans-did-at-the-same-age/

Ernie adjusted the Pew household money income for education levels which is also worth noting. Quick write ups follow in descending order.

(note this male head of household number doesn't adjust for single/married or educational attainment)

Ernie Tedeschi adjust the Pew numbers for education attainment which is also worth noting:

However they don't have "apple core" comparison that looks at generational incomes net say the cost of housing, education and child care.

They also found that despite the same preferences"... We showed that millennials do have lower real incomes than members of earlier generations when they were at similar ages, and millennials also appear to have accumulated fewer assets. The comparisons for debt are somewhat mixed, but it seems fair to conclude that millennials have levels of real debt that are about the same as those of members of Generation X when they were young and more than those of the baby boomers....."

The same Fed study found that consumption habits (in terms of car ownership, preference for owning over renting) have not changed generational, "... we find little evidence that millennial households have significantly different tastes and preferences than households of previous generations..."

For context the Fed used laborearningsand found lower real income then their comps (say baby boomers @ the same point during the life cycle) "... In the economic sphere, millennials appear to have paid a price for coming of age during the Great Recession: Millennials tend to have lower income than members of earlier generations at comparable ages, although the income of young households has not changed much; the difference likely reflects, in part, the rising labor force participation of women....."...Specifically, the real average full-time labor earnings of a millennial male household head in 2014 were about the same as those for a comparable male Generation X household head in 1998 and over 10 percent lower than those for a comparable male baby boomer household head in 1978...."