The Luckiest Generation

[phillygirl]

One of the great American assumptions — that while individuals and families may rise and fall, each generation will end up on average better off than the one that preceded it — has been the subject of much scrutiny in the past decade. Democrats and their affiliated would-be wealth redistributors have argued that the large income gains enjoyed by the highest-paid workers threaten the American dream of ever-upward generational mobility, while others have worried that the housing meltdown and the Great Recession, which inflicted serious damage on the net worths of many American families, now stand in the way of that dream. Deficit hawks, including yours truly, have long worried that the entitlement system, with its unsustainable wealth transfers from the relatively poor young to the relatively wealthy old, would eventually leave one generation — probably mine — on the hook, having paid a lifetime’s worth of payroll taxes to support a system of retirement benefits likely to fall apart before we’ve recouped what everybody keeps dishonestly insisting is an investment. It’s fashionable to hate the Baby Boomers, who are numerous and entitlement-loving, for the problem, but in fact they may be the first generation to feel the sting of the reversal.

A new paper from the Federal Reserve Bank of St. Louis, authored by William R. Emmons and Bryan J. Noeth of the Center for Household Financial Stability, finds that when it comes to lifetime wealth accumulation, it matters — quite a bit — which year you were born in, and that those born in the late 1930s through the 1940s not only did better than the generations that came before them but also are on track to do better than those born in the post-war era and after. “After controlling for a host of factors related to income and wealth, we find that cohorts born in the late 1930s and 1940s have experienced more favorable income and wealth trajectories over their life course than earlier or later-born cohorts. While it is too soon to know how cohorts born in recent decades will fare over their lifetimes, it appears that the median Baby Boomer (born in the 1950s and early 1960s) and median member of Generation X (born in the late 1960s and 1970s) are on track for lower income and wealth in older age than those born in the 1930s and 1940s, holding constant many factors other than when a person was born.”

Link


Admin note: I've edited this to "float" the picture in the text.

[Billy Jingo]

Interesting that he left out the strength of Labor during that time as compared to now.

[phillygirl]

Interesting that he left out the strength of Labor during that time as compared to now.

What do you mean by that?

[Billy Jingo]

What do you mean by that?

He seemed to discount the benefits of Labor rights (or legal extortion, depending on your point of view) that accrued to the post-war generation.

[phillygirl]

He seemed to discount the benefits of Labor rights (or legal extortion, depending on your point of view) that accrued to the post-war generation.

So you're saying that the wages in the 1950's were higher than they are now due to Labor rights?

[Billy Jingo]

So you're saying that the wages in the 1950's were higher than they are now due to Labor rights?

No.

Odd question.

[phillygirl]

No.

Odd question.

Well then I'm not following you at all. What is the issue with Labor rights that you think was discounted?

[Gingersnap]

Well then I'm not following you at all. What is the issue with Labor rights that you think was discounted?

Probably the fact that union membership peaked in the late 50s or very early 60s. That's definitely a factor in some areas since union membership ran the gamut from very high in New Jersey or New York to barely detectable in Wyoming or North Dakota.

I think a large part of the problem is the break-up of families over that period as well as the rise of the single mother who has no family to break. Despite howling to the contrary by some, even poor families who stay together past the child-rearing years do better economically than peers higher on the wealth ladder who experience divorce or no marriage at all. The traditional view of marriage as an economic partnership where both spouses had a higher tolerance for periodic dissatisfaction worked fairly well as a means wealth-building. It's still the lifestyle of choice among upper middle class couples and their wealthier peers for that reason.

The entitlements to replace family reciprocal giving have perversely spawned dependency in a big chunk of the population. You might work two jobs to pay back your parents or to put your spouse through school but most people will exert exactly zero extra effort to get off the government tit.

[scott]

The primary shift is in consumption. People saved much more and went into debt far less back then.

[ReinMan]

Interesting that he left out the strength of Labor during that time as compared to now.

The labor movement of that time actually served a purpose (well, a couple, actually).

The needs that were met by the Union then are now embedded in Federal labor regulations and agencies, such as OSHA, and NLRB.

Comparing Labor 'then' and 'now', is just as productive as comparing the modern RC church to the same institution as it existed during the renaissance.

[Gingersnap]

The primary shift is in consumption. People saved much more and went into debt far less back then.

That's a factor but one that's hard to tease out. The truth was that banks did not loan to individuals very easily or very cheaply - they certainly wouldn't offer a home owner refinancing or home equity loans with the mad abandon of the past 20 years. Credit cards weren't free or easy to get if you had no history; even then the limits were strict and low for most people. The amount of debt carried by an individual was crucial in securing mortgages, credit, or other instruments so that kept people away from those areas. Home loans were a little different but a stable work history was required as well as at least 20% down for most people. So "extra" money was hard to come by.

Because of that, most people lived on budgets and that was just an ingrained fact of life. Vacations, dinner out, gifts, and other extras were part of the budget or paid for by extra work: part-time jobs off and on for many women, overtime for men, an awful lot of teenagers worked after school, weekends, and all summer.

It may be that previous generations were inherently thrifty or it may be that most of them simply didn't have the opportunity to royally screw-up financially unless they were drunks, unemployable, or gamblers.

It's an interesting question.

[Adam]

When we talk about savings, we usually talk about the benefit to the saver. That’s significant, but there’s another, arguably more significant benefit: Money saved is money invested, providing capital to an advanced techno-industrial economy that utterly depends on it. Investors create prosperity beyond that which they personally enjoy.

Beautiful point, and beautifully-stated. Savings beget wealth and prosperity for everyone, not just the one who is putting money in the bank or investing in the stock market or whatever. This is largely ignored by most people, unfortunately.

This is why I have said for years that we would serve ourselves well as a country to institute a system of mandatory savings that would ultimately replace Social Security (largely; SSDI would still need to be funded, and that could be done by taxing the growth on those savings) and ultimately pay our way out of Medicare and fix healthcare. The problem with such a system is that it would take away the control that politicians hold, and that's politically untenable. What are the dingleberries inside the Beltway going to do if they can't threaten people's Social Security or Medicare any more? Why, they'd lose all control over the population!

[Adam]

Well then I'm not following you at all. What is the issue with Labor rights that you think was discounted?

Apparently, it's the zero-sumism that if you just pay labor more, that will "equalize" things because you necessarily must pay management less. IOW, take from the salary of the CEO and distribute it amongst labor, and somehow that will bring Cosmic Sameness.

Forget the fact that this is zero-sumism that has no basis in reality. It's making everyone equal, man!

[deudyurondame]

The labor movement of that time actually served a purpose (well, a couple, actually).

The needs that were met by the Union then are now embedded in Federal labor regulations and agencies, such as OSHA, and NLRB.

Comparing Labor 'then' and 'now', is just as productive as comparing the modern RC church to the same institution as it existed during the renaissance.

Yes, but let us not use any distinction of said equality to misdirect us from "Labor rights".

[Celeste Chalfonte]

That's a factor but one that's hard to tease out. The truth was that banks did not loan to individuals very easily or very cheaply - they certainly wouldn't offer a home owner refinancing or home equity loans with the mad abandon of the past 20 years. Credit cards weren't free or easy to get if you had no history; even then the limits were strict and low for most people. The amount of debt carried by an individual was crucial in securing mortgages, credit, or other instruments so that kept people away from those areas. Home loans were a little different but a stable work history was required as well as at least 20% down for most people. So "extra" money was hard to come by.

Because of that, most people lived on budgets and that was just an ingrained fact of life. Vacations, dinner out, gifts, and other extras were part of the budget or paid for by extra work: part-time jobs off and on for many women, overtime for men, an awful lot of teenagers worked after school, weekends, and all summer.

It may be that previous generations were inherently thrifty or it may be that most of them simply didn't have the opportunity to royally screw-up financially unless they were drunks, unemployable, or gamblers.

It's an interesting question.

I'm going to say, a good deal of the latter and a bit of the former.