

The wealth gap between young and old people - jtzhou
https://www.washingtonpost.com/news/wonkblog/wp/2015/07/29/millennials-should-no-longer-dream-of-ever-becoming-millionaires/

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mkozlows
The biggest problem with this article is that the data in their core graph[1]
doesn't actually match up with their claims.

What that graph shows is what families were worth over a 14 year periods for a
bunch of cohorts. And the data makes... a pretty smooth graph. There's lots of
overlap and no obvious discontinuities, and no reason at all to think that
there's any change in trend over time.

The only apparent effect that even possibly shows that younger people are
worse off comes in the last two data points of each young person's line. But
that's a totally obvious artifact, because that's the 2008 recession, which
was the worst event of the 1989-2013 period graphed. (The 2000 dot-com bust
was not nearly as huge.) EVERYONE'S line goes down at that time, including the
oldest cohorts.

If the graph had more data, and showed what the 1901 cohort were like at age
31 (in the throes of the Great Depression), it would almost certainly be
obvious that those 2008-driven dips aren't especially bad, comparatively. And
yet, that's the old-person generation that is supposed to be the envy of the
young.

This is just terrible interpretation of some unsurprising data.

[1] [https://img.washingtonpost.com/wp-
apps/imrs.php?src=https://...](https://img.washingtonpost.com/wp-
apps/imrs.php?src=https://img.washingtonpost.com/blogs/wonkblog/files/2015/07/whoa2.png&w=1484)

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falcolas
Speaking only for myself and my parents - the factor here has been land. They
both inherited several hundred acres of farm and ranch land, and purchased
some land in-town when it was (inflation adjusted) $90,000, and is now in the
$2-3 million range.

They're both terrible at saving, their combined income was never over 50% of
what I'm currently making, yet they have both been retired and comfortably
living off these "investments" for 20+ years now.

I, on the other hand, am just hoping that I can move to part-time work
somewhere in my 60's. I'm hopeful, but it means keeping my current income
levels for another 20 or so years, and avoiding any major health or other
emergencies.

~~~
rhino369
I assume the housing market is the majority of this wealth disparity. The
nations northern cities have seen huge increases in property values. For those
who bought cheaply before the run up, the benefits are clear. You buy a house
for 150k in Palo Alto, CA in 1981. And in 2015 it's worth 1.5 mil.

For millenials, we are stuck in a market where you got to pony up 1.5 mil to
buy a family sized house.

Maybe the market will just keep going and going. But I don't think our economy
can support that sort of thing. At least not the extremes that happened since
the 70s.

~~~
jtzhou
And the person who bought the home in Palo Alto in 1981 is only paying 1/5 of
the property taxes as the person in a comparable home who bought recently.
California is really the epitome of having a tax code favoring land owners and
the older generation over those relatively new to the job market.

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carsongross
There is a huge generational disconnect between the boomer-driven media and
political establishments and the X'ers and millenials.

My prediction/hope is that the stereotype of millenials as relatively happy
socialites will end up reversing, with them falling in with us burn-it-to-the-
ground X'ers once they are old enough to realize how screwed they are.

~~~
jtzhou
True, but there is definitely a lot of staying power in those currently of
retirement age, kicking the can down the road, with a growing proportion of
the population over age 65 (20% in 2020 versus 9% in 1970) receiving the
benefits of Social Security and Medicare which are largely unfunded.

There will have to be a number of cut-backs in retirement benefits for future
retirees, including means-testing, removing the maximum wage for Social
Security contributions, and higher Medicare premiums.

~~~
ForHackernews
> removing the maximum wage for Social Security contributions

This sounds like a great idea to me. It's absurd that only the first $118,500
of earnings are subject to to social security tax, and it means that our tax
structure is much less progressive than it appears at first glance (which is
one reason certain people strenuously avoid talking about any taxes except
Federal Income Taxes).

~~~
twoodfin
It's not absurd: Social Security's benefits formula has significant "bend
points" that make it an increasingly bad "investment" for higher income
workers. Eliminating the wage cap would remove any remaining fig leaf covering
its essentially redistributive nature: High income workers would have to live
to 140 to get back what they "paid in" even without interest.

~~~
mikeash
Why do we need to keep a fig leaf to cover up what everybody already knows is
there? We should either accept that Social Security is a form of welfare and
rationalize it accordingly (my preference) or we should overhaul it to
actually be the mandated savings scheme that it's said to be.

~~~
bmelton
Because welfare isn't popular, it makes it more subject to the political
climate, and because as a mandated savings scheme, social security isn't
terribly performant.

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11thEarlOfMar
A couple of factors that play into this over the last 100 years: The
prevalence of credit cards that increase the amount of depreciating goods
young people can buy, and the long-term power of 401(k) investing.

Expanded consumer credit, and it's appurtenant high interest rate cost, would
tend to keep young people less wealthy towards the last half of last century.
As credit card debt skyrocketed, savings rates plummeted from almost 11% in
1982, to 1.5% in 2007 [0].

Similarly, the power of 401(k) investing is really only coming into it's own
in the last decade or so, since 401(k) accounts have had 30 years to mature,
total retirement assets now total well over $3 Trillion nationally.[1]

[0] [http://www.americanhistoryusa.com/give-me-liberty-or-give-
me...](http://www.americanhistoryusa.com/give-me-liberty-or-give-me-debt-a-
history-of-credit-cards/)

[1]
[http://www.nber.org/bah/fall02/changingCharacter.html](http://www.nber.org/bah/fall02/changingCharacter.html)

~~~
toomuchtodo
Don't forget wage stagnation over the last 40 years and the increased cost in
college education (funded, yet again, by cheap credit backed by the federal
government).

~~~
TheOtherHobbes
This. There's been a massive shift of wealth away from the middle classes.

And college loans are just taxation by the back door - with the difference
that instead of a graduate tax paid to the government, you pay a loan "tax" to
the shareholders of the loan fund.

In fact, taxation is increasingly privatised. Instead of paying taxes to
government you pay a profit-surcharge on almost everything. This goes to
corporate shareholders but provides little or no returned value.

The result is that trillions of dollars are rotting uselessly in offshore tax
havens, when they could have been invested in future economic development. And
spending power has been suppressed, when it could have been driving the
economy from the other end.

~~~
plonh
Dollars are illusory so they cannot rot. The government can always stimulate
actual productivity by printing dollars to pass around.

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BrandonMarc
_One of the most important points that the paper makes is that everyone’s
income and wealth tend to follow a kind of natural pattern during their life.
[People under 40] haven’t been working for many years, so they don’t have an
opportunity to save as much; they also need to make investments in things like
education and new home ownership. [People in their 40 's and 50's] have worked
long enough they start to accumulate wealth rapidly._

I don't mean to SHOCK you, but did you know there's a massive age gap between
young and old people? Also, an experience gap. Something Must Be Done About
This!

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dataker
A large reason for that is a leveraged economy.

I still remember how hard it was to build up enough credit to move beyond
prepaid cellphones.

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ams6110
The answer (which is the same as it has always been) is buried at the end:

 _If young people want to increase their chances of being wealthy, one
strategy is to emulate the behavior of older people: keeping an emergency
fund, paying down debt, avoiding high-cost credit, and putting money into
higher-returning investments_

~~~
pcurve
It's a sound premise, but young(er) people will never see the kind of boom
that their parents experienced.

Younger generation is permanently hosed.

What this article fails to mention is all the privatization and regulations
that have caused capital misallocation and favored certain classes of people.

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shenanigoat
Well...at least the young are rich in 'youth'.

~~~
6t6t6
Unfortunately, this kind of richness does not use to last really long.

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traviagio
So living in expensive cities like NYC/SF and London when you are younger is
also becoming impossible. But we still do it... Heaps of us.

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MajorLOL
>If you’re over 62, your odds of having at least $1 million in net wealth
(your total assets minus your total debt) are relatively achievable -- about 1
in 7. But if you are under 40, your odds are low: 1 in 55.

So the older you are the more time you have had to grow wealth. The younger
you are the less time you have had. This is then forcibly tied into median
family income?

this is huffington post tier article.

~~~
stephengillie
> _Young people (generally defined here as those under 40)_

What is with the media and this strange concept of "young people" now being
the 28-40 age bracket? Back in my day, "young people" meant 8-18 year olds.

This isn't the only article making this bizarre wordplay. One of the previous
USDS "submarine" articles referred to "young people" on a team as the members
who were over 28.

~~~
mjevans
Clearly they are talking about 'the workforce' as 'people'. 'kids' are not
considered anything but a cost center in their equation.

~~~
msandford
'kids' used to work and earn money. That used to be a real category. It's not
anymore. A lot of people don't learn how to really manage their money until
after they've graduated from college and realize that they're going broke and
that there are no new loans.

Is that irresponsible of them? Sure! But how were they supposed to learn if
they couldn't get a job and make some of their own money?

