Nowhere is life more U-shaped than in San Francisco. The city’s idealistic youngsters believe that they will start the next big artificial-intelligence company, and are willing to put up with high costs and crime. Successful Boomers live in enormous houses in Pacific Heights and sit on company boards.
Gen Xers, in the middle, have neither the idealism nor the sinecures. Only 37 per cent are happy with life in San Francisco, compared with 63 per cent of Gen Zers, according to a poll in 2022 by the San Francisco Standard, a local paper. Many have little option but to live in Oakland – the horror! – if they want a big house.
Gen Xers are reluctant to be corporate drones, placing more emphasis on work-life balance and autonomy.
Although Gen Xers will in time escape the U-bend, they will remain losers in other ways. Consider their incomes. Gen Xers do earn more after inflation than earlier generations – the continuation of a long historical trend, and one from which both Millennials and Gen Zers also benefit. But their progress has been slow.
A recent paper by Kevin Corinth of the American Enterprise Institute, a think-tank, and Jeff Larrimore of the Federal Reserve assesses American household incomes by generation, after accounting for taxes, government transfers and inflation. From the ages of 36 to 40, Gen Xers’ real household incomes were only 16 per cent higher than the previous generation at the same age, the smallest improvement of any cohort.
Keanu Reeves in 2003’s Matrix Reloaded: In the movie franchise, humanity is unknowingly trapped inside a simulated reality, the Matrix, which machines have programmed.Credit: AP
Perhaps this poor income growth is a consequence of a stereotype that a range of psychological studies have confirmed: Gen Xers are reluctant to be corporate drones, placing more emphasis on work-life balance and autonomy. It is no coincidence that in 1999, when Gen Xers were in the prime of their lives, there were two hugely successful films in which people broke free of life’s shackles.
In The Matrix Thomas Anderson, a computer programmer, discovers the world is an illusion simulated by intelligent machines. In Fight Club an office worker joins a secret society whose members kick lumps out of each other. All very exciting, of course – but hardly conducive to a solid career.
Gen Xers have, to be fair, faced difficult circumstances. People’s earnings typically rise fast in their 30s and 40s, as they move into managerial roles. Unfortunately for Gen Xers, when they were in that age range labour markets were weak, following the global financial crisis of 2007-09.
In 2011, for instance, the median nominal earnings of British people in their 30s rose by just 1.1 per cent. Earnings growth in Italy, which was hit hard by the euro crisis, was just as poor. And in Canada from 2011 to 2017 the real median earnings of people aged 35 to 44 years did not grow at all.
Gen Xers have also done a poor job accumulating wealth. During the 1980s, when many Boomers were in their 30s, global sharemarkets quadrupled. Millennials, now in their 30s, have so far enjoyed strong market returns.
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But during the 2000s, when Gen Xers were hoping to make hay, markets fell slightly. That period was a lost decade for American stocks in particular, coming after the dotcom bubble and ending with the financial crisis.
What about homeownership, the ultimate symbol of intergenerational unfairness? The conventional narrative contrasts perma-renting Millennials with Boomers who enjoy six spare bedrooms. Yet data on American homeownership, provided by Victoria Gregory of the St Louis branch of the Fed, overturns this received wisdom. In fact, the big decline in homeownership rates happened from Boomers to Gen Xers. Starting in their late 30s and early 40s, Gen Xers of a given age had a similar chance of owning as Millennials do.
Aversion to homeownership is in some cases a choice. Gen Xers may have imbibed a passage from Coupland’s novel: “When someone tells you they’ve just bought a house, they might as well tell you they no longer have a personality.”
But, again, circumstances are probably a bigger factor. From their late 30s to their early 40s, the time when many people first get on the housing ladder, Gen Xers suffered from the effects of the financial crisis. It became hard to get a mortgage. Some of those who already had one foreclosed on their house and went back to renting.
Aggregate statistics capture all these trends. Jeremy Horpedahl of the University of Central Arkansas tracks average wealth by generation, using data produced by the Fed. He finds that, at 31, the Millennial/Gen Z cohort has about double the wealth that the average Gen Xer had at the same age. Using survey data from the European Central Bank we find suggestive evidence of similar trends in Europe. From 2010 to 2021, Millennials in the euro area tripled their nominal net worth, versus less than a doubling for Gen Xers.
The position of Gen Xers may not improve much in the years ahead. They could be the first to suffer owing to broken pension systems. America’s social-security fund is projected to be depleted by 2033 – just as Gen Xers start to retire – meaning benefits will be cut by 20-25 per cent unless Congress acts. Next time you see a quinquagenarian, at least give them a smile.
The Economist
