Working Paper: NBER ID: w27123
Authors: William G. Gale; Hilary Gelfond; Jason J. Fichtner; Benjamin H. Harris
Abstract: We examine household wealth across birth cohorts and over time using data from the Survey of Consumer Finances. We show that although the Great Recession reduced wealth in every age group, longer-term trends indicate that the wealth of older age groups has increased while the wealth of younger age groups has declined. A substantial share of these changes, in both directions, can be explained by changes in household demographic and economic characteristics. As for the millennial generation, their median wealth in 2016 was lower than the wealth of any similarly aged cohort between 1989 and 2007. Millennials will have several advantages in wealth accumulation relative to previous generations, such as more education and longer working lives, but also several disadvantages, including weak prospects for economic growth and delays in home purchase and marriage. The millennial generation contains a significantly higher percentage of minorities than previous generations. We estimate that minority households have tended to accumulate less wealth than whites in the past, controlling for household characteristics, and the difference appears to be growing over time for Blacks relative to whites. These results apply to the period before the COVID-19 pandemic and are best interpreted as addressing generational wealth patterns through 2016 and providing a pre-COVID benchmark against which future studies can be compared.
Keywords: wealth accumulation; millennials; household wealth; economic characteristics; demographic factors
JEL Codes: D1; E2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Great Recession (G01) | wealth reduction (G51) |
| wealth reduction (G51) | older generations recovery (J14) |
| wealth reduction (G51) | millennials decline (J11) |
| demographic changes (J11) | wealth accumulation for millennials (G51) |
| economic challenges (F69) | wealth accumulation for millennials (G51) |
| demographic variables (J10) | wealth outcomes (D31) |
| minority households (J15) | less wealth accumulation (E21) |
| household characteristics (R20) | wealth accumulation disparity (D31) |