Despite being better educated, Millennials still make less money than their parents. And unless you’ve been living under a rock, you’ve probably heard the same accusations why — Millennials are lazy, they bounce between jobs, they’re too educated, they’re tech obsessed — there’s a lot of them. But how much of this is true? Well, as it turns out, really none of them (tech obsessed is debatable). Millennials aren’t lazy and they don’t job hop any more than Gen Xers. They are merely doing their best with what they’ve been given.
According to the “Emerging Millennial Wealth Gap,” a report from the nonpartisan think tank New America, Millennials earn 20% less than baby boomers did at the same age. And not only are median earnings lower, but paychecks are more inconsistent, housing has skyrocketed, student loans are unmanageable, and net worth is lower than previous generations. Let’s use the interactive tools on this website to prove it.
Millennials Still Make Less Because Salaries Haven’t Really Increased
Salaries haven’t really increased for millennials. According to the U.S. Census Bureau, the average household income in 1990 for people between the ages of 25 and 34 years old was $30,359; the average household income for the same age group in 2019 was $70,283. However, when we adjust the 1990 income for inflation (using one of the many inflation calculator found on this website), we get an adjusted income of $57,757; that means that millennial households today make only $12,526 more per year than someone of the same age from 1990. While that might seem like a step in the right direction, it’s only a 17.8% increase in a span of 30 years. And when today’s cost of living is factored into the equation, we can see that major expenses (such as mortgages, rent, and student loans) have far outpaced our rise in household income.
Median Household Income: 25 To 34 Years Old
| Year | Median Income | Adjusted for Inflation (2019 dollars) |
|---|---|---|
| 2019 | $70,283 | $70,283 |
| 2010 | $49,877 | $58,610 |
| 2000 | $44,414 | $66,120 |
| 1990 | $30,359 | $57,757 |
| 1980 | $19,337 | $57,281 |
The Great Recession Was Hard on Millennials
The Great Recession was pretty hard for millennials. According to the U.S. Census (see chart above), household income (when adjusted for inflation) actually decreased between 2000 and 2010. Millennials, who largely entered the workforce during this period, bore the brunt of this downturn and are still feeling the effects today. And although household income has recovered since the Great Recession (roughly 16.6% since 2010), that doesn’t paint the whole picture. Because if we zoom out and look at the past past 20 years (since 2000), we can see that it only improves by 5.9%. And while this is still an increase, it still doesn’t keep pace with today’s cost of living.
Household Income Change (In 2019 Dollars)
- 1990 to 2000: Gain of $8,363 or 12.6%
- 2000 to 2010: Loss of $7,510 or -12.8%
- 2010 to 2019: Gain of $11,673 or 16.6%
- 2000 to 2019: Gain of $4,163 or 5.9%
- 1990 to 2019: Gain of $12,526 or 17.8%
Just a quick note: Not all costs have soared when adjusted for inflation. While some consumer goods have increased, many have not. Computers and electronics are cheaper and so is gasoline. According to this Business Insider article, even beer is cheaper.
Housing Has Skyrocketed For Millennials
Housing costs have exponentially increased in the past 40 years when adjusted for inflation. In 1980, a new home sold for $211,994. In 1990, a new home sold for $254,261. That means millennials are now paying $108,705 more than a homebuyer in 1980 and $66,439 more than a homebuyer from 1990.
| Year | New Home Price | Adjusted for Inflation (2019 dollars) |
|---|---|---|
| 2019 | $320,700 | $320,700 |
| 2010 | $221,800 | $272,771.04 |
| 2000 | $169,000 | $265,048.13 |
| 1990 | $122,900 | $254,260.95 |
| 1980 | $64,600 | $211,994.22 |
Many Millennials Are Cost Burdened
According to Bankrate’s mortgage calculator, if you were to purchase a new home for $320,700, your monthly mortgage payment would be $1,411 (with a 2.95% 30-year loan and a 20% down payment). If you don’t have enough for a 20% down payment (approximately $64,140 in this case) and you decide to put just 5% down (approximately $16,035), then your monthly payment goes even higher to $1,613. In order to afford this house and stay within HUD’s recommendation of spending 30% or less of your income on housing, you would need a monthly after-tax income of $5,376 or a before-tax yearly household income of roughly $88,000. That’s $18,000 more than than a normal household takes in. Use the Nuevoo tool to explore estimated after-tax income.
Quick Note: We are at record low interest rates and online mortgage calculators typically underestimate costs.
The Rental Market Is Equally Terrible
It can be pretty difficult to save for a down payment when your rent is already high. According to the U.S. Census Bureau, the average rent (when adjusted for inflation) in 1980 was $740 and the average rent in 2000 was $899. That’s significantly less than those paying an average rent of $1,690 for a studio apartment today. Even worse, this doesn’t account for the variation between markets; there’s a big difference between renting in Mississippi and renting in Seattle, where the fair market rent is over $2,000 for a two bedroom.
| Year | Median Gross Rent | Cost In 2020 Dollars |
|---|---|---|
| 1960 | $71 | $620 |
| 1970 | $108 | $710 |
| 1980 | $243 | $740 |
| 1990 | $447 | $869 |
| 2000 | $602 | $899 |
Millennials Net Worth Is Lower
According to this Business Insider article, millennials have a net worth of less than $8,000. And despite being more likely to say that they’re “disciplined” or “highly disciplined” financial planners, only 70% of millennials have a bank account and 58% have a savings of $5,000 or less. When compared with their parents, millennial salaries are estimated to be 20% lower than a baby boomer at the same age. When asked what they would do with $1,000, more millennials said that they would pay off debt over saving it.
Check out the wealth shown to scale tool and visualize how your income compares to Mark Zuckerberg, Jeff Bezos, and the 400 richest in the world.
Student Debt Is Really That Bad
According to the Federal Reserve, Americans owe more than $1.7 trillion in student debt.
With the average borrower paying a monthly student loan payment of $393, it would take approximately 20 years, or 240 monthly payments, to pay it off. Considering the fact that student loan debt has increased 102% since 2010, it’s unlikely that this problem will take care of itself.
Let’s Do The Math
When we start to factor in everything, it’s easy to see just how difficult it is to stay financially afloat. Not only are salaries low, homes unaffordable, and student loans unmanageable, but when we add in other costs — health care costs, transportation costs, childcare, credit card debt — the problem only gets worse.
| Monthly Income After Tax (based off of a before-tax household income of $70,283) | $4,418 |
|---|---|
| Rent/Mortgage (using 30% rule) | $1,325 |
| Utilities | $398 |
| Student Loans | $393 |
| Health Insurance | $574 |
| Car Payment (used car) & Insurance | $590 |
| Childcare | $1,230 |
| Credit Card Expenses (varies) | $120 |
| Total Spending Money Left | – $212 |
Imagine Other Scenarios
Imagine if you’re household income (after tax) is below $4,418 per month or one or more of your expenses is more than what’s listed above. Needless to say, things can really start to snowball. Once you factor in other family expenses, such as additional childcare costs, car repairs, family health insurance, etcetera, debt soars even higher.
Even worse, imagine trying to stay afloat on minimum wage.
Final Take
Millennials make less money than their parents because their surroundings have not been favorable.
While every generation has had its struggles, millennials have been particularly vulnerable to circumstances outside of their control. And despite the rhetoric that gets thrown their way, they’re flexible, adaptive, and hard-working.
Just like previous generations, their ingenuity and determination will overcome financial hardship, they just have less room for mistakes.
If you want to do your own research, consider some of the free, third-party tools we’ve amassed on this site.
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