The New Class War: A Wealth Gap Between Millennials
The divide between the wealthiest millennials and their peers is larger than in any previous generation, leading to a burgeoning class divide that fosters resentment and has significant societal implications. A recent study highlights the stark contrast in financial realities within the millennial cohort, shedding light on a generation often misunderstood when discussed as a monolithic group.
While a significant portion of millennials grapple with challenges such as student debt, low-paying jobs, unaffordable housing, and scant savings, there exists a small faction of the generation whose financial situation markedly deviates from this narrative. This elite group of millennials has accumulated wealth surpassing that of their counterparts in previous generations. As identified in the study, the average millennial possesses 30% less wealth by the age of 35 compared to what baby boomers owned at the same age. Conversely, the wealthiest 10% of millennials have amassed 20% more wealth than the top 10% of baby boomers at the same milestone.
This disparity underscores the fragmented experiences within the generation, highlighting the extreme variance from individuals struggling to make ends meet, to those enjoying unprecedented affluence. The study authors, noting the dichotomy, pointed out the divergent paths within the generation, with some members achieving remarkable success, while others face ongoing financial instability.
The challenges millennials encounter are multifaceted, involving lower levels of homeownership, considerable debt, insecure low-wage employment, and delayed family formations compared to previous generations. Yet, for the top 10% of earners within this group, the landscape looks markedly different. They have reaped significant benefits from an economy that increasingly rewards higher-skilled and higher-status positions, creating a widening gap within the generation itself.
Education, career paths, and the timing of major life milestones, such as family creation, play critical roles in determining individual financial outcomes. Those who pursued higher education and secured higher-paying jobs are ending up wealthier than their baby boomer counterparts who followed similar paths. Additionally, the impending “great wealth transfer” from baby boomers to their children is poised to further exacerbate the wealth divide among millennials. It is anticipated that between $70 trillion and $90 trillion will be passed down in the coming decades, with a significant portion of this wealth concentrated among high-net-worth individuals.
As this wealth transfer unfolds, disparities within the millennial generation could intensify. The visibility of wealth, particularly among the so-called “nepo babies” on social media, stirs discontent and pressures those with less to mimic affluent lifestyles, occasionally leading to financial imprudence. Insights from Wells Fargo reveal that a substantial number of affluent millennials engage in spending beyond their means for social appearances, often resorting to credit to sustain such lifestyles.
This internal class conflict is not just about present financial disparities but also concerns the perception and reality of wealth accumulation in the future. Historically, the American dream has celebrated self-made millionaires, yet the trend is shifting towards inherited wealth playing a larger role in wealth accumulation, signaling a possible transformation in the dynamics of wealth creation.
The ramifications of this shift are widespread, affecting not only personal relationships and societal structures but also creating a burgeoning market for industries catering to the needs and desires of the wealthy. This includes realms such as luxury real estate, where brokers like Clayton Orrigo have carved out a niche servicing young heirs with substantial inherited wealth, facilitating their acquisition of multimillion-dollar properties.
As the millennial generation navigates the complexities of this new class war, the divisions within it become increasingly apparent, reshaping notions of success, wealth, and the means by which they are achieved. This generation, diverse in its experiences and outcomes, stands at the crossroads of significant societal shifts driven by the interplay of inherited wealth and earned success.
