Recovery for Whom?
By THE EDITORIAL BOARDAPRIL 12, 2014
The Federal Reserve, increasingly optimistic about the economy, is dialing back its stimulus efforts. The International Monetary Fund has raised its forecast for growth in the United States. Congress has long since reduced aid to the economy, with many lawmakers, mostly Republicans, adamant that the economy is better off with less government involvement.
The official line is clear: The worst is over, and recovery has given way to expansion.
But that’s not the whole story. Economic gains so far have mostly benefited those at the top of the income and wealth ladder. Worse, future growth is likely to be lopsided, because the foundation for broad prosperity is arguably the weakest it has been since World War II.
Take, for example, Americans age 25 to 34, the leading edge of the so-called millennials, the generation born in the 1980s and 1990s. They are worse off than Gen Xers (born from the mid-1960s to the late-1970s) were at that age and the baby boomers before them by nearly every economic measure — employment, income, student loan indebtedness, mobility, homeownership and other hallmarks of “household formation,” like moving out on their own, getting married and having children.
This group had the bad luck of entering the work force in the depressed and slow-growth years that started when the recession hit in 2007. Instead of spending the crucial early years of their work lives laying the groundwork for a solid economic future, many of them have struggled with unemployment and underemployment, and many have fallen so far behind where they would hope to be that recovering lost ground may well be impossible.
According to the latest census data, nearly 16 percent of those in their mid-20s to mid-30s were in poverty in 2012, compared with just above 10 percent of Gen Xers in 2000 and baby boomers in 1980. Nearly 14 percent of that age group were living with their parents in 2013, a higher percentage than in previous generations. And of those living at home, 43 percent (2.5 million people) would be counted as being in poverty if they were on their own. Only 38 percent of those who were on their own were homeowners, compared with 46 percent from this age group who were on their own in 2000.
The median household income of this age group — $51,381 in 2012 — is nearly $8,000 less than the median for the same age group in 2000 and virtually unchanged from 1980, adjusted for inflation. The older millennials are also less likely to move; in 2013, only 20 percent of people in their mid-20s to mid-30s had relocated recently, compared with 27 percent who were the same age in 2000 and 26 percent in 1980.
Some of the trends in the latest data were evident before the recession, especially stagnating wages, delayed marriage and later childbearing. But the poor economy has intensified those conditions. For instance, in a study by the Pew Research Center of the entire millennial generation, 74 percent were unmarried; many of them said they wanted to marry but lacked the economic wherewithal. Even among those age 25 to 34, only 44 percent were married in 2013, compared with 55 percent in 2000 and 66 percent in 1980.
These patterns should not come as a shock. Evidence and experience from before the recession show that starting one’s work life in a poor economy can translate into lower earnings and less career attainment over a lifetime.
What is shocking is that despite the known danger and despite the prolonged bad economy, more government resources have not been used to prevent and reverse such a huge waste of human capital. Instead, public resources for job creation and even for unemployment benefits have been too little and too late, if available at all.
Another shocker is that those in the 25-to-34 age group are the best educated cohort in American history, with more than a third having a bachelor’s degree or higher. Education is important. But clearly, education alone does not create jobs and opportunities that lead to prosperity. For that, a fair and functional economy is needed — one in which the government plays a robust role, alongside consumers and businesses, to promote full employment and to ensure a just distribution of gains.
Americans who began their careers in the teeth of the recession are not the only ones bearing economic scars. Younger millennials are not appreciably better off than their older peers, though they have not yet lost as much ground. At the other end of the spectrum, many older Americans who lost jobs and assets in the recession also face an uncertain future.
Certain sectors of the economy, especially the financial markets, are indeed turning a corner. But true prosperity is impossible when the productive potential of young adults is being squandered.