Will there be a Millennial Big Chill?

Millennials are finally doing OK economically. Will their politics moderate?

“How does it feel/ Ahh, how does it feel/ To have a cellular phone/ And a colonial home/ Like a suburban drone” — The Capitol Steps

Jean Twenge is rapidly becoming one of America’s most interesting public intellectuals. The San Diego State psychologist has been the most forceful proponent of the theory that teen unhappiness is due to smartphone-empowered social media, and she’s written a book on the differences between generations. Now she’s provided a powerful counterargument to one of the most widespread and enduring economic tropes in our public discourse — the idea that the Millennial generation has been uniquely disadvantaged by the American economy.

The standard story goes something like this: Educated Millennials (Americans born in the 80s and 90s) graduated into the Great Recession, putting a permanent scar on their earning power. At the same time, they took out record amounts of student debt to pay record high tuition, even as the college wage premium was shrinking. And at the same time, high housing prices kept Millennials out of the market, preventing them from getting on the same wealth escalator that made the Boomers rich. As a result, Millennials own far less of the nation’s wealth than the Boomers or Gen Xers did at a similar age. As a result, the Millennials rejected capitalism and embraced socialism, leading to the unrest of the 2010s. And if we don’t (make college free/ cancel student debt/ nationalize health care/ overthrow capitalism/ abolish billionaires/ whatever), then we’re headed straight for Revolution.

There were always some noticeable problems with this story. First, although it’s true that graduating into a recession does tend to leave a long-lasting scar on people’s earning power, the effect is rather small. And only a small part of the Millennial generation actually graduated into the Great Recession; the formal recession only lasted a year and a half, and by 2012 the job market was recovering. As for record student debt, it was concentrated among high earners, and the truly eye-popping debt loads were mostly carried by people with professional degrees.

As for Millennials’ low share of the nation’s wealth, it was never clear that this was something that should be compared across generations. After all, the Boomers were young at a time when much of the nation’s wealth — the suburbs — was still being built. Their parents, the WW2 generation, didn’t have that much to start out with. But by the time the Millennials came along, the nation was full of real estate, so of course it was going to be harder for Millennials to capture a large share of the nation’s wealth at a young age.

The econ blogger Jeremy Horpendahl has been pointing this out for a few years now. He shows that that if you look at actual wealth per capita, instead of generational shares, Millennials are building wealth at the same rate their predecessors did:

Source: Jeremy Horpendahl

This is adjusted for inflation, of course, so it takes things like the rising prices of health care and child care and rent into account. And yes, it includes student debt.

Over the past year or so, more people have begun noticing that Millennials’ wealth situation isn’t as dire as the country had been led to believe. The St. Louis Fed followed up with a graph similar to Horpendahl’s in 2022. And Fortune reported on how the total wealth of the Millennial generation doubled during the pandemic.

But wealth is only one piece of the economic picture, and not until Twenge’s article did someone put all the pieces together. If you haven’t yet read that article, you really should. It’s thorough, methodical, and comprehensive, answering almost all of the potential criticisms in advance. Twenge shows that although Millennials’ incomes took a huge hit during the Great Recession, they’ve since recovered, and are now considerably higher than that of any previous generation at a similar age. I’ve annotated her graph with a blue circle showing where the “Millennials are screwed” takes first started appearing en masse:

Source: Census Bureau via Jean Twenge, edits by Noah Smith

In 2012 or 2013, it really did look like Millennials had gotten the short end of the economic stick — 25-to-34-year-olds made no more money in 2012 than they did in 1969. But like so many other economic phenomena, that turned out to be more about the cycle than the trend — young people’s incomes bounced back strongly in the late 2010s, and held up find during the pandemic. In fact, for older Millennials, the bounce-back has been even stronger than the rise in the brown line or the red line would suggest, because the people who were in the 25-34 age range in 2012 were almost all in the much higher-earning 35-44 age range by 2021. (This group includes Yours Truly.)

And no, the Millennial rebound isn’t an artifact of household size. Despite what you may have heard about all the Millennials moving back in with mom and dad, the number of people per household in the U.S. has been going down pretty steadily:

Also, note that the income measure being used here is a median, meaning it’s not being distorted by a few rich young people.

In other words, in income terms, Millennials are doing fine — better than any generation did. The rise isn’t completely even — Black and Latino young people’s incomes have gone up, but men’s incomes have lagged behind women’s. But overall, this just doesn’t look like a downwardly mobile generation.

Twenge also busts the myth that Millennials don’t own homes:

Millennials’ homeownership rates in 2020 were only slightly behind Boomers’ and Gen Xers’ at the same age: 50 percent of Boomers owned their own home as 25-to-39-year-olds, compared with 48 percent of Millennials, hardly a difference deserving of headlines or social-media memes.

A recent Redfin analysis came to a very similar conclusion. They even included Gen Z in their chart:

Source: Redfin

There was a modest gap a few years ago, but Millennials have mostly caught up to Gen X since then.

But weren’t Millennials forced to pay higher prices for those homes? Yes, but in terms of wealth building, that doesn’t really matter as long as the homes are being bought. Once you own the home, how fast you build wealth just depends on how fast you put equity into the home and how fast the home’s price goes up (and maybe also the rental yield if you rent it out). What the Redfin data shows is that Millennials are, by and large, are on the escalator of middle-class housing wealth. I don’t personally like the fact that America uses homeownership as its primary middle-class savings vehicle — it introduces all sorts of bad incentives for people to be NIMBYs — but the system appears to still be working as designed.

That really just leaves the question of total wealth. Twenge posts a version of the St. Louis Fed’s wealth graph, which itself is similar to Horpendahl’s. Here’s the Fed’s version:

Source: St. Louis Fed

This is actually the weakest part of Twenge’s argument. In the time since the Boomers were young, the U.S. economy has gotten much richer; real median personal income has grown by 40%. With higher national incomes, we should ask why Millennials — and Gen Xers for that matter — didn’t build wealth faster than the Boomers did.

One answer is that they got a later start; high-earning Millennials were more likely to go to grad school, meaning they didn’t start making money and building wealth until a later age than the Boomers. Student debt has got to be a factor too. And that earnings hit that older Millennials took during the Great Recession might have been temporary, but it delayed wealth-building as well.

So here, at last, we can see some modest remnant of the “Millennials got screwed” narrative. The scars from the Great Recession and the student debt bubble mean that Millennials are only as rich as the Boomers were at the same age, when in fact they ought to be richer.

But there is one important caveat here that Twenge actually fails to mention. Where do you think the vast accumulated wealth of the Boomer generation will go in 10 or 20 years when the Boomers die? What will happen to all those nice expensive houses in the suburbs? Their children will inherit them. Their children are Millennials.

I know that inherited wealth isn’t the American Dream, and turning their parents’ suburban home into a retirement account isn’t exactly the economic future that many Millennials would hope for. And the transfer will be highly unequal — Black and Latino families will inherit less, and racial wealth gaps will be perpetuated. But all the same, the fact of that coming inheritance means that Millennials, in aggregate, will have a more comfortable retirement than their current wealth numbers suggest.

So in terms of both income and wealth, the story of the Millennials is that they got hurt by the Great Recession and swindled a bit by the student debt bubble, but now they’re doing OK. Most of them will not be trapped in downward mobility or have to work until they’re 80. Economically, they will largely resemble the generations of Americans that came before them.

Does this mean Millennials will chill out?

An interesting question, however, is whether they will socially resemble the earlier generations. The new socialist movement and various “woke” movements have given Millennials a reputation as a rebel generation. But the Boomers were similarly stereotyped back in the 60s and 70s. And we know what happened there — they settled down, made some money, had some kids, and chilled out. In fact, there’s a very famous movie about this, called The Big Chill.

There’s a scene when one of the characters turns to another and says “Who would've thought we'd both make so much bread?” I think a lot of Millennials will be asking each other that question in the 2020s.

In fact, the transformation of the Baby Boomers into Reagan-and-Trump-voting reactionaries is way overstated. Even as they aged, the Boomers remained quite a bit more liberal than the Gen Xers. And there’s no clear relationship between aging and political leanings. Even The Big Chill isn’t actually about Boomers becoming conservative; it’s about Boomers retaining some piece of the romantic spirit of their youth, even as they settle into prosperous middle age.

But at the same time, Boomers never ended up making an actual revolution or giving rise to truly radical politics. They remained liberal, but they grew up — they got good jobs and houses and wealth and families, and they did these things in a peaceful, orderly manner, working within the existing system of the United States. Ultimately, they ended up voting for the same parties their parents did, and splitting along recognizably similar lines.

Maybe that was just a factor of age. Revolution is a sport for the young; if you make it to 35 without burning the country down, you’re never going to burn it down. And I strongly suspect that unless the country falls into civil war as the result of a disputed election in 2024, we’ve passed the peak of the most recent era of unrest. My bet is that the protests and riots of the summer of 2020 will end up being by far the most radical thing the Millennial generation will ever do.

But the Millennials could still end up driving a long-term leftward realignment in American politics. So far there are no signs that they’ve been drifting to the right as they age. And it’s not at all clear that having houses and wealth and good jobs will turn them away from that path either. There’s actually no evidence that I can find that homeownership makes people more conservative. And higher income is increasingly correlated with progressive politics.

There is one age-related factor that appears to draw people to the right, however: having children. Fertility rates are down, and Twenge discusses some reasons for this in her article. But what really matters for politics is probably not the number of kids that get born, but the number of people who end up having any kids at all. The future of Millennial politics may depend on whether increased incomes, homeownership, and wealth make Millennials feel comfortable having children. In 2021, most said they didn’t want to, but that might have partially been due to pandemic pessimism; 2023 saw birth rates rise.

In any case, I think the future of Millennial politics is still up in the air as the generation eases into middle age. Perhaps my generation will go through a Big Chill of our own, and follow our forebears into prosperous suburban quietism. Or perhaps the 2010s will end up shaping us more deeply than the 60s and 70s did our parents.

Either way, though, we seem to finally be making some money, which is a big relief.

Update: Here’s a fun fact from a recent Charles Schwab survey:

48% of respondents said they already feel wealthy today, with an average net worth of just $560,000. And counter to the narrative that young people are struggling with money, feeling wealthy was most common among millennials and Gen Z, with 57% and 46% respectively reporting that they feel rich compared to just 41% of Gen X and 40% of baby boomers. 

The narrative of Millennial economic resentment grows less plausible by the day…

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Full lyrics to “Like a Suburban Drone”, by The Capitol Steps:

(sung to the tune of “Like a Rolling Stone”, by Bob Dylan)

Once upon a time, you felt the hurt

Wore a tied died shirt, slept in the dirt

Didn't you

People used to shout and say watch out

You're bound to sell out

But you thought that they were all

Kiddin’ you

But now you go out to dance

In a yellow tie and polyester pants

Now you talk like your dad

Now you wear mattress plaid

And say, Do you want to

Barbecuuuuuue

How does it feel

Ahh, how does it feel

To have a cellular phone

And a colonial home

Like a suburban drone

Ah you thought that life was meaningless

Joined the SDS, you were so impressed with

Malcolm X

Growing marijuana crops

Burnin’ buildings, fightin’ cops and

Havin’ sex

You used to be so enthused

With Abby and Eldridge and the language that they used

Now when you see kids march on the evening news

You don't go join them, you have too much to lose

You're conservative now, you got no time for

Bobby Seale

How does it feel

Ahh, how does it feel

To be a 90s man

With a Miami tan

And be a Reagan fan

A Republicaaaaaan