At age 25, boomers were wealthier than today’s Gen Y at the same age.
Do you feel like the younger generation is making more money than you ever did? According to new research by Australian social research company McCrindle, at the age of 25, baby boomers were far wealthier than today’s Gen Y at the same age. But that doesn’t mean boomers had it ‘easier’.
Gen Y’s (aged 22-36) comprise 22 per cent of the Australian population and make up the largest proportion (36 per cent) of the workforce. They are today’s parents, leaders and increasingly becoming wealthy accumulators.
Director of Research at McCrindle, Eliane Miles says the research into the wealth gap between boomers and Gen Y provides valuable insight into how income and wealth are distributed across generations.
McCrindle even made this infographic based on Australian Bureau of Statistics data to provide a picture of how the distribution of income and wealth has changed in Australia.
In an interview on ABC’s Nightlife, Ms Miles suggested that both baby boomers and Gen Y’s have faced their own unique set of financial hardships but neither generation has had it ‘easier’.
The wealth difference between boomers and Gen Y’s can be explained by a number of the usual factors, not least the cost of housing. The average annual full-time salary today might be $80,000 (compared with $19,000 in 1984), but the costs of acquiring a house today has risen exponentially.
For instance, the average price of a residential property in 1981, when many boomers were buying their first houses, was $64,000. In this same year, 61 per cent of Australians aged 25-34 owned their own home.
Across the nation today, the cost of buying a house has ballooned to more than 10 times that figure, and in 2011 the number of people owning houses in the 25-34 age bracket had dropped to 47 per cent.
While the cost of buying property was far lower 30 years ago, it was also more difficult to borrow than it is today. The wealth of boomers can, in large part, be owed to a mindset that attributed the accrual of wealth with hard work and loyalty to employers. Ms Miles says the hard work of boomers paid off, equalling a “miracle wealth accumulation” that allowed them to invest in property and to offer ongoing financial assistance to their children.
Boomers currently comprise 25 per cent of the population yet they own 55 per cent of the nation’s private wealth. This has contributed to the housing affordability issues currently faced by many Australians. However, social researcher Mark McCrindle suggests that “in 2020, when the oldest boomers hit their mid-70s, we will witness the biggest intergenerational wealth transfer in history” (around $2.8 trillion). The decades ahead may see the younger generations becoming the main beneficiaries of this wealth, potentially smoothing out the housing playing field.
Read more at mccrindle.com.au
The McCrindle research found that the wealth of baby boomers at age 25 was higher than that of Gen Y’s today of the same age.
These findings have allowed us to see how the cost of living has influenced consumer wealth and spending. Australians aged 25-29 have a higher disposable income than those aged 65-69. Interestingly, the McCrindle research found that since young people today have little prospect of owning a home, their consumer spending has risen, thus increasing their quality of life in comparison to that of boomers.
The flipside of this fact is that because consumer spending is so great, young people may be sabotaging their chances of ever owning property. However, until we see as much research go into expenditure as into income and wealth, we can never truly know whether people can actually afford to spend their wealth the way the trends suggest.
Furthermore, while boomers worked to accrue savings to live on later in life, a vast number of Gen Y’s are starting out with debt. i.e. education, placing them on the back foot before they even begin. While banks today are offering up loans more easily for Gen Y’s than they did when boomers were entering the housing market, the reality is that because mortgage repayments can be put off, debt can be blown out for an even longer period – making it even more difficult for young people to get ahead financially.
As Eliane Miles, Director of Research at McCrindle suggested, this data provides valuable insight into how trends in the wealth and spending habits of Australians have changed. However, we must remember to look at this data rationally and use it improve our understanding of the financial prospects for all Australians, rather than to create unhelpful intergenerational comparisons.
What do you think of the research findings? What was your experience of working and affording a house as a baby boomer? Do you think the financial challenges of Gen Y’s are all that different to what you experienced?
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