Thanks to recession, millennials shorted

Many making 20 percent less than their parents earned at same age

CHICAGO — When Julius Givens moved to Chicago after graduating from college in 2013, he spent six months delivering sandwiches by bicycle while living with two other roommates in a studio apartment.

“I had no money” and more than $20,000 in student loans after earning a bachelor’s degree from the University of Missouri, said Givens, who aspired to be a firefighter at the time. “It’s tight living with three people in a studio, but you figure out how to handle it.”

Scrimping was a way of life for Givens, and it still is for some in his generation. Through a fluke in the timing of their births, 75 million young adults in the millennial generation entered adulthood as the economy was in or coming out of one of the worst recessions in U.S. history. And that’s left an indelible financial mark on today’s 25- to 34-year olds. Most have found jobs since the harsh days of unemployment, but their incomes are 20 percent lower than what baby boomers earned at the same age, according to a new study by Young Invincibles, an advocacy group for millennials. They also have half of the net wealth the baby boomer generation had accrued by roughly the same age.

Millennials fall short in other ways as well. Numerous studies point out that millennials have fewer cars and homes, less savings and other assets, and a lot more student loans than their parents had when they were young.

Givens doesn’t begrudge the situation. He says he’s doing better than his mother did at his age, since she worked and raised six children on her own in St. Louis. He feels fortunate to have a professional job in the medical products industry and backing for a business he’s starting. He now lives comfortably in a two-bedroom apartment with a roommate in Chicago’s Wicker Park neighborhood.

“I’m not hurting for anything,” Givens said. “I don’t need a car or a house.”

But many millennials will struggle to achieve the financial wherewithal their parents had.

A study by the New York Federal Reserve in 2015 showed that a recession early in a career can drag down earnings at the time and then continue to stunt paycheck growth as people move on to other jobs through a lifetime of work.

Additional research by the St. Louis Federal Reserve attributed the tremendous increase in 25-year-olds living with parents to the fact that 40 percent of graduates around the time of the recession ended up being underemployed. In other words, they started jobs that required fewer skills and provided lower pay than would be expected based on the level of their education. During 2012 to 2013, almost half of millennials were living at home, compared with only a quarter of the same age adults in 1999.

“Incomes earned early in one’s career often set the stage for lifetime earnings,” said Tom Allison, deputy director of policy and research for Young Invincibles. “When you start from a lower rung, it’s harder to negotiate a higher salary.”

Using U.S. government data from the Survey of Consumer Finances, Young Invincibles researchers found that young adult workers earned $40,581 in 2013, compared with the average $50,910, adjusted for inflation, that young adults earned in 1989.

“You can’t earn 20 percent less income and have the same standard of living as the baby boomers,” said Downers Grove financial planner Adam Glassberg, 30.

“The more you save early in life, the more flexibility you have later,” Glassberg said. “The impact of lower income and lower net worth will be millennials’ redefining retirement — working longer; maybe into their 70s; not 65.”