White Millennials Gain Wealth, But Black Left Behind : Planet Money : The Indicator from Planet Money Many white millennials have made amazing progress in building wealth in recent years. Meanwhile, Black millennials keep falling further and further behind.
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The Growing Racial Divide In Millennial Wealth

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The Growing Racial Divide In Millennial Wealth

The Growing Racial Divide In Millennial Wealth

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So Greg Rosalsky, welcome. You write the Planet Money newsletter, and you have recently published this newsletter about millennial wealth and how it compares to previous generations.

GREG ROSALSKY, BYLINE: That's right, Stacey. The story starts a few years ago with a senior researcher at the Federal Reserve Bank of St. Louis. Her name is Ana Hernandez Kent. Ana is what you'd call a young millennial - old enough to have friends who still wear skinny jeans yet young enough, you know, to have friends who spend too much time making videos on TikTok.

VANEK SMITH: And I am wearing skinny jeans right now. So...

ROSALSKY: Yeah (laughter). She may have been born in the '90s, but she's definitely not Gen Z.

ANA HERNANDEZ KENT: I absolutely refuse to get on the new trend of, like, parting my hair down the middle. I'm not a fan of that.

ROSALSKY: OK, so I have no idea what she's talking about.

VANEK SMITH: (Laughter).

ROSALSKY: But maybe that's because I'm an older millennial, you know, born in the 1980s. A few years ago, Ana and her team at the St. Louis Fed began studying the wealth of older millennials like me. They found that the typical older millennial household, as of 2016, had only about $28,000 in net worth, putting them 40% behind what previous generations had in wealth at the same age.

HERNANDEZ KENT: Forty percent behind - that's pretty substantial. And we questioned whether they would become a lost generation, right? - these older millennials.

VANEK SMITH: So there are a lot of reasons to believe that older millennials could become a kind of lost generation. They came of age in an economy marked by growing inequality and a decline in social mobility. They had to deal with issues like the skyrocketing cost of college, and they entered their careers during the Great Recession.

ROSALSKY: Yeah. So, I mean, Stacey, the days of dubstep, Passion Pit and cronuts may be behind us, but the economic scars from that same era are real. And so Ana was worried that we millennials were destined to be poorer than the generations that preceded us.


VANEK SMITH: But then Ana and her team got their hands on this newer data, which tells a new and more complicated story.

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

ROSALSKY: And I'm Greg Rosalsky. Today on the show - the good news and the bad news about millennial wealth.


VANEK SMITH: Every three years, the Federal Reserve releases the survey of consumer finances. It's based on extensive interviews of thousands of Americans about the kind of nitty-gritty details of their finances.

ROSALSKY: Which is why it takes three years to compile - so when the Fed released the latest data last year, Ana Hernandez Kent and her colleagues jumped at the chance to see what happened to older millennials, you know, '80s babies, since 2016.

HERNANDEZ KENT: So we have this new data set. And we decided, let's look at them. Have they remained the lost generation? Have they fallen further behind? Have they gotten closer to where we would have expected them to be?

VANEK SMITH: And, Greg, we have good news and bad news to report. Let's start with the good news. We need a little good news.

ROSALSKY: Yeah, so the wealth of the typical older millennial household jumped substantially from $28,000 in 2016 to $51,000 in 2019.

VANEK SMITH: Which is really big - but it is worth noting that that is still behind compared to other generations. But the booming stock market and the housing market over those three years has helped to close the gap. The 40% wealth gap with previous generations that they found in 2016 fell to an 11% gap in 2019, so it's improving.

ROSALSKY: That's the good news. But when you dig deeper, there's a lot of bad news. And the most glaring is the growing gap between Black and white millennials. The typical household headed by an older white millennial has about $88,000 in wealth. Black millennials are faring much, much worse.

HERNANDEZ KENT: So the typical Black millennial - older millennial has about $5,000 of wealth. That is very, very little wealth to be able to weather an economic crisis, to be able to plan for the future whatsoever, let alone a down payment on a house.

VANEK SMITH: Five thousand dollars versus $88,000 - and while about two-thirds of white older millennials own homes, less than a third of older Black millennials do. There are also big gaps in owning stocks and paying off student debt.

ROSALSKY: And while older white millennials catch up with previous generations of white Americans, older Black millennials keep falling further and further behind, not just compared with white people in their age group but compared to previous generations of Black Americans. The typical older Black millennial household only has about half as much wealth as the typical Black American in previous generations.

HERNANDEZ KENT: That's incredibly shocking because Black Americans have made great progress in terms of political representation and job protections, but it doesn't seem to be translating into wealth gains.

VANEK SMITH: To get some perspective on this, we called up Nicole Smith. She's an economist at Georgetown who has done a lot of research that can help explain why the wealth gap is so large.

NICOLE SMITH: For economists like me that have been looking at the wealth gap and disparities for quite some time, it is not surprising to see a number that large.

ROSALSKY: Nicole says that understanding the wealth gap facing the current generation has to start with all the awful racist policies in American history - ones that excluded Black Americans from all sorts of opportunities and social programs, including ones that helped Americans buy homes.

SMITH: The biggest determinant of wealth in this country is homeownership. Do you own your own home?

VANEK SMITH: This legacy from the past means that Black parents have less wealth and had a harder time helping their kids put down payments on their own homes or pay off student debt.

ROSALSKY: And Nicole says student debt goes a long way in explaining why older Black millennials are poorer than the generations that preceded them. With the decline of manufacturing and many other middle-income jobs that used to provide opportunities to less-educated folks, college has become the primary path to making it to the middle class.

VANEK SMITH: But college costs have been skyrocketing. And so while Black millennials are more likely to go to college than the generations before them, they are also more likely to be saddled with a large amount of debt.

SMITH: We still have a significant earnings premium for our students who, you know, finish college, but what's been happening is they're finishing college and finishing with much higher debt than anyone else.

VANEK SMITH: And Nicole says when Black people do go to college, they disproportionately end up at institutions that are less selective and are not as valuable on the job market. These include for-profit colleges, many of whom prey on kids' dreams of a better life.

SMITH: We have a situation where, you know, we're feeding a lot of these young people false promises. Go to school. Go get your degree. You know, you're going to get a good job. You're going to be better off.

VANEK SMITH: And Nicole believes we should do something proactive to address this situation, and it is why she is in favor of forgiving a large amount of student debt. Still, she says, she does see problems with making a policy like that universal. For example, it could end up giving money to, like, very high-paid professionals who do not need the help.

SMITH: You can't let the perfect be the enemy of the good, right? We can make this needs-based. We can decide on which types of professions we want to give an extra push to, and we can do it for different segments of the community. And I think if we do that, then it's definitely a step in the right direction to removing some of the burdens of student loan debt from society.

ROSALSKY: In spite of all the daunting numbers, Nicole says she's optimistic that policymakers are at least discussing issues like the racial wealth gap and she's hopeful will start to do something about it.

VANEK SMITH: This episode of THE INDICATOR was produced by Jamila Huxtable with help from Josh Newell. It was fact-checked by Sam Cai. THE INDICATOR is edited by Kate Concannon and is a production of NPR. Also, subscribe to Greg's newsletter. Where can you find it, Greg?

ROSALSKY: Yeah. You can find the Planet Money newsletter at npr.org/planetmoneynewsletter.


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