Economic Perspective: Doing Worse Than Their Parents

MARY WALDEN:

“Today’s program looks at ‘doing worse than their parents’. Mike, one of the hallmarks of our society has been that children typically do better economically than their parents. Now I understand a new report casts doubt on whether this situation will continue. Please explain.”

MIKE WALDEN:

“Well this new report is from the very prestigious McKinsey Global Institute. They looked at several countries, including the U.S., and they looked, for example, at today’s young workers, millennials if you will, and where they are headed in terms of their income. McKinsey came to the conclusion that somewhere between sixty-five and seventy percent of today’s young workers are not going to achieve the incomes when you adjust for inflation of their parents.”

“Now that’s very startling because that again is against what we typically have seen over really the lifetime of our country. Now, McKinsey posits several potential reasons. One, the Great Recession significantly reduced starting pay of these young workers, and if you start lower that means you’ve got a bigger ladder to climb in order to get to a certain level. Also, future income growth is expected to be lower by historical standards, and then there’s the further concern about technology moving into the workplace in decades to come and replacing workers. Perhaps making future unemployment higher than what we have typically seen.”

“The bottom line here is we hope that this does not occur. We hope that today’s young people can achieve higher standards of living than their parents, but at least one report says that may not be possible.”