Counterparties: Why the young are falling behind
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Things are better, but they’re also still bad. That’s the shorter version of the Fed’s view of the job market: “Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated”.
The economy may be puttering steadily along, but young people are falling behind. Annie Lowrey reports that younger workers are doing worse than one particularly personal gauge of success — their parents. A study by the Urban Institute finds that Americans under 40 have accumulated less wealth than their parents at the same age. As Lowrey points out, “because wealth compounds over long periods of time”, that puts young people at a distinct long-term disadvantage, and also lowers economic expectations. The usual culprits — stagnant wages, the financial crisis, student debt — are to blame. Surveys from Pew and Gallup also highlight the damage the current economy has inflicted on the young.
On the bright side (sort of), younger consumers are less enthusiastic about credit cards than they used to be. Which is fine, because for credit card companies, the feeling is mutual. They’re just not that enthusiastic about extending credit in an idling economy to people with falling wages and shockingly large amounts of student debt.
The numbers here are not completely reliable. The Urban Institute calculates that $42,000 in wealth can be lost if you buy a house when you’re 40 rather than 30. The problem is that this number comes from using data from the “past few decades”. Price appreciation during those few decades, we now know, was an anomaly. But that doesn’t stop comments like this, from a mortgage consultant, about young people’s lack of credit history: “You could say that they’re not going to get mortgages, and that could have dire economic consequences”. On the other hand, if you bought a house in 2007, that too could have had dire consequences. — Ben Walsh
On to today’s links:
Britain’s 2013 budget: Cutting beer taxes, subsidizing shale gas, backing £130bn in new mortgages – BBC
Cyprus is asking for a new loan from Russia to avert a financial meltdown – Reuters
Should Cyprus go “full Iceland” and institute capital controls? – Pawel Morski
“Demagogy has emerged as the real winner of Italian elections” – Vox EU
And, of course, there are many more links at Counterparties.