28/10/17: Income Inequality: Millennials vs Baby Boomers

OECD's recent report, "Preventing Ageing Unequally", has a wealth of data and analysis relating to old-age poverty and demographic dynamics in terms of poverty evolution. One striking chart from the report shows changes in income inequality across two key demographic cohorts: the Baby Boomers (born at the start of the second half of the 20th Century) and the Millennials (born in the last two decades of the 20th Century):

Source: http://www.oecd.org/employment/preventing-ageing-unequally-9789264279087-en.htm.

The differences between two generations, controlling for age, are striking. In my opinion, the dramatic increase in income inequality across two generations in the majority of OECD economies (caveats to Ireland and Greece dynamics, and a major outliers of Switzerland, France and the Netherlands aside) is one of the core drivers for changing perceptions of the legitimacy of the democratic ethics and values when it comes to public perceptions of democracy. 

You can read more on the latter set of issues in our recent paper, here: http://trueeconomics.blogspot.com/2017/09/7917-millennials-support-for-liberal.html.

The dynamics of income inequality for the Millennials do not appear to relate to unemployment, but rather to the job markets outcomes (which seemingly are becoming more polarized between high quality jobs/careers and low quality ones):

In other words, where as in the 1950s it was sufficient to have a job to gain a place on a social progression ladder, today younger workers need to have the job (at Google, or Goldman Sachs, or other 'star' employers) to achieve the same.

Thus, as low unemployment swept across the advanced economies in the post-Global Financial Crisis recovery, there has not been a symmetric amelioration of the youth poverty rates in a number of countries:

In 25 OECD countries out of 35, poverty rates for those aged 18-25 are today higher than for those of age 65-75. Across the OECD, statistically, poverty rates for the 18-25 year olds cohort are on par with those for of 76+ year olds cohort, and both are above 12 percent. 

There is a lot that is still missing in the above comparatives. For example, the above numbers do not adjust for differences between different age groups in terms of quality of health and education. Younger workers are also healthier, as a cohort, than older population groups. This means that their incomes should be expected to be higher than older workers, simply by virtue of better health.  Younger workers are also better educated than their older counterparts, especially if we consider the same age cohorts for current Millennials and the Baby Boomers. Which also implies that their incomes should be higher and their income inequality should be lower than that for the Baby Boomers.

In other words, simple comparatives under-estimate the extent of income inequality and poverty incidence and depth for the Millennials by excluding adjustments for health and education differences.