The Rise of a Wealth Gap Among Millennials: Exploring the New Class Divide
A recent study has revealed that the wealth gap between rich millennials and the rest of their age group is the largest of any generation, sparking a new wave of class tension and resentment. While the majority of millennials struggle with student debt, low-wage jobs, unaffordable housing, and low savings, a select group of millennial elites are surpassing previous generations in terms of wealth.
The study found that the average millennial has 30% less wealth at the age of 35 than baby boomers did at the same age. However, the top 10% of millennials actually have 20% more wealth than the top baby boomers at the same age. This disparity highlights the vast differences among millennials and their varying levels of success.
The financial headwinds faced by millennials can be attributed to several factors. Coming of age during the financial crisis has resulted in lower levels of homeownership, larger debts outweighing assets, low-wage and unstable jobs, and lower rates of dual-income family formation. However, the study also notes that the top 10% of millennials have benefited from greater rewards for skilled jobs. The returns to high-status work trajectories have increased, while the returns to low-status trajectories have stagnated or declined.
Interestingly, millennials who pursued higher education, secured graduate-level jobs, and started families later in life ended up with higher levels of wealth than baby boomers who followed similar life trajectories. This suggests that certain choices and opportunities can lead to greater financial success among millennials.
Another factor contributing to the wealth among millennials is inheritances. In what is referred to as “the great wealth transfer,” baby boomers are expected to pass down between $70 trillion and $90 trillion in wealth over the next 20 years. High-net-worth individuals worth $5 million or more will account for nearly half of that total. Wealth management firms have already begun to witness some of this wealth trickling down to the next generation.
As more wealth is transferred to millennials, tensions between different classes within the generation are likely to escalate. Wealth displays on social media by millennial “nepo babies” could fuel an intra-generational class war and drive non-wealthy millennials to overspend or create the appearance of lavish lifestyles to keep up. A survey by Wells Fargo found that 29% of affluent millennials admit to buying items they cannot afford to impress others. Additionally, 41% of affluent millennials admit to funding their lifestyles with credit cards or loans, compared to 28% of Gen Xers and 6% of baby boomers.
This battle between rich millennials and the rest could also shape their attitudes toward wealth. Historically, the majority of millionaires and billionaires in America have been self-made entrepreneurs. However, inherited wealth could become more common among millennials. A study by UBS found that among newly minted billionaires last year, heirs who inherited their fortunes accumulated more wealth than self-made billionaires for the first time in at least nine years.
The surge in wealth among millennial heirs is also creating a lucrative market for wealth management firms, luxury companies, travel firms, and real estate brokers. Clayton Orrigo, a top luxury real estate broker in Manhattan, has built a thriving business catering to moneyed millennials. He has sold over $4 billion in real estate, with the majority of his recent clients being buyers in their 20s and 30s with inherited wealth. Orrigo’s specialty lies in forging close relationships with family offices, trusts, and young money elites.
The rise of extreme wealth among millennials is an intriguing phenomenon that highlights the disparities within the generation. As more wealth is transferred and inherited, tensions between different classes of millennials are likely to increase. This divide could also shape their attitudes towards wealth and success, potentially changing the landscape of entrepreneurship and inheritance in the future.
