The Federal Reserve Says Millennials Are Broke. Pew Says Millennials Are Loaded. Which Is It?

Young people sitting around a table with their computers.
Millennials: making more money, kind of. Annie Spratt/Unsplash

On Tuesday, a Pew Research Center analysis of census data revealed a counterintuitive piece of good news about millennials: Relatively speaking, we’re in the money.

According to Pew, households headed by Americans ages 22 to 37 earn more, adjusted for inflation, than young households at any time in the last 50 years.

Avocado toasts all around!

The median adjusted income for millennial households last year was $69,000, according to Pew, putting 2017 narrowly ahead of 2000 as the best recorded year of household income for young people.

But wait: Didn’t the Federal Reserve Board just report last week that, as my colleague Jordan Weissmann put it, “millennials are, in fact, the brokest generation”? (Yes, they did.) So what’s going on here?

First, “household income” is a pretty limited proxy for wealth, especially when you consider that millennials are better educated and (not unrelatedly) have a high ratio of debt to income. According to a May study from the Federal Reserve Bank of St. Louis, the median net worth of households whose heads were born in the 1980s (older millennials) is 34 percent lower than that for people their age in the past. A recent Federal Reserve Board study corroborates this, reporting that average net worth for young adult households in 2016 is 20 percent lower than that of boomers in 1989 and 40 percent lower than that of Gen X in 2001. (The saving grace for millennials: the idea that student debt will get paid off by the increased future earnings associated with a college education.)

Second, while millennials’ household income is higher, it’s not great compared with what everyone else is making. In 1978, according to the Fed study from this month, young boomer households were making on average $77,500 in 2016 dollars—compared with the $88,000 national average. In 1998, the average Gen X household made $73,500 versus the national average of $103,800. In 2014, the average millennial household made $78,200—more than Gen X, but less as a percentage of the national household average of $112,000. Relatively speaking, then, millennials are underperforming.

Third, household roles are changing. Millennial women work more than their Gen X counterparts did 17 years ago, and they make more money. The median income for young women is up by nearly a third since 1975, to $29,429. The median income for young men has fallen. If you isolate for female-headed households, the trajectory looks great. If you forget the household concept and just look at all young people’s individual income, the numbers were worse in 2015 than they were in 1975. (Things have improved a bit since then, granted.)

Fourth, lots of millennials still live with mom and dad—somewhere between one in five and one in four young Americans live with their parents. That’s a big change from previous generations, and it means the pool of “households” is a little skewed. According to census data, nearly 75 percent of the 8.4 million millennials living at home in 2015 made less than $30,000 a year. That share drops to 63 percent among those living with roommates, and 45 percent among those living independently. In other words, there’s a whole segment of millennial households that aren’t getting counted in Pew’s sunny data, mostly because they’re too poor to move into their own place. Mom is buying the avocados.