Are Boomers The Most Selfish Generation In History?

Hi guys, just before we get into it, a quick but very important correction from last week's video. As many of you have pointed out, California does indeed have sales taxes, and one set at a very high nominal rate. I said the state had no sales taxes, when I should have said low sales taxes. Now even that probably needed a bit more nuance, because while California's sales taxes look like some of the highest in the USA, it has broad exemptions on a lot of goods and services, which means it actually collects a lower rate of taxes than places like Texas or Florida. This was a silly mistake that I made for the sake of brevity, which when taken alone obviously sounded very dumb, because it was. I'll leave a link to a paper discussing the details of sales tax policies and the depths and breadths of those collections between the states for those interested. But for now, speaking of mistakes that shouldn't have happened, Generation Z. The world has never been wealthier than it is today. The global economy has produced more goods and services in the last decade than it did for the first 5,000 years of modern human history combined. New technologies have not only given us material abundance, but also better health, better access to knowledge, more convenience, and less boredom. But this wealth has not been spread evenly. For most of human history, it was assumed that children would live lives roughly the same as their parents. Progress was slow, and most of society was dedicated to feeding themselves with only a little bit left over for other pursuits. Modern technology and industry changed that, and as more people could dedicate themselves to more innovation, the world compounded its to give us what we have today. It's not a perfect world, of course, but for the last 200 years, people have been relatively confident that their children would live more prosperous lives than they did, with the exception of a few little hiccups here and there. In return, elderly generations have been able to enjoy a level of comfort in their old age that would have been hard to accommodate in a world that wasn't consistently improving. However, it now seems like for the first time in a long time, this intergenerational bargain has been broken. Young generations are now falling noticeably behind the life milestones that older generations achieved at the same age. Buying a house, getting married, starting a family, planning for retirement, trying out a new business. By most metrics, Gen Z has fallen well behind their parents. Now, Gen Z struggling financially is not exactly a shocking revelation, but it's also wrong, or at the very least, missing the much larger point. To say this, we need to do something deeply unpopular on the internet, defend the baby boomers, because realistically, they are as much a victim of this trend as anybody else, even if their numbers do look slightly better. So, what is suddenly causing young generations to fall behind their parents? Are there larger problems that these trends distract from? And finally, is there a way to fix this? Let's take a moment to thank today's sponsor, Grammarly. Now, whether it's scripting these videos or rewording a message to make the per my last email sound less passive aggressive, getting your message across clearly is not always easy. And when you're dealing with topics like taxes, trade deals, or government budgets, even one confusing sentence can send the whole argument off a cliff. That's why I use Grammarly. It's essentially an AI writing partner. It helps me clean up awkward phrasing, tighten up my ideas, and most importantly, make complex things sound clear, which, let's be honest, is half the battle when you're trying to explain anything involving economics. One of my favorite features in Grammarly is reviewing my tone. I can make the script sound more casual, more confident, or even more neutral when I'm talking about housing subsidies. It also works wherever I write, google docs, gmail, slack, so whether I'm working on my next script or emailing a sponsor politely asking if they'd like fewer mining jokes, it just works. There's a link in the description you can click to try it out. And if you upgrade to Grammarly Pro using that link, you'll support the channel too. Thanks again to Grammarly. It's always risky in economics to throw arbitrary groupings around population samples and draw too much from these groups. Generational cutoffs, as in the years that define someone as a millennial or a gen x or a gen z or whatever, are largely arbitrary. For example, millennials were born between 1981 and 1996, but people at either end of this randomly selected date range had radically different childhoods, entered the workforce during wildly different market conditions, and lived through very different global events. The only exception to this is the baby boomers, as their generational grouping is less arbitrary and more based on the boom in birth rates seen after the second world war in most western countries. But outside of that, most generations are just random lines in the sand spread out over 15 to 20 year intervals. To make matters worse, the actual cutoff dates that define generations vary by as much as half a decade between different sources. The point is, assigning characteristics and drawing conclusions based on the time people were born is getting real close to astrology, and look, gen z's mercury can be in gatorade all at once. If this was just drawing some lines for the sake of convenience, that would probably be fine if it wasn't doing so much harm. But these groupings, at least in the case of economics and broader sociology, are unfortunately a really entertaining distraction from larger problems. Now big disclaimer time, we have used generations to broadly define various groups many times on this channel before, because, well, it's easy, and easy to understand. But when looking at economic disparities between generations, it is important to look at other variables besides just the time that people were born. If we were making this video a decade ago, it would be a similar story about the plight of the millennials, but now they are about to become the wealthiest generation in history. This is partially because they have started earning higher incomes and building up impressive personal fortunes. They may soon not only be the wealthiest generation in history, but also wealthier at a younger age than anybody else that came before them. However, of course, there is another driver of this as well, and that is that they are generally at the right age to start inheriting fortunes passed down by their dying ancestors. So is it possible that economists and demographers mistook the plight of the millennials for just being young and broke? And by extension, does that mean that poor hard-done-by Gen Zers are really just waiting for their turn? Well, actually, both can be true at the same time. Younger generations might end up being wealthier while still largely living less prosperous lives than their parents. There are many little and not-so-little luxuries that we take for granted today that just weren't even thinkable 50 years ago. Something like simply going on an overseas holiday was a symbol of extreme wealth for the boomers when they were young. The majority of people, even advanced economies, never left their home country, and today there is an entire industry that has sprung up to cater to barely solvent college kids on their fifth tour around Europe. The same is true for a lot of consumer goods. Dishwashers, washing machines, microwaves, 55-inch TVs, mobile phones are all pretty much standard issue in most homes. But just a few arbitrary generations ago, these were a serious purchase. Now, these are actually important, so remember them for later. There are also the literal luxuries. Younger generations are consuming luxury brands far more than their parents ever did. And of course, on top of that, there is the lifestyle improvements like entertainment and information on demand 24-7 from our pockets, advanced medical treatments, and even the potential of working from home, which had been made possible by new technologies that just didn't exist back then. It's unfair to begrudge the youths for enjoying things that just hadn't been invented yet, but it's also important to recognize that it was largely the boomers that developed these technologies in the first place. Technological advancements have been the foundation of the exponential economic growth and the increase in living standards that came with it that we've been enjoying over the last 200 years. That rate of technological progress has never been faster than it is today, and yet younger people are getting poorer. So then what is actually going on here? Well, luxuries may have become more accessible, but essentials haven't. Given the choice, most logical economic participants would probably choose affordable housing, education, and food over backpacking around Sri Lanka, but that's a choice that's been made for them. A lot of people don't think they will ever achieve these larger financial goals, so what is there to lose? Most economies around the world today, especially advanced economies, have been really good for asset owners, but not so great for workers. Yes, one of the symptoms is an over-inflated housing market in almost every major center around the world, but this is happening during the time period when baby boomers were at the peak of their careers, and accumulated assets in younger generations were just those workers. A Gen Zer with a lot of assets would be benefiting as much as the baby boomers, it's just that the boomers have more time to acquire them while the going was good for workers. As for the technology we all get to enjoy, it is easy to take it for granted, and that is certainly a basic reality of human nature, but it's also not entirely clear just how much this has improved our quality of life. Being constantly online and available from anywhere in the world is great for economic productivity, it's obviously anecdotal, but it's how I'm writing this very video while I'm on holiday at the moment. However, good for the economy doesn't necessarily mean good for economic participants. A lot of workers today with company-issued phones have probably not been totally disconnected from their work ever. Now, obviously from my own example that's totally fine, it's my own business and I really enjoy what I do, but for a lot of regular workers it's a drastic reduction in quality of life that wouldn't necessarily get captured with GDP or net worth figures. Then there are other figures that are just largely ignored. Millennials can be the richest generation in history, and also be struggling, because millennials are not a singular entity, it's a billion or so people that just happen to be born between two random years. The collective wealth of this generation is held by a small group of people which drags up the average a lot, but leaves most people fighting over the scraps. Now again, in defense of the boomers, they have also had this problem. Almost half of their generation's entire collective net worth is accounted for by about 20 people, but inequality was still better back when they were starting out. Eventually, Gen Z is also likely to be the richest generation in history, but as inequality has constantly grown, these issues will become more pronounced. Now it's possibly easier to point at old people or young people and say that it's a generational problem. Beefing between the whippersnappers and the fuddy-duddies is very human, but it's not good economics. This is an inequality problem, not a generational problem. There are plenty of boomers doing it extremely hard as well. Now with that in mind, there have been some significant economic developments that have made this trend worse over time. One of the big ones is of course debt. There is a large group of people today with negative net worths, where their debts are greater than all of their assets combined. This makes the already challenging task of calculating wealth even more difficult. Deciding how much non-liquid assets like houses and cars are worth over large populations is one thing, but then how should someone with half a million dollars in medical score debt and minimal assets be counted? On paper they would be one of the poorest person across an entire population, but are they really worse off than someone who truly has nothing? Student debt and consumer debt where a personal liability is incurred without a corresponding asset to balance it out have become far more common in the last three decades. Back when inequality was lower it was also much harder to get a loan. This was true even for something like a house. People needed to develop a personal relationship with their bank manager and give them a comprehensive insight into their personal finances before a bank would grant even a modest loan. This was because they really had no other way of knowing. Back then the role of a bank manager was quite prestigious because they had a lot of discretion about who got financing and who didn't. But lending to someone with no tangible assets for the purpose of consumption was borderline unheard of. This made it much harder for older generations to dig their own financial graves so to speak. But a few technological changes like nationwide electronic banking systems and credit reporting databases turned consumer lending into a staple of the banking industry. There is even a growing pool of so-called phantom debt from buy now pay later lenders that aren't technically counted as debt for some reason but are still a financial liability. So as one statistical tale became much richer the other technically became poorer. One other factor compounded this as well in a slightly less clear way. Birth rates in most wealthy countries have declined rapidly over the last 50 years. Statistically this means that wealthy parents are on average leaving their fortunes to a smaller group of their children. An only child that gets an inheritance from both their mother and their father would on paper be twice as wealthy as each of them individually. An inheritance is the most common way that extremely wealthy young people make their fortunes, so this further concentrates some of the generational wealth at the top, statistically leaving less for everybody else in the generation. Now this isn't by any means unexpected. In free market economies, especially those with robust investment markets and opportunities, wealth naturally gravitates to more wealth. Debt and self-concentrating populations have only really accelerated a that naturally happens over time, and that just means new generations have more inequality, which means more people struggling. So then, why are we only just noticing this now? Well the truth is, even with the amazing economic growth the world has been experiencing over the last 250 years, the anecdote that younger generations will live better lives than their parents is by no means a guarantee. Inequality fell dramatically after the second world war, particularly because a lot of capital assets had been literally bombed to rubble in Europe, and in the USA there were massive government programs aimed at improving quality of life for people returning from the war. Before that, inequality was at record highs during the gilded age, and by most estimates the great depression didn't really help too much, it only made a bad situation worse for poor people. Since the massive shakeup that was the second world war and the rebuilding efforts that came from it, modern economies have done what they naturally do without intervention and have started concentrating wealth again. This also manifests in ways that can't be normally measured with inequality graphs or gini coefficients either. As inequality grows, power and influence generally shifts towards wealthy people and their institutions. In the modern age, that's companies that have stamped out union power, lobbied for less regulation, and have created greater competition for the jobs they can offer. What this eventually causes are the headlines that we are all too familiar with about mass layoffs, overworked and underpaid employees, and young generations getting crushed by their economic situation. It just so happens that this trend has peaked as gen z entered the workforce. This trend that takes its time and plays out over multiple generations, which creates the much more headline-worthy story about up-and-coming generations struggling, which is also great for engagement as people go back and forth about interest rates back in their day and firm handshakes and walking to school uphill both ways. And this is all where we get to the biggest, most important point of all. The last 70 years have been insanely good for asset owners, but it's also been incredibly good for the poorest people. Not the poorest people in advanced economies, but the poorest people in the world. Global poverty has dropped considerably as global industry and finances developed economies that were previously incredibly poor. The classic example of this is of course China, but this has played out for billions of people who were otherwise living agrarian lives similar to their ancestors from 500 years ago. Now this is much harder to notice because most of you watching are from advanced economies where it's arguably been the middle class that's paid for the wealth accumulation at the top end, as well as the opportunities afforded to the bottom end since, well, a lot of these opportunities were jobs that were outsourced to people willing to work for less. Now globally that's overall been a good thing for humanity, locally it's caused a lot of pain. The argument of if it was worth it is probably beyond the scope of purely economics. Now there are some solutions to this, but one thing that younger generations are particularly lacking is political representation. We have made an entire video over on our geopolitics channel, going over the reason why young people just don't matter, politically. You should be able to click to that video on your screen now. Thanks for watching mate, bye.