Commentary

Value Of Wealth & Education

 Value Of Wealth & Education

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 Reprinting selected data from the American Consumers Newsletter by Cheryl Russell, Editorial Director, New Strategist Press of May 2018, shows that  more than 1/3 of households in the U.S. are headed by someone with a bachelor's degree or more education. 

“A study by the Federal Reserve Bank of St. Louis examined data from the Survey of Consumer Finances to determine trends in the net worth of households by educational attainment of householder. Here are the findings...

College Grads Control 74% of Wealth

Net worth by education, 

2016

1989 (in 2016 dollars)

Householder is a college graduate: 

$291,000

($238,000)

Householder not a college graduate:

$54,000

($66,000)

Source: Federal Reserve Bank of St. Louis, May 2018

The net worth of college graduates has increased over the decades, while the net worth of householders without a college degree has declined. Consequently, households headed by college graduates now control 74% of household wealth, up from 50% in 1989.

At age 31, young adults with a bachelor's degree are much more likely to be married than their less-educated counterparts, according to a Bureau of Labor Statistics' analysis of the National Longitudinal Survey of Youth 1997. The NLSY97 is tracking the education, labor force experience, and partner status of a representative sample of people born from 1980 to 1984. This group was aged 12 to 17 at the time of their first interview in 1997 and aged 30 to 36 at the time of their 17th (!) interview in 2015-16.

Looking at the partner status of the cohort at age 31, researchers at the Bureau of Labor Statistics found fewer than half were married--41% of men and 49% of women. But among the college graduates, most were married.”

College Grads More Likely to be Married 

Percent of men married at age 31

     34.4% of those who did not graduate from high school

     35.9% of high school graduates, no college

     39.1% of those with some college or associate's degree

     50.1% of those with a bachelor's degree or higher

Percent of women married at age 31

     32.2% of those who did not graduate from high school

     45.1% of high school graduates, no college

     46.9% of those with some college or associate's degree

     56.8% of those with a bachelor's degree or higher

Source: Bureau of Labor Statistics' analysis, May 2018

“Young adults are hesitant to marry (or stay married to) partners without a college degree, most likely because the lack of a degree typically results in lower earnings.   

Born in the 1980s you belong to what could be a "lost generation." This is not a tabloid headline, but the considered opinion of the Federal Reserve Bank of St. Louis (A Lost Generation? Long-Lasting Wealth Impacts of the Great Recession on Young Families). In an examination of trends in household wealth, fed researchers determined which households had recovered from the Great Recession and which had not.

For the analysis, the researchers estimated typical life cycle wealth trajectories using the 1989 through 2016 Survey of Consumer Finances. They then compared actual wealth to expected wealth for household heads born in the 1930s, 1940s, 1950s, 1960s, 1970s, and 1980s. Two stories emerged, and only one had a happy ending.

  • Here's the story with the happy ending: By 2016, the net worth of older Americans (born in the 1930s, 1940s, and 1950s) had recovered from the Great Recession. 
  • Here's the other story: By 2016, the net worth of younger adults (born in the 1960s, 1970s, and 1980s) had not recovered from the Great Recession. Those born in the 1960s were still 11% short of their expected net worth in 2016. Those born in the 1970s were 18% short. Those born in the 1980s were even worse off. Their net worth was 34% short of what it should have been based on the lifecycle wealth trajectory of earlier generations. 

Housing and mortgage debt explain the wealth shortfall for the 1960s and 1970s cohorts. These age groups bought homes during the housing bubble and lost equity when the bubble collapsed. Few in the 1980s cohort were homeowners during the housing bubble, so the shortfall is caused by other types of debt--student loans, auto loans, and credit card debt, say the researchers. :

There is still hope for those born in the 1980s,says the report. However, because of their high educational attainment and the many years of catch-up available to them. But, the feds conclude, "the 1980s cohort is at greatest risk of becoming a 'lost generation' for wealth accumulation." 

You can find out more information from the American Consumers Newsletter here.

 

 

 

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