Photo: Anadolu Agency/Getty Images
Last fall, Deutsche Bank warned its clients that millennials were coming for their wealth. In a research note, the bank’s strategist Jim Reid predicted that the generation’s impending attainment of political supremacy will “be a potential turning point for society and start to change election results and thus change policy.” As this younger generation ages into its prime voting years — and boomers steadily age out of the electorate — the intergenerational “balance of power” will shift.
“Assuming life does not become more economically favourable for Millennials as they age (many find house prices increasingly out of reach),” Reid continued, “such a shift in the balance of power could include a harsher inheritance tax regime, less income protection for pensioners, more property taxes, along with greater income and corporates taxes … and all-round more redistributive policies.”
But not all financial analysts are wringing their hands over what millennials will take from the boomers. Some are licking their chops over what they’ll soon receive from their elders.
In a 2019 report, the consulting firm Cerulli Associates projected that, over the next quarter century, roughly 45 million U.S. households will collectively bequeath $68.4 trillion to their heirs. This transfer will constitute the largest redistribution of wealth in human history. Generation X stands to inherit 57 percent of that $68.4 trillion; millennials will collect the bulk of the rest.
Millennials, in other words, are one day going to be a lot richer (or at least, some millennials are). In the coming years, that reality is likely to heighten the generation’s class contradictions – and just might redraw the dividing lines in American politics.
Generations are social constructs. No natural law distinguishes people born between 1981 and 1996 from those who came before or after. Too often, generational analysis elides class divisions (by using “millennials” as shorthand for “relatively young college graduates with white-collar jobs in major urban centers”), or else veers into the astrological (per McKinsey, millennials are “questioning” individuals who value “experience,” while Zoomers are “communaholics” who prize “uniqueness”).
Nevertheless, it is true that an era’s peculiar social conditions shape the formative experiences of its youth. A person born in the late 1980s was raised on distinct media, cultural products, and economic assumptions from someone born in the early 1950s. The former also, generally, entered the labor market at a less opportune time. The binding dates of the “millennial” generation may be arbitrary. But Americans who began life at the “end of history,” attained pubescence around 9/11, and graduated in the vicinity of the Great Recession do tend to share certain cultural sensibilities and material interests.
This reality has been most visible in millennials’ voting patterns and balance sheets. Millennials gave Joe Biden about 60 percent of their ballots in 2020, while voters over 45 gave him only 48 percent. Within blue America, generational polarization is even more striking. Voters under 40 broke overwhelmingly for Bernie Sanders in both of his bids for the Democratic nomination, and have constituted the mass base for progressive primary challenges like Alexandria Ocasio-Cortez’s surprise victory over Joe Crowley in 2018.
Millennials’ socialistic leanings are of a piece with their (relatively) meager financial holdings. The St. Louis Fed calculated that in 2016, “the typical older millennial family was 34 percent poorer than we would have expected” based on the experience of previous generations. Millennials’ home ownership rate famously trails that of their predecessors at the same point in their life cycles, with roughly half of millennials still paying rent. Such statistics have led headline writers to declare millennials “one of the poorest generations ever.”
Poor, proto-socialist, tenuously housed — this is the generation that Deutsche Bank fears. It is also the one whose ascent the left eagerly awaits. Like many millennial Mensheviks, I’ve looked at my generation’s unprecedented affinity for leftwing candidates, and told myself that time was on our side. Social democracy might arrive too late to save the coastlines. But it was coming to America, wrapped in Bernie swag and carrying avocado toast. Our country’s exceptionally cruel brand of capitalism lived on bought-off boomers. It would not survive the rise of a debt-ridden generation with little taste for Fox News.
Such wishful thinking could still prove prophetic. But if millennials do retain our leftist leanings in the coming decades, it won’t be due to any collective dearth of wealth. After all, the boomers can’t take their appreciated assets with them, and capital is already trickling down family trees. By the time AOC turns 50, millennials will be “the richest generation in human history.”
The impending “great wealth transfer” will be wildly regressive. A recent Federal Reserve study of intergenerational transfers in the U.S. found that Americans in the top 10 percent of the income distribution were twice as likely to receive an inheritance as those in the bottom 50 percent. Transfers of wealth made by living parents to their children were even more concentrated among the well-off. Putting inheritances and gifts together, Americans who were already in the top decile of the wealth distribution collected 56 percent of all intergenerational transfers in the U.S. between 1995 and 2016.
If the great wealth transfer is sure to be concentrated at the top of the socioeconomic pyramid, it will nevertheless reach a broader base. By Capitol One’s estimate, more than half of the estates bequeathed over the next three decades will go to low or middle-income households. The nascent avalanche of asset handoffs between boomers and millennials will thus benefit a substantial subset of the latter generation. And that reality invites visions of a political future quite different from the “revenge of the millennials” narrative that heartens progressives and horrifies wealth managers. Specifically, it raises the possibility that intergenerational warfare will give way to intragenerational class conflict.
Already, the economic gap between millennials who own substantial assets, and those who don’t, is rapidly expanding. About half of millennials are invested in the stock market. Those with significant savings have seen their wealth multiply over the past three years: the S&P 500 advanced 31.5 percent in 2019, 18.4 percent in 2020, and about 17.8 percent through the first five and a half months of 2021. Yet the millions of millennials who lack significant stock market exposure derived little benefit from this boom.
Recent events in the housing market tell a similar story. About 48 percent of millennials own their homes. Those who secured homeownership early have generally seen their net-worths rise precipitously: Between 2015 and 2020, the median sales price for a U.S. house increased by 14.5 percent. And that was before the post-COVID boom. This May, the median price of an American home was 24 percent higher than it had been a year earlier, the largest annual increase ever recorded. Of course, one millennial’s rising home equity is another’s rising rent.
The recent run-up in asset values has put a dent in millennials’ reputation for deprivation. In 2019, the St. Louis Fed found that the median, older millennial household owned only 11 percent less wealth than the typical boomer household had at the same age. If inequality between generations is declining, however, inequality within is not. College-educated millennials are much closer to matching boomers’ pace of saving than non-college-educated millennials are. And the racial divide in millennial wealth is singularly gaping. White millennials lag white boomers in wealth accumulation by just 5 percent. Black millennials, meanwhile, own 52 percent less wealth than previous generations of Black Americans had accrued by their age. What’s more, unlike their generation as a whole, Black millennials have been losing ground on their predecessors in recent years. (If you’re baffled by the “woke” left’s dissatisfaction with racial progress, put down White Fragility and pick up The Survey of Consumer Finances.)
The “great wealth transfer” will exacerbate all of these inequalities. Wealthy, white millennials will claim a massively disproportionate share of the impending inheritances and intergenerational gifts. And as familial wealth is transferred, and millennials’ “earned” assets appreciate, the generation’s internal class divisions are liable to become more invidious than those of its predecessors. The millennial rich and upper-middle class will be the wealthiest America has ever known. Working-class millennials, meanwhile, are poised to enjoy less economic security than their parents, as their wages fail to keep pace with the rising costs of housing and health care.
Technological and climatic trends could further deepen such class polarization. Advances in automation are expected to increase returns to capital and lower labor’s share of income. At the same time, planetary warming will displace millions of Americans, imposing potentially ruinous costs on working-class families. Climate change also threatens to bring routine water shortages to many parts of the country, thereby periodically condemning ordinary millennials to a nigh-preindustrial living standard — while increasing the value of wealthy millennials’ mutual funds (some of which have made investments in water scarcity products in recent years).
Of course, it is possible that policy changes will avert our descent into a neo-feudal dystopia. And it is also possible that the intensification of the millennial class divide will have little impact on America’s political one. After all, millennials are already quite economically stratified, and their class divisions have nonetheless had little bearing on contemporary politics. To the extent that class position influences millennial voting behavior, it does so in a thoroughly “post-materialist” manner: Working-class millennials vote Republican at a higher rate than college-educated ones. Perhaps, millennials will remain polarized by their culture war attachments, while proposals for fundamentally changing the distribution of economic power will remain absent from congressional debate.
Still, you can see potential premonitions of a millennial class war . The conflict between millennials who own (and/or stand to inherit) assets, and those who do not, may be most visceral in the realm of housing. Our generation is just now entering its prime homebuying years. And those without high incomes or significant familial aid are finding themselves priced out of the American dream, while others can’t even make rent in high-demand areas. The fundamental reason for this is a manufactured housing shortage: There are 3.8 million more willing buyers than available homes in the U.S. today. And the dearth of so-called starter homes — the kind millennials prefer — is even more acute. Last year saw the construction of just 65,000 homes that were smaller than 1,400 square feet; in the late 1970s, 400,00 such units were built annually.
Millennials who own homes in prosperous regions are, in a sense, literally invested in keeping housing unaffordable for their lower-income peers (a house bought in 2021 won’t be a sound store of wealth unless U.S. home prices remain exorbitant in perpetuity). And some millennial homeowners actively defend that investment by supporting the zoning restrictions that have kept housing artificially scarce. For their part, millennials on the wrong side of housing inflation are increasingly making their discontent known. Their dissent often manifests in politically confused form; recently, social media users scapegoated BlackRock for the housing crisis, despite the firm’s miniscule investments in residential real estate. But some other “angry millennial” renters have organized campaigns to eliminate exclusionary zoning and promote housing abundance.
Affluent millennials are also invested in equity values that might be hard to maintain under a more equitable economic system; for labor’s share of income to rise, capital’s must fall. At present, there’s little discernible intra-millennial conflict over this matter. Although, it’s notable that corporate America’s least favorite Democratic presidential candidate, Bernie Sanders, did much better in public college towns in 2016 than he did in areas with elite liberal arts colleges or Ivy League universities.
These are admittedly slender reeds on which to build a prophecy of America’s defining political conflicts circa 2035. And it seems quite possible, perhaps even likely, that the culture war’s preeminence will outlive that of the boomers, leaving millennials to sublimate their class antagonisms in virtual-reality gun battles. That said, it is also plausible that the twilight of the boomers will bring a new dawn for class politics, as the hegemony of social liberalism among the millennial generation lowers the salience of cultural issues, while the ever-compounding wealth gap forces questions of capital ownership back onto the American political agenda, for the first time in more than a century.
What’s certain is that no righteous “revenge of the millennials” can be taken for granted. Economically, our generation is growing ever more divided. And by the time we enjoy political dominance, our collective investment in the status quo — as measured in our generation’s aggregate wealth — may be greater than any of our predecessors. If the challenge this poses to progressive politics is not accounted for, we risk stumbling into a future that Deutsche Bank won’t dread.