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Approaching Mid-Life, Are Gen-Xers Doomed?

This article is more than 10 years old.

In 1991, a little-known fiction author named Douglas Coupland wrote a book about the "poverty jet set" 20-somethings, the future hackers and slackers of America who had no allegiances to anyone or anything, and would get no allegiances in return. He called them Generation X.

Now in their late 30s to early 40s, Gen-Xers are everywhere.  They're teaching their tweens to say 'sup and word like their favorite Yo! MTV Raps artists.  It reminds them of their youth. As a result, they're keeping Madonna, Bon Jovi and Van Halen in the entertainment business.  But, this generation has hit its collective wall and it's none of their fault.  If this is their mid life crisis, it comes to them without the Corvette and the sexy new lover, which is no way to go through a crisis at all, now is it?

How bad is it for people "our age"?

Gen X reached the height of the earnings power during the Great Recession. If the Baby Boom generation was an overall positive for the market, spending money with reckless abandon and earning more year over year to encourage it; Generation X exists in a nickled and dimed America with stagnant incomes.  Gen X is haunted by an existential restlessness that can never be satisfied because the opportunities are thinner, the past looks fake, tired, and just plain wrong, and the required down payment to realize big dreams has risen substantially higher than what the Baby Boomers had to pay for it.  (Oh, those damn Baby Boomers with their cheap education and affordable housing that didn't cost 8 times their incomes...#$%!) It almost seems as if the entire U.S. economy is letting down Gen X; a generation that is coming to an age where they're finally supposed to be running things, finally supposed to be settled down. Instead, they are unemployed and living with their parents.

Hello, my name is George Costanza. I'm unemployed and I live with my parents." -- George Costanza, Seinfeld episode.

Back in 1975, my father, then a young man of 30 making $8,000 a year at Raytheon, purchased a 1,100 square foot house for $25,000 in Bristol County, Massachusetts. That house cost him a little under four times his income.  Today, the median home price in the county is around $250,000, while median household income is around $54,000, making current real estate prices, even in a depressed market, 4.6x greater than median incomes. These numbers are not exact. The home price figure is based on the third quarter of 2010. Home prices have since come down a couple percentage points since then. The median income is from 2009, and that has also come down according to U.S. Census data.

Between 2006 and 2010, the median household income in the U.S., across generations, was $51,914, according to the U.S. Census Bureau. The median home price in that period was around $257,000. It cost Americans five times their income, on average, to own a piece of the American dream, including during the worst economic blowout in a generation.

The average mortgage debt is around 122% of income. Boomers were around 78% of income back in 1990. Plus, a lot of Gen X mortgage are underwater.

There's also a kicker to these numbers, Gen X has something the previous generation never had, at least not in this quantity: super mega blaster student loans.

See: Obama Pushing For Student Loan Relief--CNN

There are two things going on here in terms of the financial gap between these two generations, X from the 80s and Arsenio Hall, and the Boomers from Woodstock and Vietnam. One is the economic impact of the generation.  Baby Boomers saved. They started spending what they saved at mid-life on luxury and other items, helping the U.S. economy. Gen Xers are different. Gen X is leveraged. It's not that they have less economic impact, it's just that they have chosen to spend now and save later.

Our systems had stopped working, jammed with the odor of copy machines, White-Out, the smell of bond paper, and the endless stress of pointless jobs done grudgingly to little applause. We had compulsions that made us confuse shopping with creativity, to take downers and assume that merely renting a video on a Saturday night was enough. But now that we live here in the desert, things are much, much better." -- Douglas Coupland, Generation X, 1991.

There is a big difference in the spam of years between the Boomers and Gen X.  The baby boom lasted for nearly 10 years, and to this day many that were born in that time frame occupy the lower end of the income scale than their younger Xers. The Boomers were extreme beneficiaries of inflation. They bought into adult society before that inflation occurred. Their entry point into the housing market was lower, so they paid less for their home and saw their home values rise with inflation. Their wages rose exponentially, above and beyond inflation. Their parents were getting 10% or more returns on savings accounts and could help them out financially. They could do LSD, hate the government, walk naked in the mud and have sex in public and the angels still shined upon them... So much for the sins of the past. As a generation, the Boomers are like fallen rock stars who go into rehab for a six months and come out a bigger star than when they went in.  Gen Xers are like Lindsay Lohan. They just keep getting sent back, they get a few breaks that look like breaks but they never really lead to anything substantial.

"I would say that the biggest difference we can quantify between the two generations is going to be their debt levels," says Anthony Davies, an economics professor at Duquesne University. "We hear a lot of talk lately about student loans and how that's been a burden for this generation, but the fact is that while the boomers could rely on a high school diploma, this generation cannot. The value of a high school diploma has plummeted, but the value of a higher education has risen even with the cost of tuition.  When you add up all the benefits of college in wages over a lifetime minus the cost of tuition, you come up with about $500 thousand to a million dollars," he says about a study he did at the University recently. "They have that educational leverage, but they need that leverage more than their parents did."

For Gen X , it is also about wrong place, wrong time.  History can work for or against you, like timing.  The Boomers had the luck of living through the defense contractor and Gordon Gecko years of Ronald Reagan, and reached their peak income years when Bill Clinton was running the White House and the U.S. was running a trade surplus.  As the Baby Boomers age, social security will be hard pressured for funding. Gen X might not see their tax dollars returned to them through Social Security checks in retirement.

"These guys have lived through three recessions, plus the doldrums of Sept 11. If a country has a goal to increase their GDP, then Gen X as a generation in terms of numbers and income trends is more of a drag than a forward thrust," says David Fiorenza, a professor at Villanova University.  "Gen X will never be at the level of the boomer generation. They'll be as good as the second string for the Phillies. They'll win a few games, but they're not going to be the starters."

It seems Gen Xers are doomed, economically. They're heading into their 40s at a time when the only guys making money work for Google, Facebook, Twitter and Apple. Everyone else is stagnating, and crossing their fingers that they don't get pink slipped. But there is some good news in these times. There is actually a number of things that makes Gen X better off than the Boomers. Alas, our 40 days in the desert may very well prove worthwhile in the end.

The Boomers are moving into retirement when the value of their retirement funds have declined. They are also still paying off debts.  Gen X has a longer time frame to deleverage. And they can now buy stocks at a very low price.  As the Baby Boomers retire, Gen Xers will be practically un-fireable. Gen X will work longer hours, but face less chance of downsizing in the future. Plus, the country is moving in the direction of universal health coverage. Health insurance costs, my friends, are coming down.  Anything that goes up and up, parabolically drops like a stone.

We might end up in better shape when we are in old age than our parents, health-wise and financially. For the boomers, this is as good as it gets.

"If Generation X is smart, and lucky, they would have collectively learned 'everything in moderation'. Boomers were very much into the idea of winner take all, and that just isn't going to fly with Gen X," says Terry Connolly, Dean Emeritus of the Ageno School of Business at Golden Gate University in San Francisco. "The boomers were saved by Paul Volcker and Alan Greenspan who ran up their 401ks and housing values. But they are now living proof that what the Fed giveth, the Fed taketh away. If someone now in their 60s thought they were going to live off investment income from Treasury bonds, they are now sadly mistaken. They thought they would have a comfortable retirement, but many Boomers will not," he says.

Like the infomercials that came up in our youth taught us -- "but wait, there's more!"  Worried Boomers in their late 50s and 60s are making the political climate in the U.S. more dramatic.  We and the younger generation in their 20s and early 30s are the Daily Show generations. We're not going to tolerate predictable political novellas for much longer.

"Gen X has lived through hell politically, but when they are in power -- and you're almost there, Obama is 47, so he is practically a Gen Xer -- but when this generation is in power I think the culture wars end, the abortion debate ends, the unhealthy mix of social issues and economic issues that drives a wedge between society ends, and I think you end up with a more egalitarian America in the future.  Right now, Gen X is middle management and they are working their tails off, but they're holding it together. I think they are going to be okay."