GENERATION Y: HIGH INCOMES, LOW WEALTH
While generation y aged 25 to 34, is income rich, earning in gross household terms $113,152 per annum, their net worth is modest, at $268,800. As they enter their mid-30s, they are getting closer to their key earnings years however, such has been the low wages growth over the last two years, their household incomes have only increased by $5,356, or 5 per cent since 2013. While gen y households on average earn more per annum than the older baby boomers, aged 55-64, who are rapidly easing out of their full-time working roles, these boomers managed income increases almost three times that of the younger generation over this period ($14,040). This 14 per cent increase in annual household incomes came about because the older boomers were reliant not on wages growth but investment income which has seen solid increases over the last two years.
GENERATION STAGNATION
It is ironic, and unfortunate that the emerging generation of wealth accumulators, moving up the career ladder have seen far smaller income increases (amounts just keeping up with inflation) than the generations that are easing out of employment or having ceased employment. Indeed, the generation aged 65 and above managed much higher income increases (16 per cent) than the younger working-age gen ys.
WEALTH COMPARED ACROSS THE GENERATIONS
The generational financial inequities are even more pronounced when analysing net wealth by generational cohort. While gen y have a household net worth of $268,800, it is less than half that of the gen xers who are just a decade older. The highest net worth generation in Australia is the boomers, aged 55-64, who not only have a net wealth almost five times that of the generation of their children (gen y) but they still have a decade or more of earnings and wealth accumulating ahead of them.
This infographic is based on analysis of the ABS Household Income and Wealth data released in late 2015 and 2013. It gives a picture of how both income and wealth is distributed across the generations of households in Australia and how it has been changing.
THE $1 MILLION HOUSEHOLDS
While gen y have seen a wealth increase of 9 per cent since 2012 ($21,647), the mid 50’s boomers have seen a 14 per cent wealth increase ($153,335) with their wealth rising since 2012 from $1,086,365 to $1,239,700. Therefore, not only does the average Australian household aged over 55 have a net worth exceeding $1 million, but, due largely to rising property prices over the last few years, it is also seeing the fastest wealth increases. When the demographic size of each generation is compared against their corresponding economic share, the differences are stark. Australians aged 25 to 34 are equal in size to the over-65s at 3.6 million, or 15 per cent of the total population of 24 million. However, the net wealth of generation y is well below this population share at just 7 per cent of the national private wealth compared to the builders generation who have a share of 26 per cent, almost twice their demographic proportion.
THE QUARTER WHO OWN MORE THAN HALF
In total, the baby boomers (45 to 64) are a quarter of the population (25 per cent) but own more than half of Australia’s national wealth (53 per cent). Their economic footprint is twice as large as their demographic footprint. While gen y has decades of wealth accumulating ahead of them which will grow their net worth footprint, it is unlikely that Australia will ever see the likes of today’s boomers again where a quarter own more than half. The boomers have been the beneficiaries of a near 50-year economic miracle, and they are unlikely to ease out of this accumulating any time soon.
THE $3 TRILLION WEALTH TRANSFER
But there is some hope for the emerging generations who have stagnated in wealth and have been priced out of property. The households of Australians aged 55 plus currently own a combined $2.8 trillion and over the next two decades will pass on much of this. By the time they move from the growing to the spending side of this accumulation, it will have exceeded the $3 trillion level. Therefore, the decades ahead will see the biggest intergenerational wealth transfer in Australia’s history and many of the younger generations will be the main beneficiaries.
Mark is an award-winning social researcher who is regularly commissioned to deliver strategy and advice to the boards and executive committees of leading organisations in Australia and overseas. His firm, McCrindle Research, is engaged by some of the leading brands and most effective organisations across Australia and internationally to help them understand the ever-changing external environment in which they operate and to assist them in identifying and responding to the key trends.
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