In cities around the world people have been occupying key streets to express frustration over a variety of issues. Many protesters have commented on “growing inequality” as being one grievance. But what if the real cause of this apparent phenomenon is demographic rather than a result of economic or financial systems, or something abstract like “corporate greed.” The baby boomer cohort has been distorting aspects of the economy since they were born, and today is no exception.
Looking at urban housing issues provides a good window into how the bulge of humanity born between 1945 and 1960 has created many of the challenges our cities and countries face today (and I’m not blaming individuals here, it’s just the fact that there are so many more people in one age cohort than in others that is unusual in human history, and the issue here)
1. Those who bought houses before the boomers have done really well. Many people born in the 1920s through early 1940s who bought in the late 1960s or early 1970s achieved a real estate windfall upon retirement. The reason? One the baby boomers hit the housing market, demand skyrocketed but the preference for detached single family homes meant that supply could not increase in the best locations, and so values went up owing to increased demand. The only place supply could expand was the suburbs.
I know many people who bought a house for $20,000 in 1970 and without taking on much or any more debt ended up with homes in the $1 Million to $2 Million range at retirement in the mid-2000s. This is in Vancouver, but I am sure similar stories can be found in places like New York, Boston, San Francisco, Sydney, Melbourne, Seattle, etc. The earlier one got in, the better. So the oldest boomers have done okay as well.
In Canada, this pre-boomer and older boomer group still has their wealth, whether it’s in real estate or they sold it. In the US, some likely ended up losing at least a portion (by buying a McMansion in suburbia only to have its value plummet, or from using their house as an ATM and borrowing too much) but I also get a real sense that this group has done okay. It is hard for younger generations to imagine buying into the same types of homes they might have grown up in. The younger boomers and gen xers got caught in the US housing crash, is my perception (but someone please give me stats to disprove this if I’m wrong).
2. In Employment, a similar general story exists. The pre-boomers ended up with the plum management jobs supervising boomers, who then filled up all of the employment making life tougher on subsequent generations, especially gen x during the economic downturns of the 1990s (until the dot com boom put people who widdled away idle time in front of computers to work). The youngest boomers and the “jones generation”(those born 1960-1967) did well in the computer revolution because they understood it, and then could put to work this lost generation x who couldn’t squeeze themselves into a lot of the companies and organizations that employed the boomers.
3. Millennials, those born after 1980, especially those born in the late 1980s are feeling a little squeezed out of both the job market (now full of boomers, gen xers, and the oldest millennials).Boomers have not exited either the employment or real estate markets. This makes jobs a bit scarce during these uncertain economic times (unless you live in Calgary) and real estate prices remain elevated in many high-demand locations. The suburban housing crash in the US offers options in those locales, but this housing style has not been embraced by younger generations for reasons that have been suggested and explained elsewhere.
Being shut out of the good jobs, and for those with a good job an affordable house, undoubtedly feels unequal, and unfair for millennials. And it might be nice to blame corporate greed on an unfair economic system for this situation. But it might be mostly a demographic phenomenon and the situation will change over the next few years.
The good news on the job front is that boomers will be exiting the workforce, creating opportunities. They will also eventually be selling houses at a fast rate. This will create some opportunities for younger generations to improve their standard of living.