Those in their 60's & 70's make more money than those in their 20's & 30's.
Millennials have made relatively little economic progress over Gen X. They outnumber them, but their incomes have been stagnant, and they have a significantly higher rate of poverty than does any other generation. Boomers on the other hand, not only outnumber preceding generations, but also have recently made substantial gains in income. This has had and will continue to have a profound impact on the distribution of income among people of various ages.
According to the US Census Bureau's Current Population Survey, US residents earned $10.6 trillion in income last year. That's up from $8.3 trillion (constant dollars) earned in the year 2000**. The chart below demonstrates how this income was distributed among five equally-sized, age groups.
As signified by the gray bars, people in their 40's & 50's earned the largest share of income in both time periods. This makes sense, because this age range includes the peak earnings years for most people. In the year 2000, people in this age group earned a total of $3.9 trillion. Last year, similarly-aged people earned a total of $4.6 trillion, a 16% increase.
Young people haven't fared as well. The total amount earned in 2000 by those in their 20's & 30's was $2.9 trillion. Last year that age group earned $3.2 trillion, an increase of 9%. As you'll read below this was nearly entirely driven by population growth. This segment experienced negligible growth in average income.
In stark contrast, the total income earned by people in their 60's & 70's doubled between the year 2000 and 2016. There are two reasons for this: 1) as the Boomers moved into this age segment, the number of people in it increased by nearly 60%. 2) the average income earned by the members of this age group increased over 30%.
The chart below amplifies the first point. The yellow bars dramatize just how significant the population growth of this segment has been relative to the others. In just sixteen years the number of 60-79 year-olds has increased to 57.2 million from 36.4 million.
And the growth of this segment is not over! Last week I demonstrated the numbers of this group are expected to increase over 15 million over the next decade. No other age group has seen or will see growth of this magnitude.
As I mentioned above, those between 60 & 79 saw their average income increase by over 30% since 2000. This is presented in the chart below. The yellow bars show that their average income increased from $32,600 to $42,900. As with the number of people, no other age group saw increases of this magnitude.
In contrast, the average income of those in their 20's & 30's increased by about $300. Per the headline, last year the average income for someone in their 60's & 70's was over $6,000 more than someone in their 20's & 30's ($42,900 v $36,800).
The 60-79 segment's gains in median income were equally impressive, increasing $5,500 over this same time period. In comparison, the median income of those between 20 & 39 fell by $1,300. As of 2016, the median incomes of these two groups are now roughly equivalent: $25,300 for the older segment and $26,000 for the younger one.
The diverging median and average incomes indicate, among other things, there is much more headroom in marketing high-ticket items to older individuals. There are a greater proportion of higher income households in that segment, and they are more likely to have the time and freedom to spend that income as they choose. How life stage drives how people spend their money will be the subject of an upcoming post.
The above findings are in line with other research on age and income. For example, older people are often mischaracterized as struggling more than are other generations. Actually, the opposite is true. Pew Research analysis demonstrates the poverty rate of Millennial households is nearly 19%. No other generation has a rate over 12%. This isn't to say some older people aren't struggling. It's just that, as measured by the poverty threshold, a higher proportion of young people are.
The above analyses point in one direction. Before you establish near- and long-term generational strategies, you need to check your assumptions and do your research about the future prospects of your existing and future customers.
If the above is news to you, then please follow me on LinkedIn. Over the next few weeks I'll be publishing additional research and commentary to help you focus your efforts, refine your strategies, and boost your profits and customer engagement.
Chase Intel helps its clients create insights to drive customer engagement and profits. These insights are often founded on a fresh look at our clients’ objectives and the data, analysis, and actions required to achieve them. As with the above example, we consistently find insights that others miss.
**I selected 2000 as the year of comparison because during that year the oldest member of Gen X was the same age as the oldest Millennial was in 2016.