Economic Equity: Millennials and the Racial Divide

November 10, 2021

This 18-minute podcast was released Nov. 10, 2021, as a part of the Timely Topics: Economic Equity miniseries.

Ana Hernández Kent and Lowell Ricketts, both of the Institute for Economic Equity at the St. Louis Fed

“There are a couple of differences between Black and white millennials that may help explain these [wealth] disparities,” says Lowell Ricketts, data scientist at the Institute for Economic Equity at the Federal Reserve Bank of St. Louis, in reference to student loans and home ownership. Ricketts joins Ana Hernández Kent, senior researcher at the Institute, in a discussion with Maria Hasenstab about their research on the wealth accumulation of millennials.



Maria Hasenstab: Welcome to Economic Equity, a mini-series from the St. Louis Fed’s Timely Topics podcast series. I’m your host Maria Hasenstab, and today I’m speaking with two researchers from the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. I’m joined by Ana Hernández Kent, a senior researcher, and Lowell Ricketts, a data scientist. Thank you both for joining me today.

Ana Hernández Kent: Thank you for having us, Maria.

Lowell Ricketts: Yeah, thanks for having us.

Hasenstab: Ana and Lowell, you have collaborated on a lot of really interesting research about the wealth accumulation of millennials. Today, I’d like to learn more about your research, what you’ve found, and what’s next as you look at millennials.

In a blog post earlier this year titled Millennials are Catching up in Terms of Generational Wealth, things were looking promising, at least for older millennials. Lowell, tell me what you found about geriatric millennials, like myself.

Ricketts: I’d be happy to. I’m also one of those geriatric millennials with gray hairs to prove it. So we were happy to see that the typical millennial family had accumulated wealth at a faster clip between 2016 and 2019. Those were the survey years for the Survey of Consumer Finance, which we use often in our work, and this really showed that they had gained ground relative to wealth expectations. So by wealth expectations we mean a predicted level of wealth based on wealth held by families in that generation, so among millennials, but also earlier generations, but at the same age. And so based on our estimates of this life cycle we found the typical millennial had accumulate 40% less wealth by 2016 than what we would have expected so we were really worried about that figure. We were worried about how this might impact their ability to achieve life’s financial milestones: if it’s owing a home or saving for retirement. However, by the 2019 survey data the typical family in this group was 11% behind expectations. So they still have a ways to go to match the wealth accumulation of previous generations, but clearly this is a significant rebound, one that we were really happy to see.

Hasenstab: Well, that sounds like good news. Ana, what did you find about younger millennials?

Kent: So Lowell is talking about a group of older millennials, and the way that we broke out generational divisions in our research was by decades. So when we talk about older millennials we’re talking about families who are born in the 1980s. When we are talking about younger millennials, we are talking about those born in the 1990s so that generation spans not just younger millennials, but also older Gen Zs. And I just first want to say that this group and the conclusions that we know about them, it’s really tentative right now, and that’s because they’re so young in the data that we have. In 2019, for example, their average age was just 25 so many of them hadn’t even finished their education. And what we saw for them was that overall, they were fairly far behind as a group, 50% behind wealth expectations. This means that they had about half as much wealth as we would have expected them to have based on older generations at the same age. They had about $7,600 at the median. But positively, this really is a wait-and-see game. We don’t know how their wealth might change over the next few years because they’re so young and they have so much time to continue to accumulate wealth. I’ll also add that they’re actually pretty similar to older millennials – that 1980s group – at similar ages. Back in 2007-2010 older millennials were similarly far behind in terms of wealth expectations. So, as I said before, for this group of younger millennials and older Gen Zs it’s really a wait-and-see game.

Hasenstab: In your second blog post, titled Disparities By Race, Ethnicity, and Education, Underlying Millennials Come Back in Wealth, you both found concerns. Let’s talk about those. Ana, were there differences in gains made between older white, Black, and Hispanic millennials?

Kent: So, absolutely. That was actually a fairly new addition to our millennial and generational research. We wanted to explore it because race and ethnicity, they’re so closely tied to financial outcomes in this country, and we’ve seen that in some of our other work. So when we disaggregated the millennial group, the older millennial group – those in the 1980s – by race and ethnicity what we saw was very different patterns. So for older white millennials they were only 5% behind expectations in 2019, whereas Hispanic millennials were about 10% behind, similar to the overall group. Black millennials, on the other hand, their story was a lot more concerning. They were 52% behind wealth expectations in 2019, meaning that they had less than half of the wealth we’d expect them to have. And the trends look different too. So white millennials took a bit to get there, but they made sizable gains, both in 2016 and in 2019, and Hispanic millennials they steadily improved each time that we observed them. Black millennials, on the other hand, they fell further and further behind in terms of wealth each survey year that we looked at them. And this is despite incomes for each of these groups being roughly on par with the expectations, so there’s something specific to wealth going on where each of these groups is behind, and especially so for Black millennials.

Hasenstab: So to clarify, are we talking about the racial wealth gap here, or are we talking about something else?

Kent: That’s a really great question. In this case, no. So when we create these wealth expectations for sub-groups of millennials we’re only using the families of the same race and ethnicity. So, in other words, Black millennials in 2019 were 52% behind where we would expect them to be based on only other Black families, so older Black families, which is why these findings are so concerning. We’re not lumping together expectations created from white, Black, Hispanic families. We’re comparing Blacks with Blacks, Hispanics with Hispanics, and whites with whites. But separately, we can also see that the group of older millennials has large racial and ethnic gaps, just like in the overall population. With white, millennial families having about $88,000, the median Hispanic families about $22,000, and Black millennial families about $5,000, so those are very large gaps that we see.

Hasenstab: Well thanks for clarifying that. Those are very large gaps and very concerning. Lowell, why does race matter? Why are there such disparities, especially for Black millennials?

Ricketts: Well, that’s a great question, Maria, and there are a couple of differences between Black and white millennials that may help explain these disparities. Student loans are very common among millennials’ balance sheet, but they weigh more heavily on Black grads. For example, four in five Black millennial grads have student loans versus about one in two white millennial grads, and the conditional balances among those that had to borrow are typically higher for Black grads, so this is going to pull down wealth, right? This is an important liability and net worth, which we’re looking at here, is the difference between assets and liabilities. Now, looking at the asset side there are very different rates of homeownership. Only a third of Black millennials own their own home versus two-thirds of white millennials. So this implies that the significant appreciation that we’ve seen among house values offers more of a tailwind, so to speak, for white millennial wealth. It’s going to buoy those assets and help raise net worth for these families. So these may be some of the trends that are driving these disparities for millennials.

Hasenstab: More recently you published a third blog post. It was titled Millennials’ Experience Pandemic Hardship Unequally. A lot of people lost jobs, had hours or salaries cut during the pandemic. How did millennials fare and, Lowell, where were the dividing lines as in who did well during the pandemic, who scraped by, and who really suffered?

Ricketts: So in our recent analysis we found a similar K-shaped recovery, so to speak, as that found in the broader economy. This has been the highlight of a lot of discussions during the pandemic recovery, and really at the bottom part of this case, so to speak, we find the same groups of older millennials that were the furthest behind wealth expectations. So these are non-college educated millennials and Black and Hispanic millennials. So they also experienced significantly higher rates of lost employment income and rent delinquency during the pandemic. So, in other words, the pandemic really hit many of these families while they were already struggling to achieve financial security in terms of wealth accumulation. Because these data offer only a snapshot of overall insecurity it’s difficult for us to say why these families experienced so much hardship during the pandemic. However, we already identified that these families typically had low wealth holdings as they were entering the pandemic, and this left these families little financial cushion to deal with, say, a job loss or a job furlough during the pandemic, a source of potential insecurity that will continue to hamper wealth accumulation.

Hasenstab: Ana, how does education play into this and what about housing or other assets?

Kent: So Lowell talked about the lower part of that K-shaped recovery and those families that are struggling. Education is really where we can see the upper end of that K-shaped recovery, as well as some other demographics. So education, for example, it was the strongest demographic predictor of who could work from home and who couldn’t, at least in November of 2020, which was, as we know, still right in the middle of the pandemic eight months in. So educated, older millennials were over 2.6 times more likely to telework at the end of last year in 2020, about 70% of them were teleworking. And they remained employed because of that and were able to be safe while they were employed versus a lot of less educated – and by educated I mean those with at least a bachelor’s degree or more – less educated those with less than that. So those that were less educated may have had to make more difficult choices staying employed versus, you know, potentially risking their health and the health of their families.

So in terms of housing, stocks, and other assets we know that those have done fairly well recently, which is great if you already have those assets, if you are already in those types of assets, but it makes it really difficult to acquire them, especially initially at entry levels if you don’t. So, again, connecting it back to the K-shaped recovery, some families, like white families, educated families, are having a party right now. They are, you know, drinking the punch and they’re having a great time financially speaking, whereas others are much more likely to be standing by. They’re not invited, yet again, like less-educated millennials, Black and Hispanic millennials, as well as we’re looking at more recently, single mothers. So one of the things that can really highlight this difference is a new data set that we have and a new publication, which is called The Real State of Family Wealth, and in this we’re able to look at wealth more frequently at a quarterly basis. And what we see there is, on average – so for families that are doing well at the top of that K, they’re doing better than ever, whether this be split by racial and ethnic groups, whether it be by education, what we can see is that average wealth is at all-time highs for nearly all of these groups. But, again, the average is not necessarily going to be representative of families that are not doing well, of families that are lower on the distribution.

Hasenstab: Moving forward let’s talk about the millennial work you’ll be doing to continue monitoring generational wealth and how recovery from the pandemic is going.

Ricketts: So the economy right now, Maria, is in a profound time of transition following the tumultuous pandemic. So what this means for millennial economic well-being remains to be seen, in large part. It’s possible that the changes we’re seeing in the labor market, for example, the rise of remote work, upward pressure on wages that seems to be brewing really could improve the prospects of those millennials that have had difficulty achieving financial security. However, we really aren’t out of the woods yet. For example, consider the eviction and foreclosure moratoria or the pause in federal student loans. We know that for many of these millennials, using our available data in the pandemic, we know that they experienced rent or mortgage delinquency, and so when those supports expire those families that have fallen behind on payments are going to have to negotiate a way to get current on those obligations. Now what those processes look like continues to evolve, but it’s going to be very important for these families to avoid damaged credit scores or substantial hardship from eviction and foreclosure. I think certainly more broadly we’re going to be keeping an eye on the typical wealth outcome for this generation, but also younger generations as well.

Kent: And I’ll just add that as the new data come out, one of the things that’s really great is that so many organizations have decided to have more frequent data that they had in the past so that we can look at these outcomes for millennials and other groups more frequently. And so as the new data come out we’re paying attention to things like unemployment, labor force participation, subjective financial well-being for these groups, as Lowell mentioned, mortgage and rent delinquencies. And what we’ve seen, at least so far, is that the bottom of that K, those families that were struggling before the COVD-19 recession, as well as during the recession, it actually could have been a lot worse without the unprecedented amount of help that they’ve gotten, like expanded unemployment benefits, deferment of student loans, mortgage and rent assistance, and, of course, the stimulus checks. So a lot of families were helped even though, of course, there have been struggles, great struggles, across a large swath of the population.

So that’s something that we’re going to be paying attention to as we move forward. Looking into the future, as Lowell said, it’s uncertain right now, but I think there’s a few questions that, depending on how they’re answered, will really determine the outcomes for millennial families. Like, are these millennials who lost their jobs, are they going to be able to get higher quality jobs than before? Is there going to be affordable childcare to help them keep those jobs, and especially for single mothers to help keep them engaged in the labor force? Will they have access to paid family and medical leave? Questions like these which are being asked more broadly, I think, than before these will really determine for many millennial families, the future outcomes of the next couple of months and years to come, and these are things we’ll be paying attention to.

Hasenstab: Well, we’ll look forward to more research from you both. So, in closing, is there anything else you’d like to discuss about your work on millennial wealth? Any final thoughts?

Ricketts: Yeah, I have one, Maria, and it’s really about this generation as a whole and some of the narratives around them as being maybe not as frugal, you know, they love avocado toast and some of these other notions that this might be one of the reasons that wealth outcomes have languished for this generation. But what we found in the data is that personal savings rate for this group is on par with previous generations and it just seems that the timing of this generation is unique here in the sense that the cost of living, in many regards, whether it be the cost of higher education or the cost of a first-time home, or even the cost of assets such as stocks in the stock market. As Ana mentioned, some of these asset prices are really at historic highs. I think that’s the context by which we need to think about millennial outcomes. They’re really swimming upstream here on a lot of these trends, these long-run trends, and it’s more than just a matter of personal savings rates. It’s really about the time they’re living in and some of the challenges posed to them.

Hasenstab: Well thank you so much for that. Thank you both, Ana and Lowell, for your time today and discussing your work.

Kent: Thank you, Maria.

Ricketts: Thank you.

Hasenstab: For more from our Economic Equity podcast mini-series visit the St. Louis Fed’s website at You can also stream and subscribe to all our podcasts on Apple Podcasts, Spotify, or your favorite podcast app.

Economists and experts talk about their research, topics in the news and issues related to the Fed. Views expressed are not necessarily those of the St. Louis Fed or the Federal Reserve System.

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