A defining aspect of the American dream is that the economic well-being of each generation surpasses that of the previous one. However, commentators have questioned whether this holds true for the most recent generations. A 2022 Gallup poll found that only 42 percent of Americans expect today’s young people to have a better life than their parents—down from 71 percent in 1999. Similarly, headlines in recent years have called millennials the unluckiest generation and labeled them worse off than their parents. Yet millennial and Generation Z adults were nearly as likely as baby boomers to report doing financially better than their parents at the same age, according to the Federal Reserve’s Survey of Household Economics and Decisionmaking. Hence, young adults appear to be more positive about their own financial progress than popular commentary suggests.

Our research examines this question by evaluating whether each generation’s income has surpassed that of the previous one. We focused on five generations—the Greatest Generation (born 1901–1927), the silent generation (1928–1945), baby boomers (1946–1964), Generation X (1965–1980), and millennials (1981–1996)—using the Current Population Survey Annual Social and Economic Supplement. For each generation at each age, we estimated the distribution of a broad measure of income that accounts for tax liabilities, transfers in cash, and in-kind transfers. Previous research has demonstrated the importance of assessing economic well-being using a broad measure of income. Additionally, our 60 years of data (1963–2022) allow for a longer period of analysis than most previous studies on intergenerational mobility.

We compared each generation’s income at ages 36–40 with that of the previous generation because these are prime working years when most people have completed their education. Our research finds that income after taxes and transfers has risen for every generation relative to the previous one, though at a slower rate for Generation X and millennials. The median household income of 36-to-40-year-olds from the silent generation was 34 percent higher than that of the Greatest Generation. The median income of baby boomers in this age range was 27 percent higher than that of the silent generation. The income growth rate was less for Generation X—16 percent—and for millennials—18 percent. The income growth rate was also positive for those in the 25th and 75th percentiles of the income distribution for each generation, with a similar slowdown for the most recent generations.

Increases in government transfers have affected patterns of income growth over time. The slowdown in intergenerational progress was more pronounced for pretax incomes than for incomes after taxes and transfers. Nevertheless, millennials in their late 30s still had pretax incomes that were 14 percent above those of Generation X.

More people now live with and rely on their parents in early adulthood, which has boosted household income growth for those in their 20s in recent generations. This could reflect financial distress among young adults if they desire to move away from their parents but lack the income to do so. However, by age 31, less than 10 percent of millennials lived in a household where their parents received over half the household income. When the incomes of individuals and couples (rather than households) are considered, our findings reveal that incomes improved between generations for those in their late 30s, which suggests that continued income growth for those in this age range is not due to a rising share of this generation continuing to live with their parents.

A slowdown in the growth of work hours has significantly contributed to the decrease in intergenerational income growth for members of Generation X and for millennials. The median number of hours worked for members of the silent and baby boomer generations in their late 30s was 27–32 percent higher than that of their previous generation. However, members of Generation X and millennials worked an average of only 1–4 percent more hours than their previous generation. This decline in the growth of work hours coincided with the stalling of female labor supply growth at the turn of the millennium, after which members of Generation X and millennials began to reach their late 30s. We removed the effect of the slowdown in work hours by calculating the hypothetical income growth of each generation while holding their work hours constant. Our results using this measure suggest that members of Generation X and millennials experienced a larger intergenerational increase in pretax income than baby boomers and a somewhat smaller increase than members of the silent generation.

Some are concerned that rising college costs and student loan debt have eroded intergenerational progress. Thus, we calculated the size of intergenerational improvements relative to increases in the cost of higher education. After accounting for growing financial aid, our findings reveal that the increase in the cost of higher education for millennials relative to Generation X is the same amount as only three years’ worth of the increase in millennials’ average annual household income. People repay most of their debt in their early working years when earnings are lower for all generations, which offsets intergenerational gains when considering only income early in adulthood. Nevertheless, the increased cost of college for millennials is small relative to the increase in their average lifetime income.

Our results are consistent with previous research showing a decline in the share of adults whose incomes exceed that of their parents at the same age. However, in contrast to that work, our research finds that this decline has stopped for millennials and that their income growth has slightly increased. Additionally, we could only study the oldest millennials represented in our data because many millennials have not yet reached ages 36–40. Thus, our findings likely understate the intergenerational progress of millennials because income growth will likely continue for younger millennials. This finding counters popular narratives that millennials are worse off than previous generations and provides optimism that the American dream may no longer be fading. This optimism is most justified when members of recent generations compare themselves with all Americans in the prior generation rather than with their parents alone.

Note:
This research brief is based on Kevin Corinth and Jeff Larrimore, “Has Intergenerational Progress Stalled? Income Growth over Five Generations of Americans,” American Enterprise Institute Economics Working Paper no. 2024-03, February 2024.