Despite their doubts, Baby Boomers do well


September 05, 1993|By JANE BRYANT QUINN

NEW YORK -- An article of faith among Baby Boomers is that their generation has fallen behind. They're not doing as well as their parents did and will be forced to retire with less.

But is that really true? A new study of comparative income and wealth suggests that it's not.

Boomers are better off than they think, at least in the material sense. As a group, Boomers' standard of living is up, which means their retirement shouldn't be at risk.

That conclusion comes from three economic demographers, led by Richard Easterlin of the University of Southern California.

In previous studies, Easterlin found that Boomers had much higher real family incomes and average earnings than their parents did at the same age.

In rebuttal, however, aggrieved Boomers point out that it takes two people to earn those family incomes. What's more, single workers have seen their incomes decline over the past two decades. This complaint prompted the Easterlin team to evaluate standards of living in a different way.

The team took account of the lifestyle changes Boomers made, in order to raise their economic status. Wives went to work to produce a second income. Couples decided to have fewer children. Some decided not to have any children at all.

A second income in the family, and fewer child-related expenses, increases the average income for each person in the household. That puts Boomers even better off, relative to the one-income, three-child families that they may have come from.

The leading edge of the Boomer generation, now age 40 to 44, has a median income in excess of $15,000, adjusted for inflation and family size, says Diane Macunovich of Williams College, another of the study's authors. At that same age, their parents earned less than $10,000.

The rate of increase in Boomers' incomes has slowed down, but not by enough for a whole generation to lose ground, Macunovich says.

Boomers argue further that they have more education expenses than their parents generally did. But they also have more college aid.

Higher incomes at earlier ages imply higher incomes at retirement. What's more, Boomers' personal savings rate is almost as high as that of their parents.

Only the lowest-income Boomers, principally from the youngest group, are apt to fall below their parents' retirement standard of living. That's due to increased inequality of income in the 1980s, which raised earnings for the well-off while putting lower (and younger) earners down.

If most of the Boomers are doing so well, how come they feel so poor? Macunovich offers some reasons:

* Boomers' parents, who lived through the Great Depression, didn't have high hopes for their futures. When their lives improved in the 1950s and 1960s, they felt enormously cheered. The Boomers, by contrast, grew up in more comfort and expected the same for themselves.

* Average earnings flattened for all age groups in the 1980s. Older people had their pile salted away, but Boomers were still accumulating it. Most Boomers will still have good in comes at retirement, but not as high as they had hoped.

* A slide in real income lowered the welfare of young people entering the labor force. They don't realize that they're still better off than their parents were. They know only that they're not doing as well as workers were five years ago.

Boomers gave up a lot up in order to raise their economic status. More of them will live alone in old age, because they divorced or because they didn't marry or have children. Says Easterlin, "In effect, an improvement in economic status over that of their parents was purchased at the expense of family life." That may make them feel poorer, too.

3' 1993, Washington Post Writers Group

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