Gen Z Increasingly Has No Income, Cannot Retire or Buy Houses


America’s young adults are increasingly “disconnected” and not earning incomes.
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  • One in three Americans ages 18 to 24 have no income, according to a new report.
  • Younger Americans are also increasingly depressed and not enrolling in college.
  • An analysis from the St. Louis Federal Reserve looks at the fate of younger workers.

Gen Zers might be reshaping the world of work — but only if they have a job. And, for many, that might not be the case.

New research from the St. Louis Federal Reserve’s Institute for Economic Equity delved into the challenges young people aged 18 to 24 are experiencing in today’s economy. They found that more than one in three have no income at all.

In particular, the researchers looked at a group dubbed “disconnected youth,” who aren’t working and are also not in school. As of 2022, disconnected youth comprised 13% of this age group; that share has been rising overall since 1998, according to calculations from the Federal Reserve Bank of Dallas.

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To be sure, many young people don’t yet have an income because they are still in school and living off loans or family assistance. But for those who are not, the lack of income could hurt Gen Z’s ability to save money for retirement or make bigger purchases down the road. It also can take a toll on their mental health, weighing them down as they try to progress in a tough economy.

Younger Americans are facing stagnant incomes

The Dallas Fed found that, even after a post-pandemic dip, the rate of disconnected youth has increased since the end of the 1990s.

At the same time, college enrollment rates have been dropping as younger Americans contemplate whether continued education is worth it, especially amidst the ballooning student debt crisis. For many Gen Zers, staying in school isn’t important to them.

A lack of income has weighed on many young adults’ ability to build wealth. For young adults, the median household had a net worth of just $11,200 in 2022 according to the St. Louis Fed’s analysis of the Federal Reserve’s Survey of Consumer Finances, way lower than the typical US adult household at $192,100.

Entering adulthood without a job or any source of income can have significant implications for young adults later in life. For example, as the research explained, a lack of financial stability means a lack of savings — they won’t be able to put money into retirement and “invest in their futures,” either by buying a home or starting a business. That comes as their millennial and Gen X peers are already staring down a looming retirement crisis, as student loans eat up savings and pensions are replaced with income and market-based retirement plans.

And the number of young adults with no income has been on the rise; in 1990, around one in five young adults said they had no wage or salary income. As of 2022, it’s over one in three, according to the new St. Louis Fed study.

“This is striking because the labor market in 2022 was the strongest on record, and yet real incomes inclusive of zero-wage young adults remained essentially unchanged as this group made up an increasing proportion of the young adult population,” the St. Louis Fed report said.

Inflation-adjusted incomes for Gen Z, among those with any income, have risen somewhat over the last five decades, though even excluding non-earners, young people have seen more stagnant incomes compared to all adults.

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Struggling to hold down stable employment can negatively impact mental health, and rising healthcare expenses have made it even more difficult for many younger Americans to get the care they need. The percentage of young adults experiencing depression monthly rose to above 12% in 2022, more than triple the percentage in 2017, according to a National Health Interview Survey and St. Louis Fed analysis.

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The rise of disconnected youth is making historical inequities worse

White young adults have a median net worth that is about triple that of Black and Hispanic young adults, despite relatively similar median incomes, due to the racial wealth gap. Achieving more equitable wealth outcomes could drive economic growth, given that more people could afford homes or pay off debts.

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“The report confirms that even during the tightest labor market since World War II, there is a limit to economic growth’s ability to reduce ‘structural’ unemployment that many young Blacks and Latinos face, plus a growing number of young whites,” William M. Rodgers III, director of the St. Louis Fed’s Institute for Economic Equity, told BI in an email.

That comes after young people were some of the first to lose their jobs and incomes in the fallout from the pandemic. The unemployment rate for 16 to 24-year-olds spiked to 27.5% in April 2020. After dropping in the wake of pandemic rehiring, that rate has picked back up to pre-pandemic trends — and also doesn’t reflect those who are not actively looking for work.

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The report mentions that these deepening disparities point to interventions such as improving access to community college and vocational training, creating more apprenticeship roles, and investing money and attention into structural barriers such as the criminal justice system and mental health.

“The research affirms the importance of investing in young people’s physical and mental health. Otherwise, the economy can’t operate at its highest potential today or into the future,” Rodgers said.

Are you or were you a “disconnected youth,” or supporting one? Contact these reporters at jkaplan@businessinsider.com, asheffey@businessinsider.com, and nsheidlower@businessinsider.com.



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