Gen X Hits Another Bump in the Road

Here's the bad news for Gen X: at each point thus far, you've drawn a pretty short straw. Your timing — at least in the context of contemporary generations, and through no fault of your own — could hardly have been worse. Not only did your childhood years coincide with social changes that significantly eroded trust and idealism, but during the early years of your adulthood, you have hit various economic landmarks at unfavorable points in the cycle.

You invested significant time and money in education and are today the most credentialed generation yet — but, unlike Boomers', yours came at a high personal cost. You began your college years just as the government made significant cuts in educational grants, shifting the burden of funding a college education toward loans. Borrowing limits on student loans were raised and unsubsidized loans made available for middle-income students, making a large percentage of you eligible for educational borrowing. Many of you entered adult life with high levels of college-related debt.

You graduated when the economy was slow and Boomers had already grabbed most of the key jobs. As an article in a 1985 issue of Fortune said: "[T]hese pioneers of the baby-bust generation are finding life on the career frontier harsher than ever . . . they're snarled in a demographic traffic jam . . . stuck behind all those surplus graduates of the past decade." Unemployment hit 10.3 percent in 1983 — college placement directors were saying it was the worst job market for college graduates since World War II. Many X'ers' careers got off to a slow start.

You made up the difference by working — a lot — or, more specifically, by a lot of you working. The women as well as the men of your generation joined the labor force. Together, couples earned household incomes higher than the national median and higher than they were for Boomer households at a comparable age, adjusted for inflation. However, on a per person, rather than per household, basis, your average incomes were lower.

And, then, the next step in the road: your higher household incomes, coupled with the significantly more flexible mortgage requirements, enabled a high percentage of you to buy homes — and to buy them at an earlier age than Boomers did.

Unfortunately, X'ers' home purchases came at the top of the housing market after prices had been driven up by the large bulge of home-buying Boomers that preceded you. During the first half of the 2000's decade, the combination of still-increasing housing prices and your trade-ups to costlier homes caused the median value of homes owned by those in the 35 to 44 age cohort to rise by 20 percent. Unfortunately, during the same period, the amount of your generation's home-secured debt rose even faster, by nearly 30 percent. When the housing crisis began, Gen X owned the most expensive homes in the country.

You have been harder hit by the decline in housing prices and ensuing mortgage crisis of 2008 than any other generation. A Boomer who bought a home in 1991 has a house today that is worth less that it was five years ago — but is still ahead overall, while a Gen-X'er who bought in 2005 now has a home worth far less than what he paid. The slump disproportionately hurt Generation X. Once again, you have been the victims of bad timing.

The rules keep changing while you are mid-way through the game. The bedrock principles of Boomers' financial plans were: (1) A good education will help you get a good job and (2) Putting money into a home is the best way to build the equity for long-term financial security. Both of these rules have failed Generation X.

More than ever, X'ers are being challenged to invent their own path forward. As it has been before, that path will almost certainly be less guided by conventional rules and less dependent on traditional institutions, than by X'ers' own sense of self-reliance and quest for multiple options. I encourage X'ers to re-imagine the next 30-50 years of your life: most of you won't have the institutionally-funded retirement options that many Traditionalists have enjoyed or the housing-based nest egg that provides many Boomers with the flexibility to blend volunteer and paid work over the years ahead. But you have your own ingenuity and entrepreneurial skills with which to build a unique future.

As I've written before, X'ers' past challenges have developed perspectives that I believe are well-suited to the needs and realities of today's world (see my blog "Why Gen X Has the Leaders We Need Now" or the HBR article "The Leaders We Need Now," May 2010). X'ers should avoid even trying to follow the Boomers' path and, instead, have confidence to bring your own pragmatic sensibility both to organizational leadership — and to the design of your own life plan.