Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, September 6, 1993                   TAG: 9309030407
SECTION: MONEY                    PAGE: 6   EDITION: METRO 
SOURCE: JANE BRYANT QUINN WASHINGTON POST WRITERS GROUP
DATELINE: NEW YORK                                LENGTH: Medium

BOOMERS NOT AS POOR AS THEY THINK

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. Many individuals have suffered reverses, but that's true in any generation. 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 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 in an even better financial spot, relative to the one-income, three-child families that they may have come from.

The leading edge of the boomer generation, now ages 40 to 44, has a median income in excess of $15,000, adjusted for 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 (adjusted for inflation).

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 to draw on.

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 - and might even be higher, if allowance is made for saving through company pension plans.

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

If most of the boomers are doing so well, how come they feel so poor? Macunovich offers these 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. They weren't prepared to step back to the leaner style of living common to young people starting out. And they haven't a clue how much their parents did without.

Average earnings flattened for all age groups in the 1980s. Older people had their pile salted away, but boomers still were accumulating it. Most Boomers still will have good incomes 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.

A smaller percentage of boomers own homes than their parents did, and homes are a major repository of wealth.

Still, boomers apparently have invested in other assets. They have higher net worths than their parents did at the same age.

Boomers gave up a lot 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.