Trillion-Dollar Transitions: The Two Key Demographics Driving Economic Change

Transitions in Economic Power to Watch

As Baby Boomers begin to pass down their accumulated wealth and gradually exit the workforce, Gen Z is poised to inherit a transformed economic landscape. Unlike previous generational transitions, this handover is happening amidst unprecedented technological change, growing concerns about climate sustainability, and shifting global power dynamics.

"This generation will redefine what it means to be a U.S. consumer," the Bank of America report states, pointing to transformations already underway in everything from diet and alcohol consumption to housing preferences and digital engagement. The implications reach far beyond simple consumer trends — they represent fundamental shifts in how the global economy will function.

By 2030, Gen Z’s global spending is projected to reach $12.6 trillion compared to $2.7 trillion as of 2024, making them among the most economically disruptive generations to economies, markets and social systems in modern history. Their collective purchasing decisions will reshape entire industries and create new ones that don’t yet exist.

Alongside Gen Z’s economic transformation, a parallel shift is reshaping global markets: women’s increasing economic power. According to Bank of America research, the gender gaps in labor force participation and employment ratios are steadily narrowing, with the difference in median annual income growth between men and women falling to around 4% by the end of 2024 from 6.5% in 2022.

This closing gap represents more than just progress toward equality — it signals a fundamental expansion of economic potential. As the Bank of America report notes, "This isn’t at the expense of men. As wealth increases, women’s prosperity will help to ‘grow the pie’ of total affluence, expanding opportunities across the board."

The "Great Wealth Transfer" will accelerate this transformation for women. An estimated $124 trillion in U.S. wealth is expected to be transferred through 2048, exceeding even the total global GDP for 2023 ($105 trillion). Of this massive wealth shift, $54 trillion will go to surviving spouses (95% expected to be women) and $47 trillion to women in younger generations.

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Gen Z: Big Spenders, Small Savers

Bank of America’s internal credit and debit card data paints a revealing picture of Gen Z’s spending habits. This generation’s spending growth consistently outpaces the overall population in both necessity and discretionary categories. Their entertainment spending jumped 25.5% year-over-year in February, while travel spending rose 13.8% — significantly outperforming other generations.

The data shows particularly strong spending in categories that reflect Gen Z’s life stage and values. Childcare expenses rose dramatically, increasing 500 basis points above the overall population average, likely reflecting changing family dynamics as this generation begins forming families of their own.

But this spending comes at a cost. Unlike their parents and grandparents, Gen Z’s spending-to-savings ratio has been climbing since 2023, meaning they’re spending nearly twice what they have in savings. This financial behavior marks a stark contrast with older generations like Baby Boomers, who typically maintain savings that exceed their spending.

"Over half of Gen Z respondents reported they aren’t making enough money to live the life they want," notes the Bank of America report, highlighting that the high cost of living ranks among their main financial challenges. This hasn’t gone unnoticed by Gen Z themselves, with 32% feeling they’re behind where their parents were at the same age in meeting financial goals.

This financial pressure is forcing lifestyle changes. Two-thirds of Gen Z reported in Bank of America’s 2024 Better Money Habits survey that they’re cutting back on dining out and skipping events with friends to manage costs. However, the economic impact of these choices remains limited for now, as younger people still account for less than 20% of total US consumer spending.

As their economic footprint grows, however, these spending patterns will increasingly influence broader market trends, potentially reshaping everything from the restaurant industry to entertainment and social spaces. Companies that understand and adapt to these changing consumption patterns will be better positioned to capture Gen Z’s growing spending power.

Highly Educated, Yet Underemployed

Women today are entering this economic transition with substantial advantages over previous generations. They’re more educated, more financially literate, and more likely to remain in the workforce after having children. They’re marrying later, having fewer children, and taking control of their finances earlier in life. Increasingly, they have visible role models: women globally now occupy 29% of senior management roles, and one-third of business owners are female entrepreneurs.

Yet, the education paradox facing Gen Z is striking. Among 18- to 21-year-olds no longer in high school, 57% were enrolled in two-year or four-year colleges in 2022 — significantly higher than the 52% of Millennials and 43% of Gen X at the same age.

"Gen Z is achieving higher levels of education compared to previous generations," notes the Bank of America report, highlighting a trend that should theoretically position this generation for greater economic success than their predecessors. This educational investment comes despite rising costs of higher education and growing concerns about student loan debt.

This advantage is translating into wage gains. Bank of America deposit account data shows Gen Z wage growth reached nearly 8% year-over-year in February — the highest among all generations and approximately double the overall median. This wage growth has provided some buffer against inflation and rising costs of living, though not enough to fully offset financial pressures.

However, larger structural challenges are emerging in the labor market. Unemployment for new entrants (a group predominantly composed of Gen Z) was up more than 9% year-over-year in February, with the trend showing worrying signs since 2023. The situation peaked in October 2023 with a troubling 29.4% year-over-year increase before moderating somewhat.

Even more concerning, the number of Gen Z households receiving unemployment benefits grew nearly 32% year-over-year in February. This growth rate was almost four times that of Gen X, suggesting particular challenges for younger workers despite their educational credentials.

These labor market struggles could have long-term implications for both Gen Z’s career trajectories and overall U.S. productivity, especially as March jobs data showed a surge in underemployment rates, suggesting many young workers are taking whatever jobs they can find in a low-churn labor market.

For a generation that invested heavily in education with expectations of strong career prospects, this employment landscape presents a significant challenge. The mismatch between educational achievement and employment opportunities could reshape Gen Z’s approach to career development, entrepreneurship, and even their perspective on the value of traditional education.