Did you intend to point out that "generation" is a singular noun while "their" is a plural pronoun? If so, I'd say that "their" is actually correct and the best way to write this. I think you could also say "its" and that would also be technically correct, but it would be significantly less clear. The current construction is the clearest way to say that the individuals that make up the group, in aggregate, are dumber than their parents, in aggregate.