December 13, 2018

Why are marketing types so interested in the spending habits of the young? Generally speaking, older people have more money. However, it’s when people first have money of their own, passing through the various transitions to mature adulthood, that they form their spending habits.

When it comes to what the Millennial generation are doing with their cash, there’s a lot more than bland commercial interest going on. Indeed, there’s a touchiness to the whole subject – indeed, implications of economic, cultural and political disruption.

This stems from the likelihood that many, if not most, Millennials will be poorer than their parents and already are poorer than their parents were at the same stage in life. It’s an unsettling development for a culture that had taken it for granted that each new generation would be richer than the last.

Suggested reading
The surprising losers of the Great Recession

By Peter Franklin

Another great driver of change is technology – if economic insecurity provides the reason for a radical shift in consumption patterns, then digital goods, services and markets provide the means. Many sectors have been disrupted already, not least the media businesses who publish anguished articles about what young people will and won’t pay for.

With so much at stake – and such obvious tension between the generations – it’s not surprising that silly stories, like the one about Millennials not saving because they spend too much on avocado toast, blow up into major controversies.

But when not being accused of extravagance, Millennials face charges of miserliness – indeed of opting out of previously normal features of adulthood such as buying a house, starting a family and even sex. If the first duty of the capitalist citizen is to consume and produce new consumers, then Millennials are going AWOL.

Writing for the Atlantic, Derek Thompson says there is a reason why 20 and 30-somethings are holding back:

“…the fact that young people are buying fewer houses and cars doesn’t prove that they want fewer houses and cars. It might mean they simply can’t afford them. That latter conclusion is now supported by research from the Federal Reserve.

“Fed economists found that the depressed rate of homeownership among Millennials was entirely about income and affordability… controlling for income and employment wiped out all generational differences.”

Suggested reading
Who's to blame for the 'boomerang' generation?

By Peter Franklin

Let’s start with the most obvious squeeze on Millennial living standards – the cost of housing:

“According to the Joint Center for Housing Studies of Harvard University, the typical sale price of an existing single-family home in 2017 was 4.2 times greater than the median household income; that’s 30 percent higher than in 1988. It’s even worse in some cities. “

Over much the same period we’ve also made it much more expensive for them to get an education:

“Millennials are the most educated generation in U.S. history to date. They bought into a social contract that said: Everything will work out, if first you go to college. But as the cost of college increased, millions of young people took on student loans to complete their degree. Graduates under 35 are almost 50 percent more likely than members of Gen X to have student loans, and their median balance is about 40 percent higher than that of the previous generation.

“And what has all that debt gotten them? ‘Lower earnings, fewer assets, and less wealth,” according to the Federal Reserve paper’s conclusion.’”

How’s that for a double-whammy?

So the reason why Millennials aren’t saving and/or splashing the cash isn’t because they’ve combined the worst habits of the spendthrift and the skinflint, it’s because they’re too busy paying the rent and paying off their student loans.

Noting the markedly Left-wing politics of this generation, Thompson asks “is it any wonder that Millennials are eager to overthrow a system that has duped them into a story of permanent progress, thrown them into debt, depressed their wages, separated them from the trappings of adulthood…?”

An excellent point, but I wonder if there’s that much of a difference between the neo-socialist promise of more free stuff from the state – and what neoliberal politics has offered to older, richer voters.

Think about the huge and lightly-taxed accumulation of property wealth – or the inflation of asset values caused by easy credit policies and quantitative easing. That too is ‘free stuff’ for those old enough and fortunate enough to hold wealth.

Suggested listening
How capitalism is killing-off the next generation of consumers

By Charlie Pickles

The great achievement of neoliberalism, globalisation, automation and all the rest of it has been to lower the costs of production. Stuff has become cheap and a lot of digital stuff is free. Capitalism has produced abundance beyond our ancestors’ dreams. Unfortunately we’ve allowed those who control economic bottlenecks like land and educational accreditation to extract far too much of the value that capitalism creates.

The next generation of consumers have been left with too little to provide the demand that is the essential counterpart to supply.