Update 416 —Millennial Economic Challenge:
Agenda to Redress Generational Imbalance
Never in the nation’s history have circumstances and public policy combined to produce an entire generation economically disadvantaged compared to — if not by — its immediate forebears. Those responsible did not intend this consequence, and many in fact have remorse and resolve.
From spending priorities to bankruptcy law, federal policy reflects the truism that if you aren’t at the table, then you are on the menu. Young people have paid dearly and will for years unless they develop a millennial economic policy agenda — because the message is there for the taking. Or here, below.
All but the youngest Millennials — the 75 million Americans born between 1981 and 1996 — are out of school and of working age. Millennials face an array of economic challenges brought on by policy decisions, rapid globalization, and bad luck, to name a few causes. Our politics are increasingly shaped by Millennials, who make up 27 percent of the electorate and will exert more influence as they age.
Compared to their forebears, Gen Xers and Baby Boomers, Millennials are strapped for cash and saddled with debt. Older Millennials, those over 30, graduated from school and entered the workforce during the Great Recession — the worst job market in 80 years. They got locked into low-paying jobs, experienced wage stagnation, and were unable to save for retirement.
Millennials lag behind other generational cohorts in terms of earnings and wealth. Millennials’ above-average rates of unemployment (8.8 percent) and underemployment (18.3 percent) combined with relatively low earnings ($35,592 average salary) hinder wealth-building. The generational wealth gap has reached historic proportions, as the average Millennial today holds 41 percent less wealth after adjusting for inflation than the average Gen Xer did in 1989.
Below, we look at three interlocking challenges facing Millennials — student loan debt, lack of workplace benefits, and low homeownership rates — and the long-term economic and political impacts.
The Student Loan Debt Albatross
More than a quarter of Millennials have outstanding student loan debt, and seven in ten students who graduated from a non-profit college in 2018 graduated with student loan debt. The average Millennial borrower holds $30,000 in student loan debt, and Millennials collectively hold more than $500 billion in outstanding student loan debt.
The astronomical level of student loan debt coincides with the doubling of the price of college over the past 30 years. Per the National Center for Education Statistics, the average cost for a four-year degree doubled from about $53,000 in 1989 to over $104,000 in 2018, after adjusting for inflation. College enrollment rose sharply during the Great Recession, as Millennials who came of age at the time found their job prospects without a college degree to be negligible.
Meanwhile, wages have stagnated, and health care costs have skyrocketed, leaving Millennials stretched thin. Those who graduated in the midst of the Great Recession began their careers underemployed, which has long-term depressive effects on lifetime earnings. As of last year, recent college graduates are less likely to be employed than the rest of the working population. Of those who are employed, 40 percent have a job that does not require a college degree.
Disappearing Traditional Workplace Benefits
Workplace benefits — health care, retirement, and paid family and medical leave — are critical to household financial security. Over the past 30 years, workers have experienced a decline in the provision of several essential employer-provided benefits. Per BLS, the share of workers covered by employer-sponsored health plans has fallen from 75 percent in 1991 to 62 percent in 2018. Over the same period, the number of workers with defined-benefit retirement plans has halved — from over 50 percent in 1991 to just 22 percent in 2018.
Millennials are the largest generation in the labor force and make up over 40 percent of those in the emerging “gig economy.” As gig models upend the traditional employer-employee relationship, key protections for workers are increasingly hard to come by. Health care reigns supreme as a concern for the underemployed, but gig jobs rarely offer overtime pay, paid family and medical leave, and/or retirement benefits. Unemployment insurance is also not available to former gig economy workers.
Health care drove Democrats and Independents to the polls in 2018. Republicans played defense on the issue after delivering serious blows to the ACA and almost repealing the law altogether. As more traditional workplace benefits fall by the wayside, Millennials, who fare worse than previous generations, will grow increasingly frustrated with the status quo.
Home Ownership and Generational Wealth
REALTOR Magazine recently celebrated that more Millennials are pursuing homeownership than ever before. Yet, Millennials’ rate of homeownership is still eight percent lower than that of Gen Xers and Boomers at the same age. Low homeownership rates affect fellow buyers, sellers, and, in the end, everyone else.
The reason for lagging homeownership rates? Rising costs of living and high levels of debt. Rent prices have risen by nearly 50 percent since the 1960s, and 70 percent of recent college graduates finish school with student loan debt. Over 61 percent of Millennials said that they delayed buying a house because of the need to repay their student loans. Lack of financial security has delayed traditional markers of adulthood, such as marriage and having children, as well as the opportunity to invest in one of the largest drivers of wealth and equity: owning a home.
The paucity of affordable housing stock contributes to Millennial home buying woes. Housing prices have increased nearly 40 percent over the past three decades. Looking back further, the average home price is over 70 percent higher than what Boomers saw in the 1960s. Zoning laws frustrate efforts to build more affordable housing, and homebuilders have incentives to build high-end units over affordable ones. Recent job growth in urban areas attracts young workers to cities, and fewer children means smaller houses. Some housing markets (e.g., suburban) are seeing steep price drops, while others (urban) show rapid growth.
Left unchecked, housing markets will continue to warp, exacerbating the generational wealth gap. Not owning a home and the associated equity is bad for the economy as a whole, as homeownership is the principal method of wealth building for the middle class. Boomers may dominate homeownership now, but who will buy their homes?
Absent an agenda and unprecedented mobilization, Millennials will struggle to catch up to older generations in accumulating adequate wealth and retirement resources. Many will be unable to meet traditional obligations of child rearing and elder care. At the same time, the oldest, wealthiest households are doing better than ever.
While turnout in the 2018 midterms increased across the board, the most pronounced change was among Millenials, whose turnout doubled from just four years prior. Per the Pew Research Center, 59 percent of Millennials identify as a Democrat/lean Democrat, but only 32 percent identify as a Republican/lean Republican (the partisan divide for GenXers and Boomers is far more even, as only 48 percent of those generations identify as a Democrat/lean Democrat). But a Millennial policy agenda and mobilization of advocates awaits.