It’s been well documented that millennials have been financially struggling, but Steven Rattner of the New York Times recently added to a bleak overall financial picture for millennials (18-34 year-olds), in an opinion piece that compiled a number of data points over time. And it’s some pretty legit bad stuff that shows that things aren’t quite what they used to be (and getting worse). Among the most striking data points:
1. Education levels have increased: education levels have increased for millennials. Those with bachelor’s degrees or higher have gone from 19.5% in 2000 to 22.3% in recent years. One would think this is a good data point – and it is – but it’s very bittersweet when the following is true…
2. Median earnings have declined: after decades of increases down to $33,833 in recent years from $36,716 in the year 2000 (in 2013 dollars). This, despite the increase in education levels.
3. Tuition costs are skyrocketing: the costs to enhance education beyond high school have gone up dramatically – up 234% since 1993, while inflation is only up 63%. In other words, our ROI for eduction has declined significantly.
4. Student loan debts have increased: and it’s digging us a hole. Among those with bachelor’s degrees, debt upon graduation has increased from 46% of the population in 1993 to 71% today, and the median bachelor’s graduate debt load has increased from $15,000 to $26,500, after adjusting for inflation.
5. Declining homeownership and rising rents: Rattner points out that home ownership has decreased (I don’t see this as a negative for a number of reasons), but adds the valid point that rents have increased from $1,000 (in 2014 dollars) to $1,152 since 1993.
6. Net worth: with all of these things combined, the median net worth has decreased from an already tiny $18,200 in 1995 to $10,400 today.
Not good. And the picture gets even worse when you add all of this to other data points that I have previously highlighted – millennials have a negative personal savings rate, the majority of millennial savings are in cash and not in investments that could be working for them, we won’t get inheritances, we’re overworked, we have crappy average credit scores (and employers are not hiring us because of it), pensions are dead and won’t be there to save our dismal retirement outlook, and we’re increasingly moving back home with our parents. Perhaps it’s time to speak to your doc about a Xanax prescription (on the bright side, you’re more likely to have insurance to cover that now at least).
By these measures, millennials are being pushed off of the financial cliff.
But why? Where did things go wrong? I think we can point to 3 things:
- globalization: of the economy, increased competition, and short-term thinking have gutted middle class wages.
- politics: we have a divisive 2-party political system that has valued policies that favor special interests and the elite more than policies that help the “median” (middle class). Political policymaking moves the averages and the averages have been moving in the wrong direction for the last two decades.
- helping ourselves: we haven’t done so well at this. Are we being pushed off the cliff or are we willingly jumping off to some extent?
How can we solve each of these?
- globalization: trade policy and foreign worker policy is big here and should be an emphasis, but unfortunately that will only slow a decline as there will always be a low-cost developing country somewhere that will be able to undercut on wages as technology and cheap oil has led to a truly global job market. Globalization is here to stay and it’s a race to the bottom on wages, so the best we can do is work with it effectively and efficiently and encourage growth of the size of the pie for everyone.
- politics: I previously went into greater detail here, but we need to start getting furious about how money controls everything in politics and eliminate all but minor individual campaign contributions. We need to get out and vote in EVERY election (not just Presidential elections)! And we need to get more involved in the political system than we have previously been, and even start running for office. The absolute worst thing we can do is throw our hands in the air and let this malignant political status quo persist. This country needs to start properly investing in education, infrastructure, retirement planning, harvesting free sustainable resources more effectively, wage growth, and other creative solutions to big problems and pull money from other areas. That won’t happen unless we get out and demand it.
- helping ourselves: despite negative overall trending, there are thousands of things that we can individually exercise to improve our personal outlook.
Let’s expand on that last point, because I think it is where you and I and all of the millennials out there can individually take the most solace.
We should not attempt to follow in the footsteps of previous generations or those of our misguided peers. If we learn anything from these numbers, it should be that we simply can’t afford to follow those footsteps.
And you know what? That’s OK. Because some footsteps are not worth following.
- we don’t need over-priced degrees
- and we don’t need to assume the debt that others do to pay for it, because…
- we can earn improve our education at our own pace
- we can buy or rent smaller dwellings
- we can move to more cost-efficient locations
- we can improve our credit and decrease our debts
- we can get rid of the 2 luxury cars in favor of one modest reliable one, or a bike
- we can bike to work and self-power our commutes
- we can cut down on dining and drinking out
- we can cook more cost efficiently
- we can reduce our energy consumption
- we can cut our water consumption
- we can switch to MVNO’s for our phone plans
- we can cut cable
- we can start cutting our own hair
… and so much more! Thousands of things more! We need to blaze our own paths.
Meanwhile, we can take gratitude in the abundance of everything that we do have. Yes, the numbers paint a bleaker picture for the millennial generation than the two that came before it and we should actively work to change that, but we are still left with significantly more at our disposal than the tens of thousands of generations that came before the last two. The birth lottery of time and place has been extremely kind to us. Things are only as bad as we choose to see them.
This was pretty inspiring! I’d like to point out that a sizable portion of the population believes in the equivalent of a “buy American” to fight globalization.
One example article: http://www.alternet.org/economy/buying-america-many-astounding-ways-you-can-express-your-values-your-pocket-book
I agree with the virtues of being less materialistic. Buying less, using less. However, that is merely treating a symptom. Who is profiting from the underpaid, overworked millenial? If incomes had continued to rise more equitably, more of us could afford haircuts and cable if we chose. The wealth exists; but it’s not in our collective hands.
Some of it is our fault. Paths exist to cheaply get a degree in a high-paying field. Someone who takes the effort to develop the hard and soft skills and remains geographically mobile -will- find a stable living. For less academic people, very good livings can be made in the trades (e.g. electrician) and are always in demand.
We need better… life skill education. Including financial literacy. In other words, the merit of not taking out $100k for a dance degree.
Absolutely, Brad…right on. I see young and old folks everyday in my line of work asking for loans. They are unemployed, no down payment and most don’t have a clue where they are financially. Life skills are something my grandparents, parents, and neighbors taught youngsters as we grew up. Unfortunately we are a generation of TV raised children and we as parents have fallen behind on educating the younger generation in regard to basic life skills. Turn off the tube, turn off the computer and talk with your children and peers, share ideas and mentor those willing to listen. We live in the best time in history with advanced medical care, abundant food, opportunity and we fall behind on basics of learning to live smart on less and save for tomorrow. I always remember the story my Mom used to tell my brother and I about the grasshopper and the ant. If you have never heard it read it in Aesop Fables the Ant and the Grasshopper. There is still wisdom there!
Sorry BRAD, take you “life skill education” privilege elsewhere. I’ll continue to Tweet about about how my masters degree in Gender Equality should at minimum land me a $80K/year job with full bennies (and a 9% match 401k, like duh). After all I am great at multitasking, a super useful skill, cuz I am able to send my Tweets while watching “I am Cait” on my iPad.
So why don’t you stop discriminating against me and my ilk.
PS vote Hillary!
I don’t quite follow where this rant is going, but you’re barking up the wrong tree. What I wrote was no attack on progressivism. I was simply describing how to win the game as it stands now.
I wish we had cheaper education and higher wages for people without highly specialized training. It used to be that you could study English or the Arts for the sole purpose of being an educated person, and make enough money (in a perhaps unrelated job) to pay as you went and at least support yourself afterward. Stay at home housewives would, as recently as the 50s-60s. We would all be better off – more enlightened, certainly better critical thinkers. How would that change our country?
Although I’m amused that this sarcastic agreement with me was made toward a potential Hillary voter and member of the LGBT community. I wonder if this alters the stereotypes in your mind any.
I didn’t read the original article, but if he actually counted 18-23yos in this data then there is a bit of sensationalism to be noticed.
Also GE, while I think your first two points in regards to where we went wrong are correct, they also completely miss the point. Millenials have overwhelming supported immigration and ‘diversity’, which are direct, natural consequences of increased globalization. You can’t simply separate the economy from the people that make it up.
Additonally, while you seem to have libertarian leanings, millenials, and young people in general, overwhelming vote for the Democratic party based on issues that make little long-term fiscal policy sense (Repubs aren’t much better, but at least their fiscal policies tend to have some basis in reality). Millenials as a whole are dominated by ‘the feels’ and pleas to emotional issues, and don’t give two shits about the general economy.
Sometimes when you’re looking through glass you forget which side of it you’re on.
The conservative mindset is just as influenced by emotion – this one, largely fear. The unknown, change. Distrust of people who aren’t like you. Fear of losing autonomy. Anything about guns or abortion, my gosh. This is the most fervently religious block, mind you. Let’s not lay any claims.
And concerning the economy, I don’t find rampant deregulation that sound (2008 called). Or facilitating the widening of the wealth gap systematically. Or putting the damper on social insurance but not the military.
Just a difference of perspective, and opinion.
I think that you and I would be friends offline, if you were willing to be friends with somebody a little slower and less wise than you. I admire each of your responses herein. Thanks for sharing.
Great article. As a millennial myself, I can see how many of these facts and contributing factors are true. We need to turn this decline around and spread the word among our peers.
Great post. Also a millenial myself, it’s sad to see the current situation and sad to see that the majority of millenials are not doing much to mitigate it. I think focusing on our personal gains would be the easiest and most effective. And so I preach it a lot to anyone who would listen, haha–“Automate your finances! Don’t buy that crap! Invest!” There’s a lot of excuses getting thrown around though. Oh well.
Not to mention, a disproportionate number (38%) of millenials are employed as freelancers and independent contractors as part of the gig 1099 economy. In the case of a recession or economic downturn, the first to be stuck without work and pay are the non-permanent employees including the large number of freelance and consultant millennials.
Aren’t Millennials one of the demographics with the lowest turn out in elections? I would ignore them too if I was a politician. It seems like our generation does love a good protest, but perhaps before making up a sign with a kitchy phrase on it start having conversations with your nonvoting friends and get them to understand voting matters.
I think perhaps the real reason voting is so challenging is none of the parties support what we want. An environment we can actually raise kids, politics that stay out of our personal lives (both sides are equally guilty) and job opportunities to get ahead. Who the fuck actually thinks kids shouldn’t get an education if they want one? Rich people. Unless it is their own kids…
The problem I see is with most of the millennial generation being lazy entitled kids… I speak for myself who is also a millennial and I look around at my colleagues, peers, and friends and can only think to myself WHERE DID THEY GO SO WRONG???
I went thru the exact same situation all of them did and followed the process/steps as defined by the greater majority of society and here I am doing VERY well off compared to the averaged so to speak…
I am a home owner who was very challenged in a housing market that went into turmoil right after I got in… but I adapted to circumstances and battled to get back on top…
I am on the path to being much better of than my parent who are doing just fine as well…
I’ve only met 1 or 2 millennials in my life who don’t have their head stuck in the sand and oblivious to how their lack of contribution to society is messing up a generations old system…
Great to bring light to it… but I’m in the same era and I’m doing just fine and I haven’t done anything crazy to get here or had any thing given to me… I worked for it and got to where I am today!
What is your control? Do you fine people in your parents’ generation to be much more aware?
On a similar note, I wonder at what things looked like for the last generation a generation ago. Sometimes people just get older and wiser. I’d be curious to learn…
Millennials have had it hard but I think they’re a resilient group of people who will find a way to make more money, save more money and eventually get their foot on the property ladder. The list you have is inspirational and Millennials can mitigate the odds by putting frugality in the front of their mind. Great post, thanks for sharing.
I tend to think that it doesn’t matter the generation your born into, its the choices you make when you become an adult. IF you have it hard then you didn’t work on building skills, if you have too easy, then you didn’t try hard enough. I agree we have to set our own path.
A lot of this is the sad state of affairs for the newer generation, but your outlook on it is really inspiring.
I have just began reading into personal finance to try and start a journey into financial security for the future – you can create your own path somewhat!
Yay debt…my net worth is somewhere around -$30,000. I paid about 28k a year for IN-state institution to earn a B.A in Economics. What is worth it? From my current vantage point, definitely not, but time will tell. I hope student debt is the next “bubble to burst” because college educations are wildly overvalued. It seems Federal subsidies only motivate colleges/universities to keep tuition costs rising. Sad that even sitting at 30k in debt I should probably consider myself lucky.