Millennials Stuck in Their Lifestyle-Choices Rut
If there's any truth to their "left behind" struggles, it's largely the result of their own choices.
A recent article in The Wall Street Journal paints a very bleak picture for the long-term future of Millennials. Entitled “Millennials Near Middle Age in Crisis,” the article claims the Millennial generation is “in worse financial shape than every living generation ahead of them, lagging behind baby boomers and Generation X despite a decade of economic growth and falling unemployment.”
To prove this thesis, the article outlines a litany of demographic data, showing this generation has less accumulated wealth and property, lower marriage rates, and fewer children than previous generations, despite being the most educated (some may say indoctrinated) generation in American history. This is especially frightening as the social safety-net programs hurtle toward insolvency.
So why the disconnect?
According to Federal Reserve economist Christopher Kurz, Millennials had an average net worth of $92,000 in 2016, which, adjusted for inflation, is about 40% less at the same point in their adulthood than Gen X-ers, and 20% less than Baby Boomers. Millennial men who are heads of households also have wage rates 18% lower than Generation X, and 27% less than Baby Boomers.
Part of this discrepancy, according to the article, is that Millennials were entering the workforce during the 2007-2009 recession, and historically, workers entering the workforce during economic downtimes have lower lifetime earnings.
Other factors included high student-loan balances, impacting their ability to purchase homes, contribute to retirement savings, etc. At a time when the stock market continues to perform at historic highs, and the housing market is booming, this is devastating.
Yet even this does not tell the whole story.
Tugging at our heart-strings to underline the desperate situation of Millennials, the WSJ tells the story of Joseph Cochran, a real-estate manager, and Tasha Brown (age 36), a consumer-finance attorney, who decided to delay marriage because their combined salaries as a married couple would drive up the payments on the eye-popping $377,000 they owe in student loans. Instead, though not legally married, they are living together, wear wedding rings, and she has changed her last name to Cochran.
We then learn the Cochrans, having struggled to get pregnant, chose to move from Philadelphia to Maryland, because Maryland’s state health insurance mandates include coverage for in vitro fertilization. As a result, they now have a three-year-old son.
In this case, the Cochrans moved to another state specifically so they could get someone else to pay for the cost of their fertility treatments. The story also notes that Tasha has a 17-year-old daughter from a previous relationship, implying that she had the child out of wedlock as a teenager herself. And though there are many community and state colleges that provide more affordable education, the $377,000 in student-loan debt seems to indicate that the Cochrans chose to attend elite schools that carry an elite price tag, and now they are struggling to repay the debt. Each of these decisions came with a price.
A Gallup poll last year found that Millennials are the only generation favoring socialism over capitalism, an economic model that ignores the truism of French economist Frederic Bastiat, who warned, “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.”
And therein lies the real story.
The problem for Millennials is not that their circumstances are more dire than previous generations. Indeed, one would be hard pressed to convince the generation that endured the Great Depression only to be catapulted into World War II that they struggled less than a generation that can call up an Uber on their iPhone to take them to the local Starbucks, where they sip on a $7 latte while tweeting their call for a socialist revolution to end their “oppression.”
No, more than anything, Millennials are suffering from the consequences of their own decisions.
The predicament Millennials find themselves in is the cumulative result of a series of questionable decisions. They have racked up enormous student-loan balances to pay for degrees that don’t produce salaries to justify the cost. They have shunned previous generations’ accumulation of “things” (i.e., property, wealth, hard assets) in favor of financing “experiences.” They rent high-priced apartments in upscale cities, rather than buying a home in the suburbs.
Though studies show that a married couple’s wealth is four times higher than a single person’s of the same age, Millennials significantly delay marriage far beyond previous generations, or do not marry at all. Millennials are also delaying, or foregoing, having children, and birth rates have fallen to the lowest point in 32 years, meaning fewer workers in coming decades to contribute to Social Security and other safety-net programs.
At the end of the day, Millennials are perfectly free to make these choices, but the choices come with a cost. It is disingenuous to spend years indulging your desires and seeking immediate gratification only to then lament the lost opportunities that smarter decisions, delayed gratification, and sacrifices would have brought.
With Baby Boomers retiring just as Millennials are entering their prime working years, there will be greater demand for their skills and services, driving up earnings. There are enormous opportunities to be had, but Millennials will have to shift their priorities and mindset if they are to take long-term advantage and secure their futures.