Monday, August 3, 2015

Times are Tough for Today's Millennials (ages 25-34) ... Unfortunately, They are Likely to Stay That Way

We American oldsters and baby boomers all owe a huge debt of gratitude to prior generations for the land of opportunity that we inherited free of charge. We now have the chance to 'pay it forward' and do something similar for future generations.

Those of us who were fortunate to follow the 'Greatest Generation' that won the peace by defeating the Nazis and Japanese in World War II were handed, and at no cost, the blessings of freedom, prosperity, peace and a bountiful economy with plenty of high paying jobs.

And while things haven't always worked out for many of us, compared to today's millennials (ages 25-34) and other younger Americans, all things considered, we indeed are the 'luckiest generation.'

We're Making Life Too Hard for Millennials draws the appropriate generational comparisons and tells a story that needs to be shared:

"{Millennials (ages 25-34) should} be fretful over their economic well-being and fearful — oh so fearful — for their prospects. The most educated generation in history is on track to becoming less prosperous, at least financially, than its predecessors.       

Earning Much Less, Despite More Education

Change, from previous decade, in median earnings of 18- to 34-year-olds. Figures in 2013 dollars.
Percent with bachelor’s degree or higher among 18- to 34-year-olds.
They are faced with a slow economy, high unemployment, stagnant wages and student loans that constrict their ability both to maintain a reasonable lifestyle and to save for the future.

Longer term, rising federal debt payments and increased spending on Social Security and Medicare will inflict a tremendous financial burden on them, threatening their own prospect of receiving promised retirement benefits.

To a considerable extent, that’s the fault of my generation, the baby boomers. We were the children of the Greatest Generation, but we may also be the most irresponsible generation....

Americans between 18 and 34 are earning less today (after adjustment for inflation) than the same age group did in the past. . . . Still more striking is that millennials have endured falling earnings even though they have attended college in record numbers.

Millennials who didn’t attend college have found their wages particularly squeezed, perhaps because of the decline of middle-skilled jobs in sectors like manufacturing, a clear consequence of globalization.

The wealth of millennials has been hit even harder than their incomes. Their median net worth was just $10,400 as of 2013, down 43 percent from the $18,200 that Gen Xers had in 1995 when they were under 35. With incomes squeezed, millennials are not only not saving much; they are dipping into whatever savings they do have.

That’s worrisome when combined with weak incomes and low net worths. Millennials also participate less frequently in 401(k) plans and, scarred by the recession, invest less and keep more than half their money in cash — not a great long-term strategy.

Another huge drag on the finances of younger Americans is the mountain of student debt that has been piled up in recent years. Members of this year’s graduating class left their campuses owing an average of $35,051, about twice the levels borne by their counterparts two decades earlier (after adjusting for inflation).        

Tuition Races Upward, Debt Mounts

Change in prices, 1993-2015
Percent of bachelor’s degree recipients with college debt upon graduation.
The most indebted 10 percent of those with bachelor’s degrees owed $54,984 or more
at graduation.
Median bachelor’s debt:
In 2012 dollars.

That’s in large part because college is becoming less affordable even as it has become increasingly necessary. Since 1993, average tuition has risen by 234 percent, far above the 63 percent overall inflation rate.
Saddled with debt and thin paychecks, millennials are delaying purchasing cars and new homes, low mortgage rates notwithstanding. By June of this year, homeownership among Americans under 35 fell to 34.8 percent, down from a high of 43.6 percent in 2004.        

Fewer Young Homeowners as Rents Rise

Average rent in the 50 largest metro areas is approaching its 2000 peak.
The portion of those under 35 purchasing homes reached its lowest point this year since the census began tracking it in 1994.
In 2014 dollars.

Some of this may be cultural — younger Americans seem less interested in major possessions like cars and homes. But they are also delaying marriage and having children, which I believe is an indicator of strapped finances.

Just to complete a dismal picture, millennials will also be the victims of the irresponsible fiscal policies pursued in large part by members of my generation. The massive budget deficits of recent years and projected needs to meet future obligations to retirees will result in a steady increase in federal debt . . . .

Rising national debt levels may threaten the ability of millennials to collect on promised Social Security and Medicare benefits. That’s not lost on millennials — only 45 percent expect to receive Social Security benefits during retirement (compared with 68 percent of baby boomers). . . .

We can’t completely undo the financial obstacles younger Americans face, such as their weak earnings. But we can start to put in place policies that will ease their burden. First and foremost would be to get the nation’s economy onto a stronger growth trajectory. . . .

As part of redressing this imbalance, we need to reform the entitlement programs, for example, by reducing Social Security benefits for the highest income Americans. And important steps could be taken to both ease the burden of student debt for those who have already graduated and provide less expensive college opportunities for the rising generation.

Let’s at least start with a greater acknowledgment of the plight of millennials and the role that we — in many cases, their parents — played in creating it."

Summing Up

My 'luckiest generation' entered adulthood as part of a strong, stable and vibrant growing economy. A rising tide lifted all boats.

Now it's our turn to deliver to the millennials and future generations the same kind of world leading and free market driven economy.

But for that to happen, We the People must get serious about bringing our financial situation under control.

And we must aid rather than hinder all reasonable private sector efforts to get the economy growing at a sustainable and rapid pace.

With today's sick politics and government centered culture, it won't be easy. Still, it must be done.

That's my take.

Thanks. Bob.

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