I have been going back over a piece in The Atlantic by Derek Thompson and Jordan Weissman entitled “The Cheapest Generation.” The article posits that Generation Y has different consumer values because they are “less interested” in buying homes and automobiles than prior generations.
As it so happened, I put up the first comment which earned over 1000 “likes”:
You mean the generation that paid three times as much for college to enter a job market with triple the unemployment isn’t interested in purchasing the assets of the generation who just blew an enormous housing bubble and kept it from popping through quantitative easing and out-and-out federal support? Curious.
Quite surprising to me, people in their twenties have been writing me personally to thank me for this sentence. Well…OK guys, you’re welcome! But maybe there’s a reason behind the enthusiasm for this comment – the fundamental thesis of the authors is wrong.
Let me expand – older people are falling all over themselves to explain the “unusual” behavior of these mysterious younger people who “don’t share the values of other generations” on cars, careers, babies and more. The value explanation is cargo cult science. Americans in their 20s don’t necessarily have different consumer values – they’re broke. They have been systematically impoverished, and then we pretend that they don’t want cars for some personal reason. America has a completely dysfunctional public transport system in the majority of its cities – you absolutely cannot live without a car. The reason young people aren’t buying cars is that 1) cars are expensive 2) they don’t have money.
Let’s have a look at some charts. First, youth unemployment:
It’s the worst job market for young people in thirty years – and this chart doesn’t detail the rise of McJobs with low wages and little stability that have replaced the light manufacturing jobs we shipped overseas.
Now let’s look at the student loan data, the money these kids had to borrow to deal with the rise in tuition that just happens to have tracked upward with the federal guidelines to allow people to take more money in loans.
Wow, you mean that the people taking out a combined trillion dollars in student loans don’t have the same consumer behavior as the generation that started with nearly no college loans? You don’t say.
I believe that there is an unconscious, concerted effort to create alternative explanations that keep us from having to arrive at an uncomfortable conclusion – these young people are being actively screwed out of their future, leveraged to the hilt, fully expected to start their own lives under this yoke while paying for every entitlement their parents voted for themselves. And who wants to think that way? It would mean some uncomfortable tension in the workplace and around the Thanksgiving table, n’est-ce pas? Perhaps it’s easier to think of it as different values. Because imagine a generation that becomes aware that the institutions of society exist to enrich everybody but them.
AWK-WARD, as the kids say.
Comments 13
Great post, Eric. Of course, in addition to being broke, we’ve also given this generation the worst case of PTSD since WWII. Not that they act or feel like victims (yet). No, the Boomers and some of us Gen X-ers have the corner on that market. Hope we can all work through our “inner wounds” in time to let the battle-hardened veterans of Gen-Y support us in the last days of Social Security. You’re welcome.
You need to write about the PTSD angle – it’s interesting and unexplored.
Thanks, Eric.
I’ll consider this as a follow-up to my post today on the effect Gen Y is likely to have on all of our living and working habits (you’re mentioned…please read). As for PTSD, it is likely more significant than any of us expect: 67% of all military personnel in 2008 were under 30. In 2010, 47% of them had been on two or more tours of duty (16% on three or more). With almost 1.5 MIL active duty and over 850K reservists, the impact to Gen Y appears to be significant. My greatest curiosity is the similarities and differences between the WWII vets and the current ones.
It’s interesting that you write, “Let me expand – older people are falling all over themselves to explain
the “unusual” behavior of these mysterious younger people who “don’t
share the values of other generations” on cars, careers, babies and
more.” I went to the same university as the authors of the article and we were in the same journalism program. They’re 26-27 and generally nice. Yet they’ve encountered a lot of success. I believe it’s soi-disant successful people, who haven’t felt the sting of the economy, who are tripping over themselves to explain the patterns as behavioral.
Thanks for writing in, David. First off, you get points for using the term “soi-disant.” Second, you have exposed a bit of sloppiness in my original point – I accidentally conflate the authors’ argument with all of the older people engaged in cargo cult explanations, the ones that really irk me. I know how old they are, so I should have said that the argument reminds me of older people’s theories about Gen Y. Also in the category of my sloppiness, I should probably say that their argument isn’t wrong, it’s just overly specific to certain people in a few cities. The trend about car ownership they are discussing is in fact on the rise in places like Boston, Washington DC and San Francisco. I should know – when I was in DC, my wife had one car to get to Baltimore for work, and we sold the other car in favor of using ZipCars on the days when we needed cars at the same time. But is that why Gen Y doesn’t buy cars in St Louis or Tallahassee? Nope, that trend has nothing to do with kids in second and third tier cities – it’s just plain economics. As far as buying houses? Sorry, that’s just economics. Values are being driven by the fact that home ownership is a terrible deal, not to mention infeasible.
The thing that really irks me these days is the decrepit moral scolds pounding Gen Y for “irresponsibility” for not “wanting to start families” and take their place as good little Western consumers in the suburbs. Those are the people who want their home to retain the same value as 2007 and then scratch their heads as to why young folks don’t want to play an obviously dysfunctional game. Then again, nobody ever accused Baby Boomers of excessive introspection.
What about the “Cash For Clunkers” program. I wasn’t a fan of it from the start. It took millions of good used cars and destroyed them to promote the economy of new cars. Now the used car market is still overpriced. I wonder how many years it will be before used cars are affordable. My first one was $1250. I wonder what kids today have to spend to get a decent first one?
Most of Obama’s policies were federal mandates to keep the status quo going at any cost. Also, the support of the automobile industry is a de facto payoff to older people – if GM went down, hundreds of thousands of pensions would have been renegotiated or eliminated. We took money that could have gone to non-car infrastructure, energy independence, education, science and things that would have benefited the future economy, and spent it on the old economy and former workers. Great.
Hi Eric,
Another spot on commentary! Precisely right, these kids are packing $70-100K in college loans and cant find jobs that pay over 13 dollars an hr. Just to service the debt the old rule has always been your first year salary needs to be equivalent to the loan value, and these poor kids if they are lucky and can get a job, are making 1/4 of what they need! Duh no wonder they arent buying 2 door Audis and bungalows.
Thanks for this – it is a great counterbalance to all the articles on Gen Y not “buying,” Makes tons of sense. Now, we need to discuss how to evolve the old biz and gov’t models to work with the new realities. Thanks.
I had heard this. I’ve also heard that it is easier in the US to declare bankruptcy, and there is less stigma than say the UK.
Here’s a drastic idea. What if all of the graduates declared bankruptcy? Perhaps a coordinated act of civil disobedience, maybe facilitated by some public interest lawyers. Think of it as a class action bankruptcy. It has the additional benefit of recouping some of the bank bailout funds for the public good (ie bank capital is reduced to increase education in the community).
Is there a reason why this is not possible?
There is a reason this is not possible – people tried this back in the 1970s, so the U.S. government passed legislation to make student loan debt not to subject to personal bankruptcy protection. Doctors and lawyers figured out the “declare bankruptcy” trick and would rack up and ton of student and consumer debt, then say, “Aw, damn, I’m totally bankrupt, can I start over?” and then they could start back up making $200,000 free and clear. And in 2005, American banks lobbied to make it even more difficult to discharge personal debt, even though the vast majority of those bankruptcies are due to illness or divorce. Bankruptcy ain’t what it used to be in America.
Now, as to public disobedience through non-payment, it’s the prisoners dilemma – do you go first? Does everybody come with you? Or are you hung out to dry? Remember, in the US, the Federal Government can attach your wages when it wants to collect on defaulted student loans.
That said, there needs to be a movement here to free young people from starting life with a crippling load of debt. As we can see in the automotive and housing markets, it impinges their ability to consume almost immediately.
I thought it seemed too obvious to be possible. As for the prisoners dilemma, it is not quite that bad because nobody “loses” from hanging back. Not to say the government wouldn’t be unpleasantly coercive though.
Big picture, it doesn’t seem too bright to discourage your brightest from getting the education that will propel the entire economy along. Professionals effectively cop it twice – they first pay for an education that actually benefits the whole economy, and they then pay income tax on a higher salary (assuming they get a job).
Changing tack a little, I wonder if this will lead to a generation divided between “free agent” people who never saw the sense in crippling debt, and thus are free to follow their instincts, and a whole belt of indebted graduates who pass up entrepreneurial risk taking in favour of a safe salary.
Seems you’re not the only one thinking about this:
http://www.businessweek.com/articles/2012-09-06/student-loans-debt-for-life