Tuesday, June 13, 2017
Will Millennials Become Wage Serfs?
In recent weeks, I have read several articles discussing how Millennials (those born from 1977-1995. Different demographers use varying time spans so I stuck with the Nielsen Media Research dates) may often become wage serfs. Amazingly, two people e-mailed me in the past few weeks and described the fate of some Millennials as Medieval serfs.
If you remember from grade school or a course in western civilization a Medieval serf led a pretty sorry existence. They were essentially peasant farmers who worked part time on their master’s land and, in exchange for their labors, they would get to use part of their master's land to grow their own food. It was a life with virtually no ability to rise. In your entire life, you may never stray more than a few miles from your master’s holdings.
Why are both pundits and my correspondents making such a harsh judgement? To me, it stems from an idea that most of us Americans have believed for a few hundred years. The idea is that each succeeding generation is better off than the one that preceded it. The “better off” is not just financial. It can mean education, sophistication, a healthier lifestyle or leading a life that matters.
The Great Recession of 2008-2009 had a profound effect on many Millennials. A number of observers have commented that it did long term economic and social damage to that youthful demographic. Some have said that this generation is rootless--many do not want to own homes or have allegiance to their employer. I do not see it that way. The issue to me appears to be economic hardship and fewer opportunities.
Here are a few Millennial factoids that I hope make my point:
--Seven out of ten students have borrowed for college. On balance, many people say that borrowing gives many an opportunity for a good education that they may not otherwise have. True, but student debt by definition has to slow economic growth. Many have a six figure millstone around their neck when they graduate and, unless they get in to a high paid field such as medicine or finance, they may be paying off the debt for 20 years. Go to graduate school and the meter really runs wild. Interestingly, many would be better off to attend a state school, work part time and finish in six years rather than four but few seem to want to go this route.
--Some 82% of Millennials say that they want to be home owners. Why are they not buying homes in great numbers in their late 20’s? They cannot afford it! Many are saddled with high levels of student debt and others live in wildly expensive cities. Right now, 22-35 year olds are paying as much as 45% of their salaries for apartments in cities including Los Angeles, San Francisco, New York or Miami. Others in the heartland are much lower. I remember that decades ago when I made my way in the world, rental agents would not write a lease if the monthly tab was more than 28% of your salary. So, how can Millennials save up for a downpayment when they are literally struggling to meet their monthly rent?
--The U.S. Census Bureau reports that people in the Millennial age bracket earn $2,000 less in REAL TERMS than they did in 1980.
--The Federal Reserve Bank of NY finds that for recent college graduates wages have only risen 1.6% in the last 25 years when adjusted for inflation. Put student debt and rising rents or housing costs and these youngsters face an uphill battle for achieving financial freedom.
--The Huffington Post reported that in 1990, those who took college loans only borrowed 28.6% of first year income. By 2015, the average loan is the equivalent of 78.3% of first year earnings and some owe much, much more with students loans now totally a staggering $1.3 trillion.
--The financial return on education is dropping. This may simply be the result of college tuitions wildly outstripping inflation.
So, while describing these fine young people as wage serfs offends me, I can see how many people who lack my optimism would come to that conclusion. Also, why did Bernie Sanders appeal to so many Millennials in the 2016 primaries? It is pretty simple to me. He promised free college education and universal medical care. Were I 22 years old, I can see why that might be appealing!
Are Millennials doomed to be 21st century serfs? I hope not. Yet, as logarithms gobble up more and more jobs and technology marches forward, young Americans are really going to need to differentiate themselves in the labor pool to keep the American dream of upward mobility with each generation alive.
If you would like to contact Don Cole directly, you may reach him at email@example.com or leave a message on the blog.