A number of years back, demographers tagged those born between 1981 and 1996 as a generation that they called Millenninals. When any new generation is defined, most of us have high hopes for them. Millennials were particularly interesting as they grew up with digital technologies and had little or no fear of them. The thought among many of us is that they could blaze a trail faster and better than those of us born decades before. Some of them did. Many of them, however, got hit by two financial crises that have put their long term prospects in jeopardy.
The first crisis was The Great Recession of 2008-2009. Unemployment jumped from about 4.8% to 10.8%. Detailed studies from major institutions have shown that if you begin your career during a recession your earning power may be stalled for a decade or more and you may never catch up with those somewhat older than you. Adding fuel to the fire was that companies could be stingy with raises given the low or no inflation environment coming out of 2008-2009. Once burned Millennials knew the importance of steady employment and were often timid about pushing for higher pay. Prior to the Great Recession, home ownership in the U.S. hit an all time high of about 68%. During the recession, it fell to about 60% and has never returned to the pre-crisis high. Why? Well, Millennials were not as confident as previous generations and also could not save enough to put down a 25% down payment on their first homes. Also, the average student loan debt was at $36,000— a huge millstone around a young person’s neck. You could declare personal bankruptcy but you still owed on your student debt.
In recent years, many Millennials dug themselves out of their financial holes. Things were looking up. All that changed this spring when Covid 19, a once in a hundred year event, hit the global economy hard. Many who lost their jobs in 2008 are again unemployed. Yes, government had provided a safety net for many although further help is in limbo as I write. Many Millennials have to be discouraged. Looking at every net worth statistic that I could find (and I love to dig), Millennials are behind previous generations in terms of net worth at the same age.
Yes, the stock market has rallied back smartly from the March lows so many of us are whole again financially but remember, some 50% of those 55+ have NOTHING saved for retirement so the current spike in equity prices has not affected them at all. Even Millennials who dutifully contributed to their 401k or 403b plans are behind many slightly older Americans. Also, if you are unemployed you are no longer building wealth via contributions to retirement plans and you likely are tapping what you did have to cover living expenses.
I vividly remember reading Malcolm Gladwell’s first two books, OUTLIERS in 2008 and THE TIPPING POINT in 2010. He alluded to that when you are born has more of an influence on your success in life and your attitudes than you might think. As a Canadian, he gave an example of how junior hockey leagues put small fry born on January first in the same group as those born in late December. The January kids tend to be bigger, stronger, and more coordinated and get more attention and often how more success than those born late in the year.
I think of my own life as an early baby boomer. Yes, I had to worry about Vietnam and the deep recession of 1974 when entering the job market but the booming 80’s and roaring 90’s more than leveled the playing field for me and my contemporaries who took their work seriously. Certainly, there will be a few million Millennials who will shrug off the Covid 19 deep recession and be great success stories. Realistically, however, I fear that there may well be several million more who will be left behind.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.
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