Stolen Life
| June 21, 2012 | Posted by Roshawn Watson under Uncategorized |
Photo By: Nisha A
By: Roshawn Watson
Increasingly, retailers, movie studios, and home improvement chains have been whining about Generation Y. “Generation Y won’t go to the movies.” “Generation Y won’t buy our [overpriced] labels.” Generation Y “is to blame for our crappy sales.” Huh?!?
First, the notion that businesses feel entitled to the Millennials’ money is borderline comical. Calling them “Generation Y Bother” because of slumping sales is not only unnecessary, it is missing a key point: many members of Generation Y are frugal out of necessity. Traditional rites of passage have been deferred if not forsaken altogether. While there are more opportunities to be prosperous than ever before, there are also more competition and challenging economic realities that cannot be ignored. If anyone has been slighted recently, it is Generation Y. For many, the lifestyles that were promised when they began their journeys have been “stolen.” Here are some reasons to cut Generation Y some slack.
Related Article: Economist Blame ME for the Slow Recovery
Generation Y is Indebted
The balance sheets of many 18 to 34 year olds suck. According to the Pew Research Center, households led by those younger than 35 had 68% less inflation-adjusted wealth than households headed by the same demographics in 1984.1 That’s right, net worth regressed big time, and I bet you can guess why: debt (particularly student loan debt). Too often, we promote education without any regards for costs. Well those costs have increased far more than American incomes. According to the Economist, the “median household income has grown by a factor of 6.5 in the past 40 years, but the cost of attending a state college has increased by a factor of 15 for in-state students and 24 for out-of-state students.” Many students make up the difference with student loans. As recently as 1996, the average student loan debt was $17,000, but now it tops $25,000 for a bachelor’s degree. Generation Y also has credit card debt, as 20% report balances over $10,000.
The implications of this debt are enormous! First, the debt dramatically decreases quality of life. It adds stress to relationships, and financial problems are among the top cited causes of divorce. Interestingly, the Pew Research Center indicates that 20% of 18-to-34-year olds have reported delaying marriage and 22% have reported delaying having children for financial reasons. Parents are increasingly being affected as well. Some parents are even delaying their own retirements because they cosigned student loans for their children. Additionally, a whopping 24% of graduates move back into their parents home at least once, hence the phrase the “Boomerang Generation.” Unfortunately, many graduates end up keeping their student loans for a very long time. Even President Obama, 50 years old, only paid off his student loans 8 years ago. Bankruptcy doesn’t offer reprieve from student loans either, as meeting the hardship criteria required to include student loans in a bankruptcy is tremendously difficult.
If Generation Y is trying to climb out of their sizable financial holes, why would businesses reasonably expect them to rush to purchase mediocre or overpriced products and services?
Related Article: Student Loan Debt Destroying Quality of Life
Generation Y is Out of Work
Increasingly, Millennials are having tough times achieving the same lifestyles that they grew accustomed to growing up. Many expected to instantly duplicate the standards of living that their parents took years to acquire. However, the “Great” Recession has eroded Generation Y’s disposable income, so money for eating out, buying new clothes, and pursuing hobbies is often tight.
One reason for this is that the job market has not been particularly kind to Generation Y. Even if they secured good jobs, their limited experience placed Millennials in precarious positions: “last one hired, first one fired.” Generation Y is one of the groups affected most disproportionately by unemployment. National unemployment is 8.2% (Bureau of Labor Statistics) as of May, but the employment of those between 18-24 year olds is only 54% (the lowest since data starting being compiled in 1948). Moreover, 49% of 18-34 year olds say they have taken jobs that they didn’t want just to pay the bills. Imagine enrolling in school with the understanding that the market was “hot” for people with your educational background, only to discover that upon graduation the market had cooled significantly. That’s certainly the case for many recent graduates today. For example, thousands of law school graduates are unemployed and stuck with large student loan debts (average debt for law students was $68,827 for public schools and $106,000 for private schools). They are finding the job market challenging because 15,000 attorney and legal-staff jobs at large firms have vanquished since 2008.
To accommodate the demand, employers are increasingly embracing alternative work models, including hiring independent contractors to fulfill roles previously occupied by traditional employees, shifting to result-oriented work environments (get paid for results instead of the time that you put in), and creating “lower-level” positions that strip away the pay and prestige enjoyed by your colleagues. Whereas many before you got nice jobs immediately after completing school, you are now expected to do unpaid or low-paying internships and grueling postdocs to gain more experience or are simply turned away entirely. For example, to address the glut of attorneys mentioned above, some of the biggest law firms have created a second tier of attorneys, who make half of what traditional legal associates do and will NEVER make partner. Similarly, universities are increasingly hiring PhDs as postdocs or instructors rather than tenure-track faculty. What normal person spends freely when her purchasing power is so limited?
Generation Y is Fearful
Generation Y has certainly endured perhaps more than its fair share of market volatility. No, it was not as bad as the “Great” Depression, but mentally the “Great” Recession has really impacted the buying, saving, and investing habits of Generation Y. As we previously discussed, young people are avoiding investing in record numbers. “Lehman Brothers, GM, AIG, Chrysler, and the collapses or bankruptcies of many other known businesses; a dip in the stock market by 38%; and home prices in the toilet all form the basis for recent resistance to investing. According to a recent study by Wells Fargo, twenty-somethings are more likely to save for retirement in CDs rather than investing in stock than any age group.”
Related Article: Young People Avoiding Investing in Record Numbers
Thus, some have emerged from the “Great” Recession decidedly more frugal and risk adverse. This occurs after significant economic downturns. Generation Y reasonably has trepidation with parting with its money. They distrust a system that has seemingly failed many of them.
Final Thoughts
Businesses criticizing Generation Y need to place themselves in Generation Y’s shoes instead of trying to place Generation Y into theirs. Everything does not revolve around their next quarter or their brand. If you build it, they will come” is not a self-sustaining business model. Many members of Generation Y are trying to reclaim some normalcy in their finances, make names for themselves professionally, and eschew unnecessary expenses until they work within their budgets. The last thing they need is for entitled businesses shaking their sanctimonious fingers at them saying that their frugality is hurting the economy. Get a grip, and build businesses that aren’t dependent on the whims of those who are least likely able to afford goods and services. Don’t blame young consumers for businesses’ lack of innovation, desirability, or wow.
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Image Credit: Nisha A
1By comparison, the average American household had a 10% increase in net worth during the same time.
I haven't heard of businesses actually criticizing them but I agree with the problems that you mention here as barriers to spending. Maybe the businesses complaining about them should hire more of them 🙂
Mike, I wish I was making this stuff 🙁 I think I have just had it up to here with all the negativity spewing out about Generation Y, but you have a fabulous proposition. Give them more jobs (a short-term investment in their personal economies), and see how much more willing they are to spend. Thanks for the comment!
I am sad when I hear anyone criticize Gen Y for being entitled, etc. So much judgement. But anyway, I never thought I'd be like that – with debt and no job, etc – but I do have quite a bit of debt ( lots of it is student debt, but still) and while I do have a good job I know lots of my peers struggling to find one.
Daisy, yes I do think people are too judgmental. Yes, there are opportunities. I love focusing on those. I occasionally feel obligated to focus on the challenges. Fortunately, you do have a good job and can be a great role model to your friends and inspire thousands through your blog.
I may be the "elephant in the corner" but I took a year off after high school and saved every penny I made, went to community college for 2 years, worked and went to U. of Md. (public college) for 2 years while working 20 hours/week , went to graduate school working using assistantships. I also had the G.I. bill. I got an A.A. degree in Business Administration and a graduate degree in Economics. I had no student debt when I graduated. Within 10 years of graduation I was in the top 1% in earnings.
I believe I could do the same exact thing tomorrow if I was 18 years old. People have choices.
Sad to say I believe parents are a bit of a culprit. They want to brag that their kids are going to a hoity-toity school.
Very interesting comment. It definitely made me think! Although I graduated from professional school with student loan debt, I was able to eliminate mine while in graduate school. My wife did the same, so we became completely debt free and have multiple degrees; it didn't take that long. Our professions pay well. Yes, it can be done. There are still plenty of opportunities just as you say.
I'm all for personal responsibility too, so we're in agreement. I think all I am doing with "Stolen Life" is saying that Generation Y may have some challenges that perhaps Generation X and the Baby Boomers did not. Since there are always going to be roadblocks with any generation, I'm not saying that tough times are exclusive to Generation Y, but I do think seeing things from their perspective helps explain why they are not anxious to go out and buy the latest products and services.
Perhaps I am reading too much into your comment, but I feel like you are suggesting that someone (parents and possibly even society at large) have filled the heads of young people with counterproductive ideas about how to succeed. If that's where you are going, I really believe that wholeheartedly. BTW, I think your plan for going to school debt free is awesome. I'm completely with you.
I have to respond to this. You entered the workforce over 12 years ago. The difference between people who entered the work force in 2005 and those who entered (or tried to enter) in 2009 is huge. It's just not the same; even when there's only a difference of four years.
I didn't know that Generation Y had all these difficulties! My generation (Baby Boomers) are only targeted for long term care insurance, medicare, funeral arrangements and other end of life details. We are ignored when it comes to entertainment because we no longer spend money. The funny thing is my friends and I spend a lot of money on vacations and othe discretionary things. It is their loss!
Oh, those options are too depressing. I agree with you that businesses are missing out on a lot of sales if they don't make products for Baby Boomers, but I guess that not what you said. You said that they don't target ads towards your generation, which is different. I've been reading that your generation is less susceptible to ads and has a stronger sense of brand loyalty. Although this isn't a justification, but perhaps businesses think that your generation impervious to advertising for these products (for the most part). In some ways, I guess that could be a compliment rather than a diss: they don't feel capable of changing your spending habits. IDK, but it is just a thought!
I am curious to know how susceptible to ads are Gen Yers are thought to be. Things like On Demand and DVR largely allow us to watch tv without the ads (and many of us have dumped tv altogether). I've read that internet ads "don't work" – this is where I get advertised to 99% of the time. I see a movement back to local small businesses and (at least on the surface) a disdain for consumerism. Or am I actually in the minority? What I also see is that my grandparents continue to soak in all the television, newspaper and magazine ads and modify their spending habits in response while my peers generally just remain cynical.
Hi Bak,
I think increasingly advertisers are moving towards more authentic feeling ads. Generation Y appears to prefer grassroots efforts. I think Karen Klien whopping $650,000 in donations thanks to a Generation Yer named Max over the course of the last week proves the point. Also, the popularity of movies such as paranormal activity, and even to a certain extent the Blair Witch project demonstrates that it is not about advertising dollars or even gloss. It is all about the message. In this age, there can be a conversation with Brands rather than a unilateral dissemination of a message. That matters big time. I don't think we should be cynical. The models are changing, but there are still plenty of ways to get the dollars even out of Generation Y's pockets :-), provided that you make products that they want (i.e., Apple)
Thanks for your comment.
Interesting point of view as usual Roshawn! Generation Y have the misfortune of coming face to face with the Great Recession at the start of their working careers. Actually, other generations before Y should thank their lucky stars for already establishing themselves and building some savings. I liked your thought of putting yourself in other people's shoes. People won't be so quick to judge when the tables are turned.
Hey Buck! Thanks so much Buck!!!! You are right… it is a very weird situation to be in. Some of Generation Y strived in the recessionary environment whereas others didn't fair so well. Sure, we many people could have made other choices, but I think the recession (surprisingly) caught a lot of people with their pants down. With regards to being empathetic, I think it is very important. It's hard, but there is much value in treating others like you would want to be treated.
Would it be totally cliche if I blamed the generation before? My parents taught me nothing about finances. Jeff's parents taught him nothing about finances. I hope to teach my kids what I had to find out the hard way. My boys, age 11 and 8, each have their own savings account and we discuss money and what's going on in their accounts often. Yes, I take partial responsibility myself, but mostly…it's my parents fault!!! 😉
Btw, I'm super proud of being in the 20% of gen y'ers carrying $10,000 of credit card debt or more…yay?
-M
M, you are too much! All I can say is the old joke "if parents don't give you at least 1 therapy session, they haven't done their job right." Seriously, sometimes the gift that we get from parents are learning the things not to do.
I have been lucky as part of generation Y and had a good job right out of college. I am still scared of the economy though and save a ton of money. I do invest aggressively in my retirement despite my generation's aversion to risk but spending money frivolously is hard for me.
Hi Lance,
I can understand where you are coming from. I didn't realize the situation that Generation Y was in and feel very blessed now that I have a better feel for their predicament. I guess I am happy to bring awareness to the plight of Generation Y.
With regards to your position, I feel where you are coming from and have a VERY similar pattern of handling our money. I totally get it.
Great article, two comments.
I am interested in what mark this leaves on the generation, as in how it impacts the remainder of our lives? For example, look at the spending habits and values of those who lived through the Great Depression. There are signs of a paradigm shift emerging from the debt fueled past.
Second, consider the inter-generational relationship in terms of government spending. Over the coming decades, the situation will be “You (the older generations) created these entitlement programs, you didn’t fund them, and -guess what- we aren’t going to fund them either.” How this all works out promises to be interesting.
Thanks Evan and welcome!
Issue 1: I agree with you that there will be a generational scar from this. I wonder how it will manifest in the next generation too. Part of the Baby Boomers' more free spending habits were directly attributable to seeing their parents being so tight, so I see where you are coming from here.
Issue 2: I think too many of these unfunded or partially-funded liabilities are unsustainable in their current forms. They definitely need to be revisited and modified to give them longevity or the axe. I don't know where we go from here, but we obviously cannot continue doing what we are doing. At some point, someone is going to have to pay for this "excess," and it doesn't appear like it is going to be the people who mostly benefited from it.
I am SO thankful that my parents didn't co-sign on my student loans, although they have helped me pay for them (when they can – and only if they've already fully funded their own IRAs for the year!). I definitely agree with the idea that generations tend to alternate, and when it comes to money at least, I have far more in common with my grandmother's frugality (extreme though it may be) than my parents' spendthrift ways.
Elizabeth, I understand where you are coming from. I'm glad that my family did not cosign for me either. I'm happy you took after your grandmother as well 🙂 It is very cool for you to be looking out for your parents' financial well-being!
It seems a lot harder for young people to start out now. I got out of school with no debt, but my younger brother had about 80k and he's been paying it down since. He's down to 37k and those are at 3% so it's not as urgent anymore.
You can read a bit here on his guest post. http://retireby40.org/2012/06/student-loans/
Hey Joe, Thanks for sharing. I hope my younger brother can avoid debt altogether. If not, I am certainly watching him work his behind off to decrease the amount he takes out. I'm very proud of his efforts!
I wasn't the typical case either I guess. I worked full time while going to university in the evenings. I saved any cash I made that I could and I lived off the rest. I have a lot more work experience than my peers because I started working at a young age and have worked hard to make a name for myself. I have never felt entitled. I have always had to work hard to get where I need to be.
Miss T,
I always found the older students to be so mature compared to the rest of the bunch, even though there were not many years in between the older students and the younger ones. It's amazing how much perspective one gains by experiencing a little bit of life. Thanks for your comment.
There is an old movie quote that I never forgot. When I was in high school, I saw this film in which a young Ferrari driver said post secondary education is "four years of spending instead of four years of making."
After I graduated high school, I looked for a college or university path in which my opportunities were guaranteed (no guarantee of success; just guarantee of opportunity). Of course, there weren't any guarantees, and I thought that was a bad deal. I felt that schools weren't living up to their obligation to provide me with a solid path, so I declined the deal. When my peers signed up for college and university, I openly questioned their competence — it's a bad deal and they should know better.
Instead, I started a business. In just a few short years, my net worth went through the roof. I can now buy and sell my peers 30 times over. College is severely overrated.
Wow Jon! What a powerful testimony. I LOVE IT. I think people miss it. They assume that the old dogma must be true; after all, what else is there. Thus, many of the best minds, we lose. I have no problem with traditional work; however, I think people should be more mindful of their opportunities so that they don't miss out on a 30:1 opportunity like you took advantage of. Cheers!
Great assessment of the situation! Being a member of Generation Y, I feel as though there are huge hurdles ahead of us (most of which you already mentioned) that previous generations never had to deal with. But the thought of marketers feeling entitled to our consumerism is hilarious – why is it a given that we HAVE to spend money? I think the Information Age has given us a unique set of tools that many generations never had before where we can find things for cheap, read reviews before we buy, and ban together in an effort to not buy anything at all. I put it on marketing for not keeping up with the times …
Thanks MMD,
Yes, I definitely am compassionate. I see what my brother went through. I have been fortunate, but I definitely feel or have felt some of the same pain that I described above. I am glad that you found humor in the advertisers. When I first read their attitude of entitlement to our dollars, I was indignant. "How dare day." I guess everyone wants to keep plugging away with the "old" system. Unfortunately, they are oblivious to the impact that some of the rapidly changing preferences and technology that you highlight will ultimately have on their business. doing business as usual is NOT even an option in some cases.
Excellent post. I fear that college has been oversold. Far too many millennials believe it is a guarantee…a right if you will … of an easy life with a high paying job. Life is not free, nor easy.
Thanks so much Thad!!! Yes, I have noticed the entitlement too. It would be comical if it wasn't so sad. It is very unappealing.
[…] Watson @ Watson Inc writes Stolen Life – If anyone has been slighted recently, it is Generation Y. For many, the lifestyles that […]