Millennials have grown up when technology has made its greatest strides. Many millennials, myself included, remember a time before cell phones became mainstream, but are the same people who couldn’t live without them today. Unlike their Gen X or Baby Boomer parents, this group has experienced a wave of technological change, globalization and economic disruption that will influence the years to come. Today, millennials are the largest group in America, consisting of 92 million people, followed by Baby Boomers and then Gen X. By definition, a millennial is an individual born between 1980 and 1999 and happens to face large student debt, meager wage growth and underemployment.
Historic Student Loan Debt
One of the largest generations in history is moving into their prime spending years. Unfortunately, the biggest difference between the spending power of a 25-year-old millennial and Baby Boomer is insurmountable student loan debt. Today, outstanding student loan debt amounts to $1.3 trillion and growing everyday. To put this in perspective, student loans were $200 billion at the beginning of the century and has grown over 6 times in the past 15 years. The average student debt for the graduating class of 2015 just surpassed $35,000, more than double where it was in 2000. The crippling aftermath has put financial constraints on millennials approaching their peak spending power.
Lack of Ownership
By extension, millennials are putting off ownership of large ticket items in favor of renting and leasing. Besides student debt, this generation has suffered from anemic wage growth. Recent graduates are seeing stagnant wages, earning the same $17 per hour as their counterparts 30 years earlier.
Furthermore, the bottom 90% has only seen real wage growth of 15% in the past 35 years, with wages of low-skilled workers actually dropping 5% in the same time frame. This normally wouldn’t be a problem, but the average home price and CPI have outpaced wage growth.
The spending power Baby Boomers had in the 90s is sharply different than it is today. For example, a $100 today would have been worth $55 at the start of 1990, while wages have not moved. Unsurprisingly, the price of big ticket items such as homes or cars have increased as well. In just the past 15 years, home prices in major cities like New York and San Francisco saw a real increase of 30.4% and 51.7%, respectively. While the real estate market has picked up in the past few years, this unfortunate trend will be detrimental down the road.
Rise of the Sharing Economy
On the other hand, the must haves of yesterday are no longer important today. In a 2015 study by Goldman Sachs, they found that 30% of millennials do not intend to purchase a car in the near future with an additional 25% feeling just as strongly. Instead, they are turning to services that provide access to goods without the burden of ownership, paving the way for the sharing economy. Millennials currently represent the fastest growing group of travelers and have flocked to Uber and Airbnb for their travel needs. Hotels and rental car companies have already begun to feel the effects and will need to adapt soon before all is lost.
The Freelance Economy
In the past 10 years we have seen the emergence of the sharing economy, and also the freelance or gig economy. Millenials have embraced freelance work for its flexibility that traditional careers do not provide. The rapid growth of the freelance economy has encouraged the development of co-working spaces like WeWork. The company, now valued over $10 billion, provide freelancers with a space to work and congregate. However, not all workers pursue this by choice and are often subjected to freelancing by virtue of economic necessity. Despite being the most educated generation, millennials have been subject to underemployment over the past 10 years, leading to the rise of freelance work
The biggest difference between millennials and Baby Boomers are their stance on important social issues. In the past it was normal to be married, own a home and have a newborn by the age of 25. Nowadays, a typical 25-year-old is single, living with their parents, and working a menial job in pursuit of a graduate degree. Millennials are postponing important life decisions such as marriage and children until their 30s, perhaps for financial reasons.
Meanwhile, this is the first generation to have access to social media from high school through their 20s. Outlets like Facebook (FB), Twitter (TWTR) and Instagram have become important mechanisms in the decision-making process. Since everything is reviewed online, America’s youth typically won’t make an important decision without consulting social media or the internet. As a result, companies have focused on increasing their web presence through effective marketing or social campaigns. A single poor internet review is enough to bring a company down or at least cause controversy.
Depending how you look at it, there is no better time in history to be a 25-year-old than today. Between smartphones, social media and the internet, millennials have all the information they need at a moment’s notice. However, it is all not all rainbows and unicorns. Millennials are coming into their peak spending years working menial jobs, living with their parents and saving nothing while trying to reconcile their insurmountable student debt.
As these trends continue, we may begin to see demand for big ticket items like houses and cars significantly tail off. Moreover, advances in modern medicine and the depletion of Social Security, have millennials believing retirement will be closer to 70 than 60. The impact this has down the road is impossible to predict, but so far millennials and the technological revolution have sent shockwaves through the global economy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Oyekan O. Damiloju