Submitted by Tyler Durden on 10/25/2014 20:00 -0400
When it comes to the future of the US, the biggest question mark by far is anything relating to the Millennial generation, those Americans born between 1980 and 2000, which happens to be one of the biggest generations in US history.
In fact, the largest US age cohort is currently the 23 year olds. However, Millennials are different from previous generations in many ways. For example, today’s 25-34 year olds are more likely to be minorities (40%) and a higher share of them has college degrees (35%). In addition, they are choosing different fields of study in college: while engineering was in the top five bachelors’ degrees awarded in 1980, in 2010, psychology replaced it in the top five rankings. This student debt-bubble funded college infatuation also happens to be the biggest curse of the Millennials, and as discussed a year ago, “Millennials Are Devastated As American Dream Becomes Nightmare For Most.”
Still, despite their differences, and the over $1 trillion in student debt which is making the US economic recovery virtually impossible, Millennials are in many ways like prior generations. Or rather better be if there is to be any hope of the conventional Keynesian medicine fixing a problem that may be at its core demographic (just like in Japan).
In order to get a better grasp of the wants and needs, as well as problems and liabilities of the Millennial generation, we present various extensive charts that highlight the key issues surrounding those young Americans which are gradually entering their post-college careers only to find pervasive disappointment.
First, as noted, here is the size of the Millennial generation in context:
They may be everywhere, but their job opportunities are limited, and not only in the US…
Which is also pushing the labor participation rate lower. Sorry BLS apologists: it has nothing to do with demographics and everything to do with global economic depression.
So without job opportunities, Millennials are forced to spend more and more time in a state of suspended occupational animation while hoping for better days.
Although as we noted earlier this week, record “student debt” is not just a young person problem any more: increasingly people in their 50s, 60s and 70s are crippled by loans they took out to help their professional development, which they find they simply can’t pay back.
Still, there is some hope that the college (and student debt) bubble are bursting: college admissions in the past two years have declined.
So with fewer job opportunities available to Millennials, and with virtually no wage growth to talk of (for anyone, not just the young), it is not surprising that median incomes for those in the late 20s and early 30s have stagnated, usually at the expense of those 2-3 decades older.
In fact, of all nations, America’s youth seem to be the most disadvantaged of all relative to the national average in recent years (whether Gen X and mostly the Baby Boomers are to blame is a different topic entirely.
The simplest way to show the lost income opportunity for Millennials is the following chart of median income for 25-34 year olds as a % of total:
With less disposable income, and thus fewer assets, today’s youth is finding it ever more difficult to build up a solid credit history…
… which means with less credit available, they have to save up cash for rainy days…
… and another logical outcome: fewer can afford to buy homes and start familiies, instead chosing to live in their parents’ basement…
… which assures that a Japanese style demographic collapse is just a matter of time.
It also means that the old American Dream of buying a home is increasingly impossible for most. The new American dream: renting.
To summarize the Millennial predicament: overeducated, with less disposable income and drowning in student loans. Yet like every other generation before them, they too have needs, wants and desires. In the purely materialistic realm these are the key needs as self-reported by Millennials.
The charts below summarize what they spend money on compared to all households:
Somewhat curiously, there hasn’t been a dramatic change in the distribution of household spending over the past two decades:
Still, there is a notable shift in more recent years, especially when it comes to discretionary spending and education.
They may not have much disposable income, but they do have a vocal brand preference.
And while it is unclear if today’s youth consumes fewer calories due to health reasons or simply because it can’t afford to eat as much (or simply is getting better at self-delusion when reporting consumption patterns)…
… one thing is clear: they want their cell phone…
… and their online video.
So with all that bad news, what are Millennials to do? Why drown their sorrow in booze of course. Or rather, beer: that may be all they can afford these days.
Finally, for those who want to put all this together and invest based on the above information, here is a quick snapshot from Goldman of what the bank’s preferred Millennial-inspired strategies are:
Lotsa charts.
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Not quite “all you ever wanted to know, though.
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7 Things the Middle Class Can’t Afford Anymore
Erika Rawes, The Cheat Sheet, USA Today 8 a.m. EDT October 25, 2014
During debates and speeches, politicians often bring up the financial burden that’s placed on the middle class. We talk about the middle class as though they are this singular entity, who used to thrive until they underwent persecution by the evil 1%. But, realistically speaking, the middle class and the 99% are not really synonymous. So, who are the middle class?
In its discussion of historical middle class societies, The Economist reports, “Their members are neither rich nor poor but somewhere in-between. . . . ‘Middle-class’ describes an income category but also a set of attitudes . . . An essential characteristic is the possession of a reasonable amount of discretionary income. Middle-class people do not live from hand to mouth, job to job, season to season, as the poor do.”
Some argue that the most sensible income amount to attach to the middle class would be the median household income, of around $54,000. Perhaps, anyone who earns between the 25th percentile and 75th percentile is a member of the middle class.
Diana Farrell, once Deputy Director of America’s National Economic Council, told The Economist she thinks a middle class income begins at the point where a person (or family) has one-third of their income left over for discretionary purposes after they’ve provided themselves with food and shelter. In other words, someone who earns $3,000 per month would have $1,000 left after they’ve paid their mortgage or rent, utilities, and grocery bills.
AMERICA AT WORK: States where the most people work from home
Though there is some debate over the exact income a middle class household brings in, we do have an idea of who the middle class are — most working class people. Today’s bourgeoisie is composed of laborers and skilled workers, white collar and blue collar workers, many of whom face financial challenges. Bill Maher reminded us a few months back that 50 years ago, the largest employer was General Motors, where workers earned an equivalent of $50 per hour (in today’s money). Today, the largest employer — Wal-Mart — pays around $8 per hour.
The middle class has certainly changed. We’ve ranked a list of things the middle class can no longer really afford. We’re not talking about lavish luxuries, like private jets and yachts. The items on this list are a bit more basic, and some of them are even necessities. The ranking of this list is based on affordability and necessity. Therefore, items that are necessity ranked higher, as did items that a larger percentage of people have trouble paying for.
Vacations
A vacation is an extra expense that many middle-earners cannot afford without sacrificing something else. A Statista survey found that this year 54% of people gave up purchasing big ticket items like TVs or electronics so they can go on a vacation. Others made sacrifices like reducing or eliminating their trips to the movies (47%), reducing or eliminating trips out to restaurants (43%), or avoiding purchasing small ticket items like new clothing (43%).
New vehicles
Very few people who earn the median income can afford to buy a new car or truck. Interest.com recently analyzed the prices of new cars and trucks, as well as the median incomes across more than two dozen major cities, and found that new cars and trucks were simply not affordable to most middle-earners.
“Median-income families in only one major city [Washington DC] can afford the average price Americans are paying for new cars and trucks nowadays.” As of 2013, new cars are priced at $32,086, according to the study. Mike Sante, Interest.com’s managing editor reminds us, “just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up all such a huge share of your paycheck.”
To Pay Off Debt
These debt statistics come from Debt.org:
“More than 160 million Americans have credit cards.””The average credit card holder has at least three cards.””On average, each household with a credit card carries more than $15,000 in credit card debt.”
Not only do we have large amounts of credit card debt, we also have student loans, mortgages, cars, and medical debts. Our debt is growing faster than our income, and many middle class workers have trouble staying afloat. Money-Zine evaluated debt growth and income growth over the past few decades and found that “back in 1980, the consumer credit per person was $1,540, which was 7.3% of the average household income of $21,100. In 2013, consumer debt was $9,800 per person, which was 13.4% of the average household income of $72,600. This means debt increased 70% faster than income from 1980 through 2013.”
Emergency Savings
To provide ourselves with a degree of financial security, we are supposed to have emergency savings to protect ourselves in the event of job loss, illness, or some other catastrophe. Most members of the middle class don’t have at least six months of emergency savings, however, and some working people have no such savings.
A Bankrate survey found that only around one out of four households have six months of emergency money saved, and many of them are in the higher income groups. Another one-fourth have no emergency savings at all, and the remaining household have a small to moderate amount of savings, but not enough to cover six months of expenses.
Retirement savings
If you reach the retirement age with little or no money saved, Social Security is probably not going to be enough to cover your basic needs. Even if you want to work for your entire life, you have no way of knowing whether or not you will be physically capable of doing so.
Although having a lack of a retirement savings is a risky move, so many people bet on double zero, just hoping that things will work out in their favor. While some members of the middle class neglect this aspect of financial planning because they are procrastinating, there are also some workers who cannot afford to set this money aside. Nearly half of those who don’t save for retirement say it’s because they simply don’t have the money.
As of late, around 20% of people near 65 have not saved anything for retirement at all, and the majority of people — 59% — worry that they don’t have enough money saved for retirement, according to a Gallup Poll.
Medical Care
Medical care is a basic necessity and something we’d think would be affordable for someone earning a middle income. A Forbes article published data indicating that workers in large companies — many of whom are members of the middle class — “face nearly $5,000 in premiums, co-payments, deductibles and other forms of co-insurance.”
During the past few years, these costs have had a large impact on working Americans. A report by Feeding America found that a shocking 66% of households say they’ve had to choose between paying for food and paying for medical care — 31% say they have to make that choice each and every month.
Dental work
According to the U.S. Department of Health and Human Services, “the U.S. spends about $64 billion each year on oral health care — just 4% is paid by Government programs.” About 108 million people in the U.S. have no dental coverage and even those who are covered may have trouble getting the care they need, the department reports.
Oftentimes, people will purchase medical coverage and forgo dental because it’s so expensive. Plus, dental insurance may cover only 50% of the more expensive procedures, like crowns and bridges. This leaves those who have insurance with large co-payments.
In many cases, middle-earners will delay or even forego some of these procedures in efforts to save on costs. According to the CDC, nearly one in four adults between the ages of 20 and 64 have untreated dental caries (like cavities or infections).
The Cheat Sheet is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.
http://www.usatoday.com/story/money/personalfinance/2014/10/25/cheat-sheet-middle-class-cant-afford/17730223/
Psychology has replaced engineering as the number one 4 year degree from college. Someone needs to ask these future so called leaders what they can or will do with this worthless degree.
You can call me an ‘old fogey’ at 65 – unfortunately, I judge a large percentage of these Millenials to be very, very, ‘lite’. Are they the kids from the Gen-X generation?.
One Medium I didn’t even see measured was Radio, which used to be a huge way to reach the youth market. Not surprising, since the consolidators like Clear Channel & Cumulus have made it “all Ryan Seacrest all the time”. Now kids don’t even listen to it.
Become school counselors Our area has way too many at a very high starting salary and teacher union benefits Why do we even need ONE
Well as long as they have the latest IPHONE and maintain their social media daily we should care not where they shelter or if they work. These are the delicate flowers of our culture. My generation would have been in the streets rioting and come to think of it we were. Viet Nam looks like small potatoes compared to the war machine BO has cranked up. More is better, right?
@Bea Lever – Riot? I can’t afford to, I’ve got bills to pay son. I wish I could take some time off to let the country know how pissed I am, but unfortunately I fell into the college trap, so half of my income is spoken for before it even lands in my wallet.
CHEMIST – Did Paul Revere say “I’m sorry I could not possibly make a midnight ride to warn of the redcoats……..I have bills to pay?
@Bea Lever – Did you seriously just equate hippy boomers with Paul Revere and the American Revolution?
No CHEMIST, I just pointed out that folks could TAKE the time to let TPTB know that this will not stand. The 18 to 29 year olds are too busy chasing something shiney on their IPHONE.
TPC
You maroon!! Paul Revere WAS a hippie!!!
Hey-ah ya ya hey ah heh ya heh
http://www.youtube.com/watch?v=zQ6RjP7MlXk&feature=player_detailpage
@Bea – Its a pretty classic move on the part of the TPTB: Keep the people struggling to survive and they will not have the time to rabble rouse.
The boomers were blessed with a period of prosperity in which to voice their concern, but then turned around and sold everyone down the river when it became their turn to drive the country.
As for the millenials, time will tell. They can either continue us on the path of government oversight, or start their own brand of Revolution.
Who knows?
@CHEMIST
Please advise us in which way the boomers have sold everyone down the river? Mon ami, boomers have worked themselves to death. Talk about a segment of our society who never had time. I will hardly draw a breath in anticipation of your reply…this should be good.