The Economy For Millennials Is A Mess, And Baby Boomers Are To Blame
Throughout history, the United States economy has taken a series of twists and turns, and each generation of Americans have seen them first hand. Whether it be the Roaring Twenties or the Great Depression that ravaged the States in the 1930s, the state of the economy can drastically alter the lifestyle of many Americans. Two such generations that clash in this regard are the baby boomer generation, and millennials.
Baby boomers are described as those born between 1946 and 1964, while millennials are thought to be those born from 1981 to 1999. While these generations come into short distance with each other, they have both experienced drastic changes in the economy in a relatively short period of time. Why is that? The issue, unfortunately, is a multi-faceted one.
To understand why there is often a clash between baby boomers and millennials, we should understand the stigmas that are attached to each generation. Millennials are often touted to be those who are lazy, self-entitled and predispose to making excuses for their failures. On the other hand, the baby boomer generation are the scapegoats of choice for millennials who want to attribute financial shortcomings to. Unfortunately for baby boomers, millennials have a point. A lot of the animosity geared toward baby boomers come from the many advantages that baby boomers got to experience.
While personal experiences are subjective, the baby boomer generation arguably experienced the most prosperous economy in the history of the United States. Labor unions were very powerful. A lot of people were working in factories, and not only were labor unions effective in representing their causes, they received generous packages including pensions among other benefits. Also, the requirements to make a good amount of money relative to their line of work did not require Master’s degrees. The commonly touted wage gap was also not nearly as astronomical as it is today. While CEO’s still made money than those lower on the organizational food chain, they did not make approximately 300 times more than their lower counterparts, as is the case today.
In addition, unemployment rates were lower and prominent public programs, which had the capacity to fund initiatives such as putting a man on the moon, were present. One of the clearest differences in what baby boomers and millennials had to deal with is continuing education. College was exponentially cheaper in the baby boomer generation. Therefore, they did not have the burden of carrying huge amounts of student loan debt upon their retirement. Not only that, but common commodities such as cars were also cheaper when adjusted for inflation rates at that time.
So, it goes without saying that baby boomers enjoyed many economic advantages that did not pilfer future opportunities for them. While millennials are often touted to be a generation of those who make excuses and look for others to blame for their own shortcomings, these claims are not without merit. The generation that came before them are the perpetrators for present difficulties today. Unfortunately, the reasons for that are multi-faceted.
One of the more primary issues that affect millennials to a great degree is the shrinking middle class. Of all the millennials, about half of them are aged between 25 to 35. This is the range of ages in which people start to seek financial independence and start to become reliant on themselves financially. One of the keys to achieving this financial freedom is to enter the middle class. However, as one Bernie Sanders likes to frequently reference, the middle class is declining. In 1971, 61 percent of Americans were in the middle class. Compare that number to 50 percent in 2015. There is a good reason why the middle class has been slowly declining. It is the wage gap.
Remember that the wage gap for all organizations was not nearly as massive as it is now. As referenced by the Economic Policy Institute, the average income for middle class Americans would increase by approximately 23 percent if economic inequality with the 99 percent and the top 1 percent did not continue to increase. That is why reaching the middle class is now deemed to be an accomplishment for those new to the workforce. For many millennials, that goal has proven to be elusive.
About this issue regarding the wage gap, the productive, direct relationship between wages and productivity has also tapered off to a major degree. During the period of 1948 to 1973, hourly compensation and productivity increased in line with each other, as it should. Productivity increased by approximately 97 percent, and hourly compensation increased at a rate of 91 percent along with it. This shows that work was being rewarded. Certainly, that makes sense. The more you work, and the more productive you are at your craft, the more you get paid. However, after 1973, this direct relationship started to decline to a great degree.
The unfortunate reality is that after 1973, productivity continued to increase (it rose by about 75 percent from 1973 to 2013). However, during that same time period, wages only increased by 9 percent. Compare that to the previous figure, and that is an 82 point drop. This means that millennials in the workforce are working harder, but are doing it for less pay. Their contributions to society are being overlooked and they are not getting properly compensated for it. Net productivity is typically described as the growth of the output of services, and while that rate has increased with millennials, hourly compensation has gradually decreased and tapered off.
Another huge factor for millennials seeking work for greater pay is going to college and getting a degree. While this proves to be a great achievement in anyone’s life, for millennials, the degree comes with a hefty price tag. College students are forced to take out student loans because of the astronomical cost of tuition. The collective student loan debt bill for college students across America clocks in at over 1 trillion dollars with no end in sight. This cripples their ability to build credit and achieve the necessary financing that they may need for major purchases in the future. Baby boomers did not have this crippling effect in their timeline because college was only about a fraction of the price.
What’s worse is that a lot of the degrees that are earned, Bachelor’s or otherwise, may have them end up getting a job that will pay them less than the accumulation of debt they had in schools. There are a variety of factors as to why the cost of higher education increased a great degree, but President Lyndon Johnson signing in the Higher Education Act around 50 years ago has proven to backfire. This bill guaranteed tuition grants, student loans and funds for work-study programs, but as members of the baby boomer generation gained power, they have decided to increase tuition while pulling back on financial aid.
While baby boomers are starting to become eligible for Social Security benefits, there may not be anything left for millennials. Not only are baby boomers one of the most populated generations in United States history, a disproportionate amount of money is being taken out of Social Security by them. At the current rate, when the first millennials are eligible for these benefits in about another two or so decades, funds may be exhausted. This is just one of many examples of the irresponsible actions that have been undertaken by baby boomers.
What many do not understand is that the baby boomer population are those who currently hold political power and make it harder for the younger generation. The 2008 financial crisis that president Barack Obama inherited? Caused by the inefficient government run by baby boomers. The risk taking on the housing market which eventually predisposed to the infamous housing bubble? Baby boomers. Those responsible for trading derivatives, failed regulation on the part of the government and forcing children to enter a job market with miserable returns? Baby boomers.
Unfortunately, millennials are becoming the worst generation with an economy worse off than the generation that came before it. What’s worse is that the generation AFTER millennials, Generation Z, will be left even more worse off due to the inefficient economy that they will inherit. While hope remains for a brighter future, baby boomers have left a lot of damage in their wake.
