By Josh Hoxie
The mechanics of wealth building are fairly simple. Save more than you spend, invest those savings to generate more money. Lather, rinse, repeat.
There’s one big problem for younger people trying to do this: The rules are rigged against them. Here are five facts showing the unfair burden millennials carry.
1. Wages are stagnant.
Today’s rising generation earns 20 percent less than their parents did at their age, despite being better educated and more productive. In fact, millennials are on track to become the first generation in modern American history to make less money than their parents did.
The federal minimum wage, $7.25 an hour, is lower than the cost of living in every city in the country — and hasn’t gone up in 10 years. It’s hard to save when the money coming in doesn’t come close to covering the basics.
2. Student debt is out of control.
The cost of attaining a college degree leaps annually, with aggregate student debt now topping $1.5 trillion. Savings that could’ve gone to a down payment on a house, starting a business, or saving for retirement are eaten up by monthly student debt obligations.
This is largely the result of state governments disinvesting in public colleges and universities, shifting the costs onto families. Since student debt is the only form of debt not discharged in bankruptcy, you either pay it off or die trying.
3. Everything else costs more too.
Millennial wealth problems aren’t due to avocado toast, lattes, or any other consumer spending habits. Millennials spend lessthan previous generations on food, alcohol, shelter, utilities, transportation, and entertainment.
A few of these things are cheaper today than a few decades ago. But these are far outpaced by the skyrocketing cost of buying a house, rent, health care, college, child care, cars, and insurance — and wages aren’t keeping up at all.
4. Buying a house is out of reach.
Starter home prices have increased by nearly 60 percent over the last five years, while inventory has dropped by over 20 percent, according to Zillow. Buying a house has become a punchline for many millennials who don’t have the privilege of family members who can help with a down payment.
Homeownership has historically been the greatest generator of middle class wealth, but millennials are buying houses at a lower rate than previous generations. The top reason they cite isn’t lack of interest or lust for living in a converted van. It’s inability to save for a down payment.
5. Traditional money advice is laughably out of touch.
The standard personal finance advice doled out these days is to save at least three months of expenses, save for retirement, and spend less than a third of your income on housing.
But when you don’t have enough to cover rent, student loans, and insurance, not to mention groceries, where’s all this saving going to come from? What’s the advice for the 40 million of us earning under $15 an hour, whose jobs don’t cover the cost of living?
The good news? Last year, for the first time ever, young voters outpaced boomers at the ballot box, with millennial turnout nearly doubling from 2014. This year, they overcame baby boomers as the biggest voting bloc.
Bold solutions to un-rig the economy are on the table, like Medicare for All, college for all, student debt forgiveness, first time home buyer programs, and a Green New Deal. Millennials are in a position to benefit the most from these programs — and to contribute the most to ensuring they become law.
Without bold solutions, the steady rise of inequality will continue unabated for generations to come.
Josh Hoxie is an associate fellow at the Institute for Policy Studies.
Shell says
“The rich are getting richer off the backs of everybody else! The poor are getting poorer! It’s never been this bad!”
Excuse-makers have been chanting that for as long as there has been a way for humans to make record of their thoughts and words and deeds.
beachcomberT says
The writer makes some strong points about the system, especially the impact of student debt. But I doubt the Green New Deal is going to lower the cost of living for young workers. If anything, carbon taxes, tougher tuel economy standards and real estate retrofitting requirements will add to their burdens.
Richard says
Please enlighten us readers, Josh, as to how the “millennial’s” who are in the BEST position to benefit from Medicare for All, college for all, student debt forgiveness, first time home buyer programs, and a Green New Deal will be able to contribute and PAY for these programs after they vote them to become law? They are being sold down the river by lawmakers who themselves don’t have a clue but talk a good game. Games don’t pay for living expenses nor do the lawmakers who are all talk and no action.
A Concerned Observer says
It is difficult for me to feel sorry for the tragic outlook of the disadvantaged millennials. These poor children cannot have everything they want handed to them. Boo-oo, get over it. One tenant not mentioned in the path to wealth outlined in this article is to live within your means. Sorry, but everyone does not need a college education. I can count on one hand the children of my extended family members and friends that have used their outrageously expensive education to build a career path which will allow them to live the lavish lifestyle this generation wants and fully expect is their birthright. Remember, colleges are a business that have salaries, infrastructure, material and real estate to pay for and are not a magnanimous entity. Public outcry loudly extols that teachers are not paid enough and that a college education is too expensive. Can you see the dichotomy here? College classes are all too often decided on based on how much fun they will be, where their friends are or the low effort it will take to make it through. If college is your life plan, the first level of choice must be picking a school you can afford. No need to live in a party dorm or a fraternity house where extracurricular activities are more likely to be based on fun and less on volunteer work to give back to the community while gaining valuable experience and life lesion. These will be more valuable in their later life than a liberal arts degree. Next, pick a major that you will be able to make it through in four years and will result in a career that will pay you the salary that will afford you the lifestyle you want. An old adage is to pick a job you enjoy and you will never work a day in your life. The reality of that statement is much clearer looking back than looking forward, trust me. Don’t buy what you can’t afford now. Credit card purchases and high ticket item loans cost will cost far more than the purchase price will be in cash. Do you really need that $900.00 cell phone with that extensive unlimited service plan the service companies try to convince you all need? No need to pay up front, you can pay by the month, just like your rent! Do you really need a cell phone at all or do you simply think you deserve it because “everyone else has one” and marketing and convinced you must have the best? Do you need a Prada purse at $700.00 or more or a new high performance car? Live within your means! Close all your social media aps and get out into the world and interact with actual people face-to-face, not on Facebook.
How about a military? Its a job that doesn’t demand experience, it GIVES YOU EXPERIENCE. It doesn’t pay as much money up front but what you do get in return is a wealth of knowledge and experiences from the college of life sciences and hard knocks (and it’s FREE). You will also give something back to a great country that has given you and your family so much opportunity and security. Yes, I said “Opportunity”, not “free stuff”. Maybe after years of playing video games, you might think being a sniper would be a cool and exciting profession. Well, not so much. There are, however, many opportunities for careers that will give you a free education and years of technical experience without building a crushing financial debt (with interest) and actually pay you along the way. If you are lucky, you will also get to meet and work alongside fascinating people from other countries in their homeland, learn a little of their language, religion, customs and what they hold dear. Being in the military doesn’t always mean killing others or being killed yourself. If you think that, you are watching too much television.
Oh, BTW, did I practice what I preach? Yes I did. And 50-years later, I would do it all over again.
Michael Cocchiola says
This economy, driven by the lust for corporate profits above social responsibility, works against our young (er) citizens. There is a national Republican-led drive to underfund and undermine our public colleges and universities. Republicans have worked hard to discredit and defund the Affordable Care Act, keeping healthcare costs high and coverage low. They have pushed to keep wages low and work hours high. Simple millennial-friendly benefits like daycare and parental leave are discouraged. And all efforts to ameliorate the crushing debt of college education are crushed.
We need an overwhelming national rejection of ultra-conservativism in this country. We need to recognize and appreciate the role a progressive government can play in helping our young citizens to succeed… not suppress them.
Mary Fusco says
@Concerned Observer, WELL SAID!!
ASF says
I know times are hard now but they have been hard before, for other generations past. Too many of the young people I have spoken with seem to think that there are no dues to pay at the beginning end of one’s employment history. They seem to feel that the student debt they incur is not real until they actually have to pay it–at which point they resent having to pay it. They seem to believe that they should start at the middle or the top and then put in as little time as possible to keep moving forward–with automatic guarantees of advancement should be their’s as a right and a given–no matter what actual level of effort they put in. This is not true of all young people or even most–but far too many.
Too many of the disappointed have been misled by teachers and parents/guardians who have bull-dozed the path in front of them to remove as many natural obstacles as possible while growing up. This seems to have contributed to some pretty unrealistic expectations. And that leads to inevitable anxiety and disappointment.
rlon says
Student debt is growing, I agree, however, students can choose local public colleges for the first two years which saves tremendous amounts of money. They can also choose public-state universities that are also much less money compares to private. This is a choice. Tuition for Daytona state, Valencia, Hillsborough is approx 103$ per credit. Full semester with books is less than $2,000. Yes, living expenses must be added- either living at home or not still can be managed. All students need to work part time. Yep, it is hard to do both but it is the only way to keep debt low. Many students choose to go away to colleges llike Rollins, Flagler college, Barry Univ and face $40k or more. This is their choice.
snapperhead says
An American tradition like baseball and apple pie….the Depend generation complaining about the younger generations.
gmath55 says
@ Michael Cocchiola – You can’t be serious!
How Harvard and Other Colleges Manage Their Endowments. There’s more than $616 billion worth of endowments assets in the U.S and they come with tax breaks. Follow the money.
https://www.youtube.com/watch?v=CSdQDbx4raM
Student Loans Will Cost Taxpayers $36 Billion: Thanks, Obama
https://www.investors.com/politics/editorials/student-loans-will-cost-taxpayers-36-billion-thanks-obama/
A hidden plan to stick taxpayers with billions in student-loan ‘forgiveness’
http://www.aei.org/publication/a-hidden-plan-to-stick-taxpayers-with-billions-in-student-loan-forgiveness/
mausborn says
Trillion dollar deficit & $23 trillion debt?
The GOP sold it’s ever lovin’ fiscal conservative soul out to a con man.
DIVA29 says
$7.50 Hour ,min wage , no one can live on it here in Palm Coast or basically anywhere in the U.S. To start with look at what rent is $900 low hard to find then prices going up. There is utilities to pay. No public transportation buses that run every 30 min or so getting u from spot A to anywhere near jobs. So there is car expense , payments, upkeep up car, gasoline, insurance, which is to high no fault state. food is not optional,, clothing is not an option. So how does $7.50 an hour begin to pay all this. It won’t. So you have multiple people going together to rent a place, then they have visitors, neighbors complain, room mate turnover is high. Companies want to earn high profits yes, but employees can’t live with them in their half million dollar homes and up, They can’t live anywhere on $7.50 hour without room mates, and rarely does that work out if there is more than one room mate. Therefore do not wait until 2026 to bring min wage to above $7.50. Or it will tear the neighborhoods to pieces and your values well go down to meet the cost of wages, not the cost of living. Figure out what it cost to live here. What 33.3% income,for housing alone so how much do people need to earn. Remember they must have cars, ins, gas, food, clothing, medical insurance, , etc. Once you see what cost of living here actually is, the sooner you will figure out what min wage should be. Time to wake up and get real people.
Anonymous says
CEO of Disney making over 66 million a year and admission is going up every year, here is one GREEDY piece of SxxT
Come on! For real? says
@DIVA29 get another job. Yes two jobs. Maybe three. Everyone I have every met has worked 2 to 3 jobs or works every piece of OT they can get. To think you can just work one job at $7.50 an hour and that will get you there, your the problem. . If you have free time and don’t have the money WORK. Welcome to the real world. Your outlook is a bad excuse. Yeah yeah yeah, I know, youre the only person show has to EARN what you have. Poor you, no pun intended.