Millennials and the next recession
Inside the financial situation of millennials and what it will mean when we enter another recession
In recent months, there’s been much talk about a looming recession. And whenever there’s mention of another recession, millennials get embroiled in disastrous scenarios. Hence, headlines like these: “The Next Recession Will Destroy Millennials” and “The Next Recession Will Wreck Millennial Parents.”
To help put the doom-and-gloom into perspective, we consulted Hansi Mansour, PhD, associate professor of economics at the University of Colorado Denver. “First of all, we don’t know if a recession is coming,” Mansour says. “I don’t like to speculate.”
Despite Mansour’s calm assurance, others are speculating. A survey by the global trading platform eToro found that “more than two-thirds of U.S. investors fear a recession is looming.” A model created by Bloomberg Economics is less fear-inducing, estimating that there is a 27% chance of a recession within the next 12 months.
Whenever the next recession does arrive — and it’s certain to arrive because “we know they are cyclical,” Mansour says — are millennials really in trouble?
Unfortunately, the answer is yes. “If another recession hits, there’s a good chance that it will affect millennials disproportionately,” Mansour says.
The term millennials refers to the generation born from the early 1980s through the 1990s or early 2000s. Products of both the Information Age and positive-psychology parenting, the generation has “become a convenient scapegoat for a host of modern societal ills,” according to a recent article in Monthly Labor Review.
They have been called “Generation Me” and labeled narcissists. They have been attacked for their perceived lack of social skills, inability to make eye contact and difficulty networking IRL (Millennial speak for “in real life”). They have been lampooned as beanie-wearing, safe-zone promoting, smart phone addicts who are best friends with their parents. In short, they haven’t fared well in a popular culture that still reflects the perspectives of their Boomer predecessors.
The millennial disadvantage
More importantly, they haven’t fared well in reality — at least financially. Many millennials graduated college and/or entered the work force during the Great Recession of the late 2000s and early 2010s. They have “lower earnings, fewer assets and less wealth,” according to a report by the Federal Reserve entitled “Are millennials different?”
They have more student debt, partially due to having attended college during a time of exponentially higher tuition rates. As a result, they have put off marriage, home ownership and having children — all traditional markers of the transition to adulthood.
Assistant Professor Edelina Burciaga, PhD, who teaches in the Sociology Department at CU Denver, says that the “usual model that characterizes the transition” to adulthood goes something like this: “You go to college, take 4-5 years to finish, start a family and buy a home.”
Millennials are not doing this.
To be sure, the last recession contributed to millennials deferring these milestones. “College students who graduate during a recession have lower wages, which is not surprising,” Mansour says. “What is surprising is that the recovery is very slow. Where you start has really big implications over where you end up in say 10 years, even after the economy recovers.”
Are millennials delaying big life events for purely financial reasons?
The Federal Reserve report finds that “millennials do not appear to have preferences for consumption that differ significantly from those of earlier generations.” This would seem to indicate that millennials simply can’t afford the car, house and baby that would ostensibly deliver them to adulthood.
Mansour isn’t so sure. “The recession is not responsible for everything that is different about millennials,” he says. “You can imagine a hypothetical where they would have delayed marriage regardless of the Great Recession.”
Burciaga is also skeptical that the millennial transition to adulthood is solely a result of economics. “As a sociologist, I think about the context that people are growing up in,” Burciaga says. “They are a product of significant social change … [and a] movement toward more freedom and choices and options — the positive outcome of that is perhaps more tolerance and acceptance for alternative life trajectories.”
Millennial narrative has been racialized
Both Mansour and Burciaga point out that millennials are not a monolithic group. While people may think of millennials as white college graduates living in their parents’ basements, the generation includes people of color and people from all socio-economic backgrounds.
In fact, millennials are more racially diverse than previous generations. This also negatively affects their economic situation, as people of color are often paid less. And if their parents are racially diverse, then they are less likely to be able to help their millennial children with something like a down payment on a house.
“Racial diversity means lower wealth, lower parental wealth,” Mansour says.
Additionally, Burciaga says that “millennials in African-American and Latino communities are not only building their own wealth but also helping their parents financially,” which adds another level of economic difficulty.
Millennials aren’t the only victims
Whenever the next recession hits, millennials will undoubtedly be negatively affected, but other groups will also suffer, Mansour stresses.
“Anyone who graduates during the next recession will likely experience similar long-term impact on their career earnings that the Millennials endured,” Mansour says.
The internet is abuzz with frightening words like looming and inevitable. There is a lot of talk about inverted yield curves, zombie companies and tariff wars. What’s happening? When is it happening? Is a recession around the corner?
“Economists are not magicians,” Mansour says. “It’s very hard to predict the future.”
Alicita Rodriguez is a senior writer for the University of Colorado Denver. She holds a BA in English Literature from Florida International University, an MFA in Creative Writing from New York University and a PhD in Creative Writing from the University of Denver.
This article can be attributed to City Stories, a publication by the University of Colorado Denver.