Recession Slams Millennials – Again
Several young adults in my life have been derailed by the COVID-19 recession.
A few examples. My daughter-in-law just finished her graduate degree in occupational therapy and sailed through her certification only to be met by a stalled job market. A friend’s daughter, fresh out of nursing school, has already been turned down for one job. My nephew, a late bloomer who had finally snared a job making jewelry for a major retailer, was laid off and is floundering again.
Student loans, the Great Recession, and now a pandemic – Millennials can’t seem to catch a break.
Going into this pandemic, people in their 20s and 30s already had lower wages, more student debt, and less wealth than previous generations at the same age. This recession arrives at a critical time when Millennials were trying to catch up, build careers and strive for financial goals.
For the youngest ones, this is their first recession. But the downturn is the second blow for older Millennials, many of whom had the bad luck of entering the job market in the midst of the Great Recession a decade ago.
Does this double jeopardy put them in danger of becoming “a lost generation”? Millennials’ predicament prompted the Federal Reserve Bank of St. Louis to ask this question in a new report on their finances.
The COVID-19 recession, the report said, “could upend many of their lives.”
The situation is far from hopeless, of course – they have several decades to make up for this rough patch! There’s no reason they can’t overcome the setbacks with some pluck and determination.
But this will require much more effort to pull off amid the highest unemployment rate since the Great Depression. The Federal Reserve estimates more than 5.5 million Millennials have become unemployed this year – African-Americans bore a disproportionate share of the layoffs.
Young adults were over-represented in the food service, hospitality, and leisure industries slammed by state shutdowns to control the pandemic. And as the recession plays out, Millennials, with their shorter tenures in the labor market, will continue to be vulnerable to layoffs.
Don’t forget about Generation Z either. The recession will be a tough period for its oldest members, who are just graduating from college and haven’t built up their resumés. They may be less appealing job candidates when so many experienced people are eager to work and willing to compromise on pay at a time of sky-high unemployment.
But Millennials, who out-number Gen-Z in the labor force, have the most to lose in this recession. Prior to the pandemic, the typical Millennial worker already had relatively lower earnings and less wealth than previous generations had at the same age.
In 2016, Millennials held $12,000 in wealth, according to the Federal Reserve report – one-third less than the comparable wealth levels for Generation X and Baby Boomers. The wealth number was even more discouraging for African-American Millennials: $1,300.
Millennials, the report said, are “the only generation to have fallen further behind” in the pre-pandemic recovery.
This seems all the more remarkable given that today’s young adults are more educated than any previous generation – but remember that college debt is a big reason for their financial woes.
Nearly half of Millennials borrowed money for college, which has had a domino effect on their finances and stalled life plans such as buying houses, marrying, having children, and saving for retirement. A 2018 study found that the young adults who are loan-free are able to save two times more than their counterparts paying off the debt.
The best thing Millennials have going for them is their energy and ingenuity – now they need a little bit of luck.
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Don’t forget that many in this cohort are supported by their baby boomer parents and/or grandparents. In addition, they will receive substantial inheritances from the baby boomer generation.
In addition, everyone knows they will not pay off their student loan debt. They will leave that to US taxpayers to pay. It is also possible that the debt will just be written off for them.
I believe there are three major issues that don’t seem to ever be addressed that contribute to the cause of Millennial’s financial problems.
1. Colleges keep raising their costs much faster than inflation, which has led parents to not pay the cost of their children’s college and have their children take out larger college loans.
2. Colleges encourage students to take majors that don’t prepare them for a high paying job or in some cases, no job at all.
3. The loss of manufacturing in the USA has resulted in less blue collar jobs and lower blue collar wages.
The world went south for me starting after my high school graduation. Graduating in 2008 from college was useless. Just paying my bills on time is my current goal in life. Can’t even get hired by McDonalds and I couldn’t gain any experience for my so called career. I also advocate that we stop sending kids to college. It’s a scam. Go learn a trade. You’ll have twice the amount of a self proclaimed smart college graduate.
They’ll do ok, just like the rest of us who endured previous recessions:
> I graduated high school during the 1973-1975 recession & joined the military afterwards. The military paid for both my associates and bachelors degrees.
> I was in college during the 1980 recession, and graduated college during the 1981-1982 recession. But, for my entry-level computer science field, I had to move to where the jobs were.
> I was working during the 1990-1991 and the 2001 recessions. After that 2001 recession, the company I worked for paid for my masters degree.
> I retired following the 2007-2009 recessions, and we’re now living comfortably through this 2020 recession.
It’s important that millennials (and everyone for that matter) not incur a lot of student loan debt – first choose the local community college route and transfer the credits, rather than initially going to the much more expensive universities. (Here in Ohio there are guaranteed college transfer programs: https://www.ohiohighered.org/transfer)
Universities keep raising their costs because they can. They simply react to supply and demand as any other service industry does. As long as students keep choosing “that expensive university” just for the college experience, costs will continue to increase. (No different than choosing that most expensive product – the price will keep going up.) Choose the less expensive education route and the size of college loans will decrease.
Students (and their parents) need to take it upon themselves to research, seek out, and choose degree fields for jobs that are marketable, in-demand, and pay well. That’s the students’ choice to select degree fields for careers that will keep food on the table, roof over their heads, and clothes on their backs.
Today’s young people have an excellent opportunity to be successful. But, always having to keep in mind that it’s almost always about making good personal choices and taking advantages of opportunities as they become available.
They’ll do ok.