Millennials and Gen-Z are poorer than ever (Here’s why) – New Trader U

Millennials and Gen-Z have been concerned about their financial well-being in recent years. They want to understand why their younger generation is facing unprecedented economic problems, leaving them to wonder why they seem to be in less financial condition than their predecessors.

This article examines the various factors that contributed to this phenomenon, examining the complex web of economic, social, and technological changes that have changed the financial landscape for these generations.

The Impact of the Recession

The Great Recession has had a major impact on the financial situation of Millennials and Gen-Z. Millennials, born between 1981 and 1996, entered the job market during or after the 2008 global financial crisis. This event, often referred to as the Great Depression, led to widespread job losses, falling wages, and a general recession that continued for years.

The timing could have been worse for many Millennials, who were struggling to find steady work or faced unemployment in jobs that didn’t match their qualifications. This initial disruption to employment has had long-lasting effects, with many suffering what economists call “economic scars” – a persistent negative impact on earnings and career progression.

Gen Z, born between 1997 and 2012, is facing its economic baptism by fire with this pandemic. When they started working, the world economy suffered an unexpected setback. Lockdowns, business closures, and widespread uncertainty have made it difficult for many Gen Zers to find a place to work.

Compared to previous generations, Millennials and Gen Z experienced higher levels of unemployment and declining wages in their early working years.

For example, a study conducted by the Federal Reserve Bank of St. Louis found that Millennials born in the 1980s had wealth levels 38% lower than what they would expect based on the experience of earlier generations in the same years.

A Healthy and Sustainable Job Market

The job market that Millennials and Gen-Z are navigating is very different from that of previous generations. Normal work processes have been disrupted, and job security has become more difficult.

Another important change is the rise of the gig economy and self-employment. While these arrangements offer flexibility, they often come at the expense of stability, benefits, and long-term financial security. Many young workers do a lot of part-time or hobby work to make ends meet without employer-provided health insurance coverage or retirement plans.

In addition, the disappearance of traditional early careers has made it difficult for young people to find a place in their chosen careers. Many jobs that once served as stepping stones now require years of experience or advanced degrees, creating a catch-22 for new graduates.

The growing demand for advanced degrees has led to another financial burden: student loan debt. As of 2021, recent student loan debt was over $37,850, and many owe more than that. This debt hinders financial progress, delaying major life events such as owning a home or starting a family.

Unemployment is another challenge, with many young workers settling for jobs that do not fully utilize their skills or match their career aspirations. A report by the Economic Policy Center found that in 2018, the unemployment rate for young college graduates (ages 21-24) was 11.1%, compared to 6.9% in 2000 and 9.4% in 2007.

For more up-to-date information, follow According to Statista, the unemployment rate for recent college graduates in the United States was 40.3% as of December 2023.

This large increase suggests that a larger proportion of recent graduates are working in occupations that do not require a bachelor’s degree, reflecting ongoing challenges in the labor market for young professionals.

Looking ahead, experts predict that the future of work will continue to change rapidly. Adaptability and continuous learning will be essential for career success, putting more pressure on young people to keep up-to-date and new skills to stay competitive.

The Double Edged Sword of Technology

Technology has revolutionized the economy, creating opportunities and challenges for Millennials and Gen-Z.

On the other hand, the digital economy has created new industries and job sectors that did not exist a generation ago. Tech-savvy youth have thrived in app development and digital marketing as YouTubers, website developers, and data scientists.

However, the rise of automation and artificial intelligence (AI) has also led to the elimination of many jobs, especially those involving routine or repetitive tasks. A study by the McKinsey Global Institute estimated that by 2030, around 375 million workers worldwide may need to change job roles due to automation.

Industries that have traditionally employed large numbers of young workers, such as retail and manufacturing, have been hit hard by technological disruption. For example, the rise of e-commerce has led to the closing of thousands of brick and mortar stores, eliminating many retail jobs.

The rapid pace of technological change also means that skills learned at school or university can quickly become obsolete. This creates constant pressure to acquire new knowledge and adapt to emerging technologies, often at the expense of work.

Globalization and the Pressure of International Trade

The increasingly connected global economy has had a major impact on job markets in developed countries, where many Millennials and Gen-Z live. Globalization has opened up new opportunities for businesses to outsource jobs to countries with lower labor costs, putting downward pressure on wages in many sectors.

Industries such as manufacturing, customer service, and even some professional services have seen significant growth in the past few decades. While this has led to lower consumer prices, it has also resulted in job losses and lower wages for many workers in developed countries.

A study by the National Bureau of Economic Research found that increased trade with China alone led to the loss of 2.4 million US jobs between 1999 and 2011, most of which were in the manufacturing sector. which typically provide stable, middle-class jobs. [1][2]

While globalization has benefits, such as increased cultural exchange and access to a greater variety of goods and services, it has also contributed to income inequality and job insecurity for of many young workers in developed economies.

Financial and Credit Policy Burden

Monetary policies, especially related to interest rates, have greatly affected the financial well-being of Millennials and Gen Z. In response to the economic crisis, central banks have maintained historically low interest rates for a long time.

While this has made borrowing easier, it also makes it harder for young people to build wealth through traditional savings accounts or fixed investments.

The low interest rate environment has contributed to rising property prices, particularly in the housing market. Home ownership has become out of reach for many young people, forcing them to continue renting and miss out on this traditional way of accumulating wealth.

Student loan debt remains a major burden for both generations. In the United States, total student loan debt is over $1.74 trillion, and the borrower owes $37,853. This debt makes it difficult for young people to save for other financial goals or invest in their future.

The combination of high levels of debt and the difficulty of accumulating wealth has created a huge wealth gap between the young and the old. Despite being the largest generation of workers, millennials control only 9.2% of US wealth. Millennials make up 35% of the current US workforce.

Rising cost of living and financial insecurity

Perhaps one of the most obvious challenges facing Millennials and Gen-Z is the rising cost of living, especially in housing, healthcare and education. These costs have continued to outpace income growth, making it more difficult for young people to find financial stability.

Housing costs have increased in many urban areas where employment opportunities are high. In cities like San Francisco, New York, and Las Angeles, it’s common for young professionals to spend more than 50% of their income on rent, leaving little room for savings or other expenses.

Health care costs have also skyrocketed, and many young people are uninsured or underinsured due to high premiums and deductibles. This creates a precarious situation where one medical emergency can lead to financial ruin.

Rising costs, stagnant incomes, and job insecurity have led to the “cost of living” for many young people. Common financial goals such as owning a home, starting a family, or retirement savings seem out of reach.

This financial insecurity is part of a wider trend of increasing wealth inequality. A report by the Pew Research Center found that the wealth gap between the richest and poorest families in America doubled from 1989 to 2016, with younger generations bearing the brunt of this disparity.

The end

The financial challenges facing Millennials and Gen-Z are complex and multifaceted, rooted in economic, technological and social issues. From the lingering effects of the Great Recession to technological disruption and globalization, these generations are facing a completely different financial landscape than their predecessors. it.

Solving these problems will require a concerted effort from policy makers, employers and the public. Possible solutions may include changes to the education and student loan systems, policies to address the housing crisis, and efforts to encourage job creation and skill development in emerging industries.

As we look to the future, it’s clear that the financial well-being of Millennials and Gen-Z will have profound effects on the broader economy and society. Finding ways to support these generations in building financial security and wealth will be critical to ensuring long-term economic stability and growth.