Gen Z is going to have a hard time getting rich | Hacker News Reader

Gen Z is going to have a hard time getting rich

businessinsider.com

39 pointspaulpauper61 comments

It seems like each generation is having more difficulty making ends meet (https://theirrelevantinvestor.com/2021/04/01/the-generationa...). Why hasn't this been improving? Is it because of regulatory capture by corporations?

There's been a pretty huge drop in living standards over the last 40 to 50 years. One interview with a person who lived through the 60s said, back then a painter could own a home, support a non working wife and six kids. These days, that same painter would have a hard time supporting himself, let alone a wife and six kids and house.

one of the biggest drivers of wealth reduction is all the regulation that prevents more housing from being built, and how it's built. this leads to higher land costs, higher costs of labor, higher regulatory costs. Not to mention, we've kept adding more and more people to this country but haven't added more land or more material inputs. so of course living standards have to come down as everything gets split up per capita. to be sure, there's a ton of empty land out there, but no one's allowed to use it. and companies have moved jobs to areas where people can't live. meanwhile gov regulates the s** out of the housing dev market and yet let's job creators go nuts in an area that can't grow due to local NIMBYism.

Similarly, there’s a sad argument that the “Life in ‘The Simpsons’ is no longer attainable”.

https://www.theatlantic.com/ideas/archive/2020/12/life-simps...

Yeah we should be able to have cheap lead paint and asbestos and get rid of fire codes. Kids these days have too many IQ points.

No regulation is not a viable solution unless we want a return to pea soup smog in LA and other areas, rivers that go on fire, and more lead poisoned children.

Getting the balance of regulations is hard but it would be a lot easier if companies didn’t have to be forced to do it. But it’s unrealistic to think it’s viable for them to behave responsibly due to adverse selection.

But in any serious discussion, one has to fully embrace the fact that regulations are good and necessary. If the debating parties don’t admit that then it’s not sincere. Equally it must be admitted that regulations and a burden and should be the minimal necessary to stop unacceptable abuse.

Houston does not have zoning, and the sky has not fallen there. What we have in the rest of the country is an incentive structure that is firmly on the side of rent-seeking and NIMBYism.

It is literally built into our tax code, with the mortgage interest deduction and California’s subsidy of the boomer Generation with the drastic reduction of real estate taxes.

It is ridiculously easy to solve the housing problem in SF, just tear down the single family homes and replace with high rise apartments at HK-level density. But the entrenched interests don’t want to do that.

Your explanation doesn’t check out. First of all, construction hasn’t necessarily slowed down. Second, jobs were always in cities. That hasn’t changed. Third, new construction trends follow economic trends[0] and that has always been the case, since the dawn of the industrial era. It would be one thing if you were arguing that rising wealth inequality is a result of no new homes being built, but you’d still have to account for all the people who live in homes but don’t own them.

[0]:https://fred.stlouisfed.org/graph/fredgraph.png?width=880&he...

This simply doesn't check out. Land prices even in countries with low barriers to construction are skyrocketing.

The simple fact is that private ownership of land leads to the value of the land capturing the value of its inhabitants. It's an inevitable trend, housing prices will increase until people start moving out in a free market. There is no purely free market solution that doesn't simply delay this.

It’s not always corporations. The people often capture regulatory powers too.

A good chunk if not the majority of wealth creation for most US households has been the value of their house. Older people own houses and have captured the upside of price increases over the decade. The young people are having a harder and harder time buying the exact same houses going up in price. If you go to any sort of planning meeting for a new development you’ll always run into cranky homeowners complaining that it will ruin the price of their property.

Where I live (Australia), the biggest issue is the massive bubble in property prices. Housing affordability has gotten a lot worse over the last few decades. Arguably it has produced a massive wealth transfer from the younger to older generations. I guess inevitably that is going to be partially reversed when those older generations pass on, and leave some of their accumulated wealth to their children. But inheritance is a very uneven process – some people have more children than others, some people spend a lot more in their retirement than others, some people live a lot longer than others (which can lead to much of their accumulated wealth being spent on aged care), etc.

However I do feel like we are transitioning from a society in which each generation was expected to make it mostly on their own (with at best a little bit of help from their parents), to one with a much greater emphasis on inherited wealth. I think as well as property bubbles, another factor is shrinking family sizes. When the average family had 5+ kids, the children couldn't expect to inherit that much. Families with only 1 or 2 kids, the child can inherit a lot more. And even prior to inheritance, it is much easier to extend financial support to your children (such as helping them to buy a home in their 20s) when you only have 1 or 2 instead of 4, 5, 6, 7...

I lack your optimism; when they pass on, their houses will be transferred to small- and big-time rental companies, who will rent their houses to young people for more than a mortgage would cost.

The only hope, in my opinion, is a giant, propaganda-driven cultural movement away from money and towards societal stability.

In Australia, the tax system favours private individual ownership of residential properties over corporate ownership.

Property developers are allowed to keep ownership of new developments (so-called "build-to-rent"), or sell the new development (on a single title) to an investment trust. But corporations buying pre-existing house stock, without plans to redevelop it, are at a tax disadvantage compared to individual owners.

I don't think corporations are quite as powerful as you think. Certainly not in Australia. At the end of the day, individuals vote, corporations can't. Governments win elections by appealing to voters, not appealing to corporations. Indeed, almost all of the negative aspects of Australia's housing policies have come about through appealing to individual voters–the older generations who own a lot of property, the "aspirational middle class" who want to own a lot of property too, the "Mum & Dad investors", the professional class (property investment is popular with doctors and lawyers and I believe even software engineers), the small business owner class, etc–rather than being driven by corporate interests.

What's also interesting is that transportation & communication are very much easier than they were for past generations. This is also combined with shorter times that a worker stays at a single job before moving on for another opportunity. Put all this together and nobody wants to stay in a single house for 10+ years, or even in the same city for that length of time: at this point, buying a house would be counterproductive -- even if you could afford it -- because the transaction costs eat you alive.

For these reasons, a lot of us younger generation folks actually value a high-quality rental property more than buying exactly that same house. [Yes, sure, you buy the house and you'll eventually pay it off, but you'd be surprised how many people don't believe they will be able to afford to retire at all, much less accumulate any wealth whatsoever.]

> Put all this together and nobody wants to stay in a single house for 10+ years, or even in the same city for that length of time

It can change when (and if) you have kids.

Uprooting our kids to move somewhere else is going to be a burden on them. I experienced that burden as a child, I don’t want to visit it on my own children unless it is (in other ways) a really compelling proposition. Especially as parent of a child with a neurodevelopmental disorder, who I know would find the disruption harder than the average child would

> I guess inevitably that is going to be partially reversed when those older generations pass on, and leave some of their accumulated wealth to their children

By being tied up in property the timing of this is hardly ideal though. The costs in housing was paid when I was young, the transfer back will be after my mortgage is paid off and my main use of this transfer will be to fund my retirement. In turn I'll be relying on these investments to fund retirement and if I live long enough the next generation won't get any of my wealth until they're older and don't need it so much.

What would be a better way (other than cash) to transfer some of this wealth when the next generation is younger and need it more?

> What would be a better way (other than cash) to transfer some of this wealth when the next generation is younger and need it more?

Some parents give guarantees to their children's mortgages, or buy property jointly with their children. I think it comes down to a couple of factors (1) the wealthier you are, and the fewer children you have, the more sustainable this is; (2) cultural attitudes differ between different families (and between cultural/ethnic groups) in terms of whether parents ought to do this, or instead leave their adult children to fend for themselves.

I think it has to do with efficiency; you need fewer and fewer people to generate value.

But those who are needed, i.e., tech workers, meet their needs and more.

In the US, it boils down to government corruption (lobbyists), and republican propaganda fueled wealth inequality. Aka Citizens United.

Increased regulations, taxes and other laws with perverse incentives

I hope Gen Z has more precious goals than getting materially rich. Not that I’m against material richness. But I do hope that we as humanity evolve together on a spiritual level. There’s so much material value already created, so many jobs are automated. I hope that we humans strive for higher goods, fully develop our potential, and start to learn seeing again that there’s a universal order that includes a worldly good and a worldly bad. I hope that Gen Z recognizes the madness that is currently coming to light and as a consequence starts doing better than their previous generations. I’m glad to help them wherever I can.

(this is all just my opinion based on personal observations. I haven’t done research into concrete data on this so take it all with a grain of salt.)

So far they seem even more materially oriented. Because that’s how we teach people to be.

We lie to children and tell them that the most important thing in their lives and their primary source of fulfillment is a career. When in reality most of us get that from our relationships with other people, and a career is just a means to an end.

And of course social media continues to reduce social interaction down its most shallow possible level.

All financial considerations aside, Gen Z will probably be the most isolated, mentally ill, and least self sufficient generations in a very long time. And that’s because of the world we made for them.

Hi, I'm part of Gen Z. Grain of salt, etc.

You're being a little unfair here, implicitly describing an entire generation as overly materialistic, mentally ill, socially dependent children. Honestly, it sounds like the Gen Z people you know might just be heavy social media users, since people of any generation that use these tools poorly have the problems you mentioned. For those of us that don't use the standard social media channels, growing up around the internet was an absolute blessing, with some minor flaws compared to the benefits it provided.

For examples of people that have benefited from being in this generation, look at the growing climate movement, or maker culture, which is democratising engineering in a way I don't think has been done before. Mental health isn't as much of a concern in this generation either imo; most people of my generation are far more comfortable talking about depression, anxiety, or autism than anyone else I talk to.

> Honestly, it sounds like the Gen Z people you know might just be heavy social media users, since people of any generation that use these tools poorly have the problems you mentioned.

Quite honestly, who around us isn't a heavy social-media user? I'm Gen Z myself, and social-media is one of those vices where there is no 'healthy' amount to have, like drinking or smoking.

It depends on what you consider social media - I check Twitter and HN a couple of times a day and watch YouTube videos for maybe an hour or so, but I try to be intentional and focus on interesting content rather than mindless doomscrolling, or viewing whatever an algorithm recommends. My friends aren't all the same, and some of them spend more time than they'd like on Reddit, Instagram or Tinder, but actively avoiding social media is a common topic of conversation at least in my social circle. Deleting the apps that want you to use them endlessly (Instagram and Facebook) has caused a noticeable improvement in my mental health, and I'm interested in pushing this further.

To counter your example, the mental benefits of experiencing a good whisky are worth the health detriments imo, but we can agree that chugging down bud light is terrible.

Yeah, I agree with you on that. I'm a Gen Z and I've noticed that social media has made the object for most people's desires material things.

> So far they seem even more materially oriented. Because that’s how we teach people to be. I don't know if this is Gen Z specific, but I do that we (as a generation) focus too heavily on material items. It seems that every generation cares about consumer culture and social status when they're young, but then quickly grow out of it as they age.

> And of course social media continues to reduce social interaction down its most shallow possible level.

Social media really does have that effect whereby everyone is constantly "on stage" and must perform; the only problem is that the performance is about petty drama and material gain over others.

> All financial considerations aside, Gen Z will probably be the most isolated, mentally ill, and least self sufficient generations in a very long time. And that’s because of the world we made for them.

I wouldn't discount people's ability to adapt: once the consensus comes around on social media (the worst offender being Instagram) we'll jump ship, and mental health will slowly recover. Isolation will follow, and for self-sufficiency, when people are dropped into situations for which they aren't ready, they quickly learn and become ready.

Let’s help them create a better world. We see what they are struggling with, we as their parent generation have it in our hands.

I think people are put off by the word "rich" or "wealth" in this article. But I read the article and mentally replaced it with "financial security". I work with a lot of Gen Z's and they just want some sense of security.

>as a consequence starts doing better than their previous generations

But how can you do better when you don't have job security/home/retirement savings? Its far easier to be generous with your time/money when you're well off. I fear we're slipping into a gritty decade even crazier income inequality.

> I hope that Gen Z recognizes the madness that is currently coming to light and as a consequence starts doing better than their previous generations.

This is wishful thinking - at best. Has human history not taught you anything?

Have positive thinking and self-fulfilling prophecy told you something?

As a Gen Z’er that graduated college in December 2020 and was fortunate enough to have (and not lose due to COVID) a full time software engineering job lined up, I’m not sure how much this should worry me. Unlike a lot of US high schoolers, I was lucky to have a pretty solid personal finance class that taught me about Roth IRAs and 401ks and how index funds could set you up nice as long as you had some discipline. Although, in the back of my mind I couldn’t help but think that something would have to give eventually and that the average rates of economic growth we were being shown in class couldn’t continue. Despite this, I still started contributing to retirement savings as soon as I turned 18 with what little money I made from internships, because I thought at the very least having SOME savings would be good even if I was looking at getting 3-4% return instead of 5-7%.

I guess the point of this post is that even as a Gen Z person being told straight up, “You’re fucked”, I’m still of two minds about whether that’s really true. The company I work for is in the area of semiconductor lithography, and the technology is absolutely astounding to me. I simply don’t believe that an economy that produces this kind of equipment and is STILL innovating is going to slow down enough to screw over an entire generation. Battery tech for EVs, solar, RISC-V and the stuff SiFive is doing, fusion power (maybe?), biotech and health-enhancing tech in general, and so many more things give me the feeling that we’ve still got plenty of reasons to be optimistic. Curious to hear what others think.

It sounds like you have a bright future ahead of you! You're doing great!

However, I don't think the average 18 year old is contributing to their 401k with money they made from their (presumably software development?) internships. :)

No 401k when I was 18, IRAs only at that point. But thanks!

>>almost a third of existing small businesses were wiped out by the pandemic

Isn't this good for Gen-z? Assuming not many owned these businesses, which I would because they are young. Doesn't this leave an opening for young people to open businesses?

I think it depends on whether the resulting hole was taken over by giant corporations or not.

Lower marriage rate correlate with poorer results. If you change that. Half expenses and double incomes they could fix this but I doubt we will fix that trend.

Because Business Insider says so?

No, because statistics suggests so.

This is a story that's been told since the dawn of time, The future generations are fucked, the good old days are gone.

Just cos some interns at an investment bank wrote a brief, speculating about future stock returns doesn't mean an entire generation is doomed. JFC.

Just because things have tended to get better the last century or so doesn’t mean it’s going to continue. Leaving behind wealth for future generations used to be a significant priority; now many people are barely interested in having a family at all. Some of those that do still decide they’d rather get a second mortgage to buy a boat than leave a paid off home for their kids. Predatory corporations liquidate the assets of the elderly when they’re deemed no longer competent by the state. None of those things by themselves is enough to sink things, but those things together combined with broader financial trends (seemingly permanently low interest rates + skyrocketing housing costs as others have mentioned) don’t exactly paint a good picture at least for a large portion of the working class.

There is a hypothesis that interest rates naturally fall as wealth becomes more concentrated. Effectively those with money become the only possible consumer, and their consumer needs are bounded.

It's plausible that the current low interest environment is capping future ROI and stock returns.

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