The Cheapest Generation
theatlantic.com
theatlantic.com
So here I am, with a car - but it's not a fancy brand-new £10,000 model with crippling monthly payments. It's a slightly beaten-up 2002 Micra, I bought it from a guy down the road for £600 cash, it doesn't use much gas. I don't care how I look in it, whether it's 'cool,' I don't see it as a status symbol, I see it as a tool for life.
Maybe that's the difference - younger generations don't see a house or a car as a symbol of status or wealth, merely as something to be used, as a necessity - just like you wouldn't choose your electricity supplier based on how "cool" it is, we don't choose our cars on that basis either now.
Though as much as the article talks about cultural preferences of Gen Y, I think the "cheapness" is being driven solely by Gen Y having no money. Sure you can say you don't need your car as a status symbol, but if you were making 40% more in salary and didn't have $100k in student debt, you'd get a nicer car.
We all entered college as tuition skyrocketed and yet the real value of a degree is shrinking, and we all graduated into a decade of zero economic growth. We're masking our (relative) poverty by being content with all are parents old used stuff and calling it "cool".
And then there are fixies - impractical bikes that cost 700 euro simply because they are cool. Whereas you can get a practical bike for less than 200 euro.
Maybe it is that we are cheap, so those things that cost beyond a certain threshold (like cars and housing) just need to work, whereas things under a threshold need to work and be cool.
iPhones also strike me as an example of this. Ray Ban glasses as well. A lot of clothing stuff ... actually pretty much everything but houses, cars and the big expenses must be cool enough to be bought.
Fixies aren't really popular beyond the hipster demographic; while there are a lot of bikes that cost >$500 dollars, they're generally bought by serious bikers for whom the value proposition is more than worth it.
> iPhone
The only thing exorbitant to me about the iPhone is the data plan, because of how often I'm in the range of WiFi. I'd argue having a personal GPS, email client, information lookup, etc. etc. is more than worth the monthly fee -- I've been lost in the country enough times.
> RayBans
Sunglasses, unfortunately, are in a stranglehold market. You either spend $20 and get colored glass or spend $200 and get an actual product (at a ridiculous markup.)
(That being said, I've had my same pair of RayBans for 8 years. They hold up well.
I've found pretty much the opposite.
I've owned 3-4 pairs of expensive sunglasses in my life, and all but one of them was crap. I'm convinced that the price differential is for nothing but a designer name.
My favorite sunglasses ever I paid $25 for at Rite-Aid, and I liked it so much I bought another pair to keep in the car. They're polarized, the optics seem good, they're solid and durable, comfortable, and don't make me look like a madman. What else do I need?
I think the parent says the cheaper sunglasses lacks UV protection.
We all choose what demographic we're going to fit in with, and with that comes tradeoffs. I have many expensive computers and the latest smartphone. This forces me to be frugal with the cost of my vehicle and the price tag on my jeans, allowing me to be "that redneck who turns into a nerd during the week" as well as "that nerd who turns into a redneck on the weekends".
I think more than the frugal generation, we're the generation who feels free to choose who we want to be and balance the tradeoffs we have to make. No longer does end goal have to be a house in the suburbs, two kids, and this year's nicest sedan, nor are our cliques set in stone. I can be both a nerd and a redneck, I can listen to both techno and country, and that's not weird. I don't have to own the nicest of everything in order to be a part of society.
Most of the sunglass brands that people know, and the stores they buy them from, are owned by a single company:
http://online.wsj.com/article/SB1000142405274870451890457536...
Further, a bike that costs less than $200 is certainly not a bike I would buy for commuting. Having commuted without a car for over three years, I can assure you that steel frames are not your friend and arguably not practical if you want to enjoy your lifestyle.
The ride of a decent steel bike is much softer (less harsh) than an aluminum bike. An old steel 10 speed with tension shifters (less fiddly/adjustment prone) is my idea of a perfect commuter bike...
Steel vs aluminum is like vi vs emacs. People argue about it all the time, but if you just go test ride some bikes you'll find out pretty quite which you prefer.
I like steel. Aluminum is just too bone-jarring.
However, I'd love to try riding a fixie some time. It sounds interesting.
Steel rides great. Cheap steel will weigh more than cheap aluminum, but is not that much heavier once you factor in yourself and what you carry.
The nice thing about steel is that it's repairable, rides nicely, and fails gracefully (should it fail at all).
Speaking as one who spent $3500 on a steel-framed commuting/winter training bike, I obviously disagree. Aluminum rides rough and carbon is just silly on a commuter.
Though to give you the benefit of the doubt, you did mention "<$200". I think that's more the issue than what the frame is made of.
Huh? The "chain loss" is the same during power. There's some friction loss when you're not pedaling a "not fixie" but there's also a "friction loss" in your legs when you're spinning just to keep a fixie's wheels turning.
> Second, you can often make a cheap fixie by finding an old frame, refurbishing it, and replacing the rear hub.
A coaster hub isn't that much more expensive and the user-experience is much better for most people. (That said, a coaster hub with some gears is reasonably cheap.)
And, replacing a hub is work (or expensive). It's often easier/cheaper to just find a rear wheel.
I think the point is, that while it's true they are often status symbols, there is a practical motivation behind them too.
[1] Congestion Charge - http://www.tfl.gov.uk/roadusers/congestioncharging/
The entire problem with luxury cars is summed up in the word 'luxury': burning cash for social proof.
http://www.youtube.com/watch?v=CwwWqRV2RsI
Makes me think its just a matter of the younger generation not having the money to buy a car. They spend it all on smaller, indulgent purchases and fail at saving.
It's hardly surprising that people without the money for cars are of the opinion they aren't so important anyway. Not being able to afford things tends to draw into sharp relief the difference between wants and needs.
And I realize Ford's marketing department can't do much about the slow, grinding recovery and thus are stuck worrying about long-term attitude shifts. But until the demographics show millenials moving to and staying in urban areas where transit is a feasible option, I can't imagine it's legitimately worth fretting over.
If millenials still choose to settle down to raise children in the suburbs, car ownership is pretty much necessary.
The only real threat from lasting attitude change, is that perhaps millenials will vote for more transit projects and subsidies over more car/road projects and subsidies and thus make it more feasible in more areas to not own cars.
We can only hope.
That's not to say that it must be inherently so. Just that, so long as these projects are typical government projects that are expected to go over-budget and over-deadline with no repercussions, they will be used as a tool for political favors and cronyism, at our expense.
[1] http://www.cato-at-liberty.org/denver-fools-the-wall-street-... Quote:
The old-style public transit system used cheap, flexible buses whose routes could be altered overnight to take people from where they were to where they wanted to go. When Denver first built rail, it substituted expensive but glamorous trains for inexpensive buses, but still allowed people to go from where they were–provided they were willing to drive to a park-and-ride station–to where they wanted to go–provided they wanted to go downtown. ...
This has been tried before, of course, most notably in Portland. How well did it work there? In 1980, under the old bus-transit model, transit carried 9.8 percent of Portland-area commuters to work. By 2010, with seven different rail lines and scores of transit-oriented developments, transit carried just 7.1 percent of the region’s commuters to work.
Today, the actual effect is not addressing actual "transit and residential goals". It's to funnel tax dollars to entities favored by the bureaucrats -- return the favor for campaign donations and so on (how else to explain that they've universally cost so much more than we agree to pay, yet they fail so dismally at attracting riders?).
So I believe that we need to find out how the system continues to be corrupted, so that we can go forward with a plan that can be reasonably expected to be successful. Following this pattern just digs us a deeper fiscal hole, without doing very much to address the real goal.
As for the linked arugment: seriously? People are honestly arguing that Denver should allow the problems of rail in America[1] to be exacerbated rather than addressed [2]???
Should we have built highways that went from suburban stables to urban stables because people liked their horses, owned horses and horses can go more places than cars (absent further roads)?
What kind of logical argument is that?
[1] the old "you can take the train downtown, but then you still need a car to get anywhere".
[2] say, by ensuring there are useful destinations at the other end of the rail line.
I think that's central to the point of my linked citation.
People stubbornly insist on buying homes where they want to live, rather than where bureaucrats claim they should. For a transit strategy to have any success, it needs to address what people are actually going to do -- or at least not pretend that it is doing so.
Until you do use them, and you realize that every bus is full, every Max car is standing room only and for as slow as the streetcar is, it is still packed every time. Considering the growth rate in this city, it isn't surprising that numbers look like they're going down.
I complain about the continuously, almost monthly, rising costs of a Trimet pass every month, but $100/mo compared to the $600+ I was paying for insurance and car payments (and not even including maintenance) has allowed me to live a more comfortable lifestyle. Forcing me to get a bike and living in a city that embraces its bicyclists has even made it a more healthy lifestyle as well.
The only reason I ask, is because I'm almost finished reading, in The Power Broker, how Robert Moses permanently crippled the NYC metro area and Long Island in particular, forcing them into a lower-density, automobile-centric society, when they would have been better served by mass transit, which he let rot on the vine. I imagine most other metro areas that were expanding at the time followed the same path.
I think that's an open question. Anecdotally, there are an awful lot of young families in my particular urban environment, mine included. Most intend to stay if they can, some give up and decide they "need" a bigger house than they can afford here.
As far as schools, this area is past the point of critical mass where there are enough high-earning, highly-educated families staying that they've driven the school quality up. Plus there is a huge and vibrant community of home schoolers to work with if you want a DIY education.
What we can do is go into massive, enslaving, soul-crushing debt for them, something the smart ones are justifiably reluctant to do.
Real estate hyperinflation is particularly bad. A house is unthinkable to anyone under 40 unless:
a) they've had a liquidity event, inherited money, or have a big trust fund.
b) they are willing to live in bumscrew nowhere or the ghetto.
c) they are willing to go into soul-crushing debt with the very real threat of being rendered underwater and thus permanently shackled to that house without bankruptcy or a short sale.
Screw that. Screw it all. Turn on, tune in, drop out.
I think the boomers qualify as the most irresponsible generation in history, especially in the USA. Now half of them have no retirement savings and are getting old, fast. Guess who's going to pay for it.
a.) Nope, none of those. Two incomes though, of which combined is higher than the median, but not by that much... b.) Not quite the ghetto, though some would say all of Tacoma is the ghetto. Still, there are much, much worse areas around here. c.) Not soul crushing. We pay about 1400/mo for our mortgage, which isn't much more than rent around here. (we had a small two bedroom apartment for 750, so it is possible to go cheaper though)
If you're willing to live outside a tech hub (which has other advantages), you'll find that in most places in the US programmers make high salaries relative to the cost of living, but the focus tends to be on the few places that this is not true. Outside the top markets, $70k + bonus is more than enough to be comfortably middle class (and own a home and car if desired).
I have a couple friends (from our generation) who are buying up duplexes. They can live upstairs and rent the lower and nearly cover their mortgage from the rent income. They are living for free and banking the savings for the down-payment on the next duplex.
Seems incredibly smart to me. You have a generation of people who've convinced themselves not to buy a house, driving up rents and driving down home prices. You can borrow money for next to free to buy those assets and rent them.
Even if you don't want to be a landlord, you can get a mortgage payment that is less than rent. Sure you have debt, but rent is just burning money every month. Even if your home declines in value, it probably won't lose as much value as you'd have paid in rent, so you're basically breaking even.
The housing situation is another matter. There's a glut. Credit is tight. Jobs are scarce. And housing prices are going down. Millenials aren't stupid.
I rent at present, it's not ideal, but it means that I'm not tied to a certain geographic region - if I need to move, it's a hassle, but I don't have a house on a 25-year mortgage that I'm stuck trying to sell in a terrible market, I can just say to the landlord - right, I'm offski, here's the keys, bye.
Because interest rates are likely to go and then I wouldn't be able to afford that mortgage any more?
I'm kinda thinking about buying a house, so I filled in an online mortgage calculator to work out what sort of money i'd have to work with. It said i'd qualify for a mortgage that was twice as high as what I think I need to get somewhere really nice, or three times as high as what i'd need for somewhere quite good.
I don't need that much extra debt to worry about.
That said, I suggested buying as much house as you can afford, not for how much they are willing to lend you. That will be different for everyone.
Furthermore, demographics in much of the affluent world is likely to create a further surplus of housing which further reduces over the long term the value of entry level housing as an investment vehicle. The population is greying.
My wife and I just bought a house. We could have afforded something big an shiny and new, but the prices being asked for that are simply unconscionable. Houses are not worth that much, and anyone who thinks otherwise is delusional. We are still in a bubble.
Instead we bought a rather nice small house in town, for less than my yearly base salary (i.e. not counting my wife's income or bonuses). It's not showy, but it's exceedingly comfortable. We'll spend some cash to make a few changes, but our payments are half of what our rent was previously.
We could have easily spent five times as much money, for a house that wouldn't suit our needs any better than the one we bought. How could the underlying asset possibly be worth five times as much? It can't be. Bubble. I'll invest my surplus income in something with sound fundamentals instead, thank you.
Because you may not have a job next month? You don't need the space? You have better things to spend the money on? Bigger houses come with bigger energy bills? While I do agree that the biggest factor here is economics (if people can't pay, they won't), I also think that there are other non-insignificant factors. Some of it is getting away from cars and houses as status symbols (a good thing), others are more practical (trying to offload a house while looking for a job is not easy). In this day and age, long-term employment is not a sure thing, so why settle down and grow roots when you'll only have to rip them out again?
- Leave more money in the bank.
- Get to maintain a positive net worth.
- Am much more free to move if I need to.
- Don't have to worry about sudden, large, unpredictable repair costs.
- Can demonstrate that I have learned something from watching the preceding generation recently get taught a very brutal lesson about the dangers of habitually buying as much as you can afford.
I'm pretty much a spot on example of what this article's describing; I live in DC where the average person in my peer group is still single, makes <50K/yr, and has student loans. A decent metro-accessible 2BR apartment here is 350K+, a house in the gentrified or gentrifying parts of the city is 500K+ (if school is a concern, make that 700K+).
This is COMPLETELY different from the experience that my friends back home in my small city in Missouri have, many of whom are married and buying houses for a song (<100K on 25-80K combined incomes).
The car thing fits this pattern too, a car in DC (and especially NY) is a total luxury item. A parking spot alone in my building is more than my rent was in MO. In MO, it's a necessity.
It's not that the author is right or wrong, they're just using a very broad brush to talk about a specific (albeit usually trend-setting) group of people.
Not necessarily true. Half the comments in this thread are saying that consumers don't spend money on cars, and don't spend it on other things, because NOBODY HAS MONEY.
Most places aren't like that, unfortunately.
That's what we get for inventing this stuff I suppose...
> For many routes within London it's quicker and far cheaper to take public transport (or a bike!) than to use a private vehicle.
Is a rather poor way to look at it in the context of London, because walking is often quicker than using a private vehicle here!
To give you an example, I live in San Jose area. To get to downtown san jose, it'll take me less than 10 minutes in a car on the high way, 45 minutes on the bike through the streets, or 1.5 hours on the bus.
1. It's much easier to buy a used car now since they have more years of service in them.
2. Getting a hand-me-down from a relative is possible.
3. Culturally, getting a new car is much more rare so there is less pressure to do it.
I think 3 is a huge factor. The social status a new car provides has fallen dramatically.
I agree, and this isn't just for Gen Y-ers, either. Most of my Gen X friends (I guess I'm a Gen X-er, too) have no interest in purchasing new vehicles. My wife and I have owned exactly one new car (which we then sold after 6 years to purchase our camper van), and our current vehicle is ten years old. Shiny cars just aren't the status symbols they used to be.
It's really a crazy contrast from what I remember a number of adults doing back in the 80s -- a new car every two years, regular as clockwork.
If you've seen a modern ski helmet after a hard hit, it looks destroyed. You wonder how it helped at all. But the destruction of the helmet absorbs some of the energy. A 'sturdy' helmet would just pass that right through to the head. Helmets are now effectively single use.
Cars are almost the same way. It's seemingly silly how easily modern cars are totaled. But they are crumpling and absorbing energy - while maintaining the passenger compartment's integrity. Older cars simply folded up. Often times the passenger compartment was the weakest point - i.e. the first thing to crush. That makes modern cars fairly disposable after major accidents, but I'd vasty prefer the safety of a modern car.
CarFax was pretty much directly predicted by Akerlof's "The Market for Lemons".
Houses on the other hand have always been held up as an investment, but I think the millenial's have been affected by witnessing the housing melt-down. Now is actually a good time to get into a mortgage (in many areas), but many people will wait because they don't want to see their investment decline. You read stories about the people who are underwater on their mortgage, but you never hear about people like me who bought a house they could afford, made payments and improvements and even with the collapse of the housing bubble, my investment is worth twice what I've put into it.
But younger people view houses and cars as tools and I can honestly applaud that view ... neither will bring you happiness by themselves.
I don't like The Atlantic's title: it implys what is happening as negative.
Outside of urban areas, cars are pretty much a necessity. I highly doubt that young adults in these areas aren't using cars at all, but it makes a lot of sense that they would buy used or borrow friends or parents cars over owning a new car, because low wages and unemployment tend to result in not having wads of cash on hand to throw at owning a new vehicle.
For young adults in urban areas, cars have pretty much always been a nice-to-have, but if you don't have the money for them (especially the extra for parking in urban areas), public transportation will work, even though it might not always be sexy.
Same with home ownership. Homes are the most expensive possessions out there. If you don't have the money, credit, cushy job, you can't afford one. So living at home, or with friends, or renting are the doable options, even though home ownership is still highly desired.
The experience of middle and lower class young adults is much different than their upper class peers. I imagine buying behavior really hasn't changed much for the upper classes. But the large majority in the lower classes have the greatest sway on the trends.
I find it fascinating that anyone would be baffled why these trends exist. When youth and lack of experience mean shitty jobs and unemployment, its no wonder the younger demographic aren't big spenders. If you don't have the money, you don't have the money.
1: Many of them don't have jobs (or have low-paying jobs) because of the economy.
2: Many of them watched their parents drown in debt from houses and cars they bought but couldn't really afford
3: Student debt.
No amount of marketing is going to fix that.
This quote alone just makes me shake my head: “I don’t believe that young buyers don’t care about owning a car,” says John McFarland, GM’s 31-year-old manager of global strategic marketing. “We just think nobody truly understands them yet.”
Then factor in that for many folks, they spent that money on that education and graduated to find out the only place that would/could hire them was the local coffee shop for 20 hours a week, and there is no amount of marketing in the world that is going to convince that person to buy a $30,000 car.
I doubt that most people who felt financially secure and could afford a new car wouldn't want to own a new car. Nobody really enjoys driving a beater, or being forced to walk or ride a bike everywhere (aside from doing it for the enjoyment of it), or trying to negotiate for rides with friends. Public transportation in most of the U.S. is awful, so I don't see many people choosing that over having your own shiny new car.
So the article briefly touches on the economic pressures facing young people in mentioning the recession and student debt, but it spends most of its paragraphs trying to paint some kind of cultural picture of "Millenials" as being a neo-beatnik generation that worships sharing.
No, it's the economy, stupid. And not just recently, either; for the last 50 years at least, there has been a gradual trend towards ownership of things like homes and cars costing more and more in terms of the working hours needed to afford them.
If you are among the 3.8 million people making minimum wage (or less!) now [2], a car is the last damn thing you want to own. You won't be able to afford a good one, so you'll constantly be spending money on maintaining it, not to mention that it will strand you one day and your minimum wage job will be more likely to fire you for not showing up than the average cubicle job. Cars are expensive to license, expensive to insure, and in California, old cars are expensive to smog. Even better, if you fail to pay for any of this, you're likely to receive a citation or ticket, which can quickly add up to more time off work and more money out of pocket.
If you're young, you're far more likely to either be burdened by student debts or be making minimum wage [3]. That means that the odds are that you're either not living on your own, in which case a shared vehicle (either a housemate's or a Zipcar or something else) makes more sense than owning your own, or you're living on your own and you can't afford a shiny new Ford Fiesta without a third full-time job.
Additionally, the entertainment industry tends to make more money during economic downturns, and poor people are more likely to spend a greater portion of their money on entertainment. If you can afford little, you might as well have as much fun as you can, especially if your prospects for making more money in the near future aren't that good. If you can hitch a ride to Burning Man, that sounds better than spending the money of the ticket price and time off work and food and everything else on mechanical work for your aging car.
Bah. This article was crap. It didn't have the quality I've come to expect from The Atlantic.
[1]: http://finances.msn.com/saving-money-advice/6952105
[2]: http://www.bls.gov/cps/minwage2011.htm
[3]: http://www.bls.gov/cps/minwage2011.htm again.
I wish I could afford my own transport, but my low paying tech job (I'm a 4 year self taught junior developer at a small web development company) can barely pay my rent, let alone afford the ridiculous amounts of money I would have to pay for car insurance (I think I was quoted around £2,100), my driving lessons and a car mean that, for the next few years at least, it won't be possible.
Which is a shame, considering that I have to pay 1/6 of my monthly wages in monthly bus tickets anyway.
One of the qualms I have with English public transport is that over 55's get completely free transport, (I have no issue with them of course) whereas 15 - 21 year olds tend to pay extra in my area, so the people who are only just starting to work in their low paying jobs get charged so that people who have houses fully paid for and receive money every month on their pensions can have it for free.
http://www.direct.gov.uk/en/TravelAndTransport/Publictranspo...
Being neither of those, I get to pay a hell of a lot more! I'm glad I've got a decent job since I still wince each month when I renew my Oyster.
http://www.statista.com/statistics/185536/share-of-workers-p...
Further, a look at hard data (for both the bottom 20% and the middle 20%) shows that people today are more likely to own a car than in 1981, and have more house per person than in 1989 (no data on square footage exists in 1981).
http://www.aei.org/files/2011/10/25/Material-Well-Being-Poor...
So no, it's not the economy.
Also look at the ratio of median income to real estate value. We are still in a housing bubble.
My household earns about 40% more than the national average, we do not live extravagantly, we budget well, and we feel barely middle class. This is ridiculous. I'm surprised there aren't riots.
If we "feel barely middle class", it's because our expectations and desires have grown faster than our means. It's not because we have less than some historical cohort.
Think about that for a minute.
Find me a corporation or an entrepreneur who thinks like this. Imagine a CEO saying this to shareholders and the board:
"We didn't make our goals this quarter, and many in our industry also showed reduced sales numbers. It is clear that we need to reduce our expectations. Next quarter's numbers will be lower, and shareholders are just going to have to take a loss."
He'd be out on his ass the next day.
Related to this is the idiotic garbage that the working class are fed by the media: that they should hate people who make good wages and agitate to cut those other peoples' wages down to be in line with their own.
Again, find me a corporation that thinks like this. Apple is currently worth more than Microsoft. Is Microsoft thinking "how can we make them make less money?!?" No. They're thinking "How can we grow? How can we make as much money as Apple is making?"
Unbelievable.
You realize that you're being sold into fiefdom on the feudal "lands" owned by the financial industry, right?
Edit: I'm not a socialist. I'm a capitalist.
Part of capitalism is negotiation. The American middle and working classes have been fed this ridiculous line of baloney that capitalism is a magical hands-free machine that will elevate their standard of living if they do nothing. It doesn't work that way, as every businessman and entrepreneur understands. You have to negotiate. You have to push. They push, and you push.
Studies have shown that the ideal point in negotiation is often precisely where both parties feel a bit, but not too, unhappy. Right now the rich and corporate interests are rolling in it, happy as clams, and everyone else is suffering. That's because one side is pushing and the other side is not.
So how do workers and professionals (whom I count as workers... the white/blue collar distinction is increasingly meaningless) push?
The old way was unions, but that's definitely shown its age. We need some new ideas.
Lowering our expectations is not a particularly productive idea.
Edit 2: I also think using government to push is fair game.
Why? Because the rich and corporations do it. They take corporate welfare, bailouts, special infrastructure investments, government contracts, and benefit hugely from publicly funded R&D.
But they want you to refuse to use the government as a lever because... it works!
So capitalists really ought to be socialists, at least for now. Only give up a lever in a negotiation if the other party on the other side of the table also gives up that lever. The rich want you to be principled libertarians while they munch at the government trough.
Go read the article I linked to. We are richer than our parents. We own more and bigger houses and cars than they owned.
To fix your analogy: "Next quarter's numbers will be higher, and shareholders are just going to accept 10% growth rather than 20%. Expecting 20% growth forever is unrealistic."
If you want to argue that growth should have been higher than it actually was, or that somehow the evil vampire squid is holding us back and making us into serfs, go ahead and make that argument. But you still need to square your argument with the fact that we are consume more than ever.
Also, wrt growth, the argument I would make is that for much of the last 30 years, most of the economy's growth has not been shared with the middle class. Some of this is undoubtedly structural - the technology revolution has put a higher premium than ever on those with highly developed skills/education and there are certainly workers who have just been left behind. But if you look at the data, the wealth gains over the last 30 years have pretty overwhelmingly been concentrated in the VERY top of the income distribution (I hate to use the rhetoric of the Occupy movement just because it is very inflammatory to a lot of people, but it really is a top 1% phenomena). If this inequality could be mostly explained by education/skills, you'd expect something more like the top ~20% to be vastly pulling away from the bottom 80% of the distribution.
This has been true for a very long time, but people were filling it in with debt. Then everything got over-extended and collapsed.
Please go read the source I linked to, which shows that growth has not stalled for the bottom 20%, nor the middle 20%.
Uh, they do say that all the time.
I tend to agree with the other poster: our expectations are too high. It's a product of having witnessed one of the greatest runups in wealth (and debt) we've ever seen in history.
A 2500 sqft house, two (or three) cars, regular vacations to Europe or the warm south, maybe a summer house, boats, motorcycles and other toys...these things are now expected by the "middle class". It's completely out of whack with history and the rest of the planet.
So whether you choose to lower your expectations or not has no bearing on what will actually happen. We're going to have a deleveraging run where the average Westerner is, as a whole, poorer than the generation before us.
Note: the views casually related above may or may not represent the actual considered opinions of the management.
We do have the incentive. And we will extract that wealth. But it takes time, since "they" currently have the political power.
What you describe is what is happening in the real world. Reform everywhere so they get the pensions and benefits, but nobody after them will. This is happening both publicly and privately. Even unions are stiffing new members.
We'll have the last laugh, though. Eventually the boomers will need to divest. At that point they'll find out we don't have the money to buy their assets.
Hadn't thought of that. Might be quite funny...
I suppose they'll just give it to their offspring. So for now... kill rich kids? Just brainstorming here.
Much like our southern neighbours, our soon-to-be-retirees don't have much in savings, and the vast majority of their net-worth is tied up in their homes. Unlike the US, we haven't had a housing price adjustment yet. So these boomers are counting on having the current value of their home as their future retirement fund. But as we've learned, that number may as well be fairy dust until someone hands you a cheque.
So what happens when these boomers go to retire, and they find out nobody can afford (or wants) to buy their $500,000 McMansion? When every boomer actually has half, or worse, the amount of money to retire as they thought?
Goldman buys them all up at a bargain rate and rents them to those of us who can afford to not live in the global megaslum?
You are describing the upper echelon of lawyers and execs.
Also, no other Toys - I have a weight set (power rack, olympic weights, heavyweight bench, etc) that ran me 1300 brand new, other than the car and the house that is our most expensive purchase... ever. I could have sworn once we reached a six figure income we'd be "well off." I guess that is a dream.
But there were/are a generation of blue-collar, "middle class" people out there living the life I describe. I know some of them. They aren't lawyers and execs, they're public servants, unionized factory workers and such, most of whom make less money than me. Their boomer parents were middle-class wealthy, and their expectations are higher. Only the economy no longer supports it. So they fulfilled these expectations via copious amounts of debt. Then everything broke.
One managed to land a six-figure job in Kentucky, one of the lowest cost of living places that was largely passed over by the housing bubble. The major reason he's well-off is that his house was affordable and he went to a lower priced university and didn't need much in the way of student loans. He lives in a ~2000 sq. ft. house that cost about $175k when he bought it. Where I live that house would be $400k, and it's not even a major city. Median incomes where I live are no higher.
Another had a liquidity event. Another owns a hugely successful online company.
The vast majority -- vast majority -- of the peers I know do not live anything like what you describe. These are not slackers either. These are hard working, highly educated professionals. Many of them routinely pull 60 hour work weeks doing things like computer programming, business, marketing, and high-end interior design for wealthy clients.
I honestly have no idea how people making the median family income can live, unless they live in horrible neighborhoods or in the middle of nowhere.
I didn't say "Earth to Planet Trust Fund" just to be snarky. There is a culture of people who grew up with wealthy parents, had mostly paid for rides to places like MIT, and earn six figures, and really do have kind of a "why do they not eat cake?" view on this stuff. In my experience they're not bad people. They're just insulated and ignorant. They have absolutely no idea what they're talking about if they think their situation is anywhere near normal.
Again, public enemy #1 here is the housing bubble, which from an income/value ratio point of view is still in effect. #2 is the cost of college. The former has increased somewhat in quality since the previous generation, though not enough to justify a quadrupling (or more) in cost. The latter hasn't increased much in quality at all, but the cost has skyrocketed.
In the UK, our parents' generation paid zero. They got given grants...
That includes the elite, politician-farming universities.
The current government just tripled the fees, after one coalition partner promised to abolish them in the campaign. That's why students ended up trashing (actually the other partner's) HQ in 2010.
And, that other couple aside, we're by far the most extravagant people in our friend group (designers, developers, creative class all). Only a couple of our middle class friends own anything, much less expect to own two houses and cars.
The specter of wide swathes of middle class people who "expect" two houses and cars and European vacations is simply a strawman argument, conjured up to "prove" that these people "deserve what they get."
In 2006, 40 percent of home sales were for "second homes", with the typical buyer having a household income of $80,000.
>"tatsuke95's comment is ridiculously out of proportion"
I'm glad you think it's out of proportion, based on your personal anecdotes about your friends (except for two, but you've defined them as upper middle class, so they don't count!).
But the "wide swathes" of indebtedness, bankruptcies, defaults and deleveraging in the US says otherwise. Where have you been for the past five years? Those are facts. It occurs when people "live beyond their means", which is nearly synonymous with having too high expectations: you want more than you earn. Do you think it's the rich people living beyond their means? Is it the poor people buying cars and houses they can't afford? No, it's the middle class.
Minimum wage hasn't kept up with inflation.
Debt financed consumption.
You're trying too hard. This stuff isn't that complicated.
I rather like the AEI. It serves a purpose. Kind of like a honeypot.
You're right that minimum wage hasn't kept up with inflation. You're also right that debt financed (a lot of) consumption. But it doesn't follow that those earning minimum wage drove consumption by acquiring debt.
As yummyfajitas links above show, those earning minimum wage are a tiny percentage of overall wage earners. In other words, minimum wage earners aren't going to move the needle much. Double minimum wage (and magically don't have that affect employment levels) and consumption isn't going to go up all that much, simply because there aren't that many people earning minimum wage. For that reason, it is a bit of a silly metric to base an argument on.
Whereas OP includes values (eg smartphones vs cars), thaumaturgy also says they don't have the cash.
No reasonable person can deny wage stagnation, rising unemployment, increasing costs (education, food, housing, and transportation).
yummyfajitas gets argumentative, citing some libertarian fallacies.
specialist refutes yummy.
liber8 gets pedantic, forgetting original point.
The average price of a new car in 1980 was $7,200 [1]. In 2010, it's $28,400 [2]. That's an almost 300% increase.
Federal minimum wage in 1980 was $3.10 [3]. In 2010, it's $7.25, a 130% increase. That's lagging pretty far behind new car prices.
You point out that fewer people are earning minimum wage now than in 1980, but I would counterpoint that more people are unemployed now than in 1980 -- by almost double in terms of the real numbers of unemployed people (but "only" a rate increase from 7.1% to 8.4%) [4].
Although car ownership did increase from 1980 to 2010 [5], total new passenger car sales actually fell from 1980 to 2010 [6], which is closer to what the original article was actually discussing, and would support the conjecture that there are simply more cars on the road now than in 1980.
Further, the inflation-adjusted income of people aged 25 to 34 has stayed roughly level from 1980 to 2010 [7], which pretty well jives with so much of what I've read everywhere else that shows a tremendously overall weakened buying power amongst the youth demographics -- which, again, was what the article was trying to be about.
So, in summary: the price of a new car has gone up a lot but wages have not, especially if you're young. I'm pretty confident that this might be a factor in why young people aren't buying new cars.
[1]: http://www.thepeoplehistory.com/1980.html -- might not be a good source, I'm open to suggestions for something better.
[2]: http://www.ehow.com/facts_5977729_average-cost-new-car.html; this number seemed high to me, but http://www.usatoday.com/money/autos/2010-07-12-carprices12_S... corroborates it.
[3]: http://www.infoplease.com/ipa/A0774473.html
[4]: http://www.nidataplus.com/lfeus1.htm
[5]: http://en.wikipedia.org/wiki/Motor_vehicle#United_States -- because I questioned the partisanship of your source.
[6]: http://www.bts.gov/publications/national_transportation_stat...
The employment to population ratio is the same as it was during the 80's, and was considerably higher until the recent recession. In contrast, the fraction of people earning min wage has fallen.
http://research.stlouisfed.org/fred2/series/EMRATIO
Further, adjusting wages (rather than total comp) for inflation is a gratuitous statistical fallacy. One of the biggest drivers in "inflation" is an average of the price of the expanding basket of goods called "health care" [1]. For most people, this is paid for out of non-wage compensation.
[1] I.e., an MRI + laparoscopic spine surgery today costs more than back pain in 1980.
And that is clearly not the case. According to government statistics [1], nearly one-third of those lacking health care coverage in the United States are young adults. The unemployment rate among this cohort is over 15 percent, and much higher if one looks at U6. And those who are employed are collecting lower wages which are not offset by higher benefits: less than 25 percent of young workers are provided health insurance through their jobs as compared with over 57 percent for the rest of the labor force.
Put simply, breaking down aggregate statistics into demographic chunks gives a much better picture of what is really happening. Younger works have it really hard these days. Older (employed) people are still doing OK and they are the ones pulling up the aggregate income figures. But for young people -- the focus of this article -- the data supports Thaumaturgy's argument that younger people these days are simply poorer.
[1] http://money.cnn.com/2012/04/16/pf/health-care-young-adults/...
If inflation-adjusted compensation were down, this fact would pose a paradox and suggest we are incorrectly measuring inflation - however, the paradox is easily resolved by looking at total comp.
Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people by calculating the value of these products and services as if they were bought using salary. Leaving aside the morass of problems with the way this approach leads to grossly inflated aggregate income and is clearly intended to deflect from more accurate claims that most market wages are stagnant, their approach is totally off-topic in any discussion about the state of the labor market: what kind of jobs are available to young people; what those jobs pay in salaries and benefits; and what people can afford to purchase given those incomes.
You should also ask yourself why the authors go through such contortions to count things like rentals as purchases and IMPLY that housing is clearly affordable when there is a perfectly straightforward and universally-applicable measure of real estate affordability in the rent/buy ratio? The only reason the AEI does not use this statistic is that it is inconvenient, showing that housing costs have risen significantly across the United States in response to the housing bubble which started in the 1990s, Prices have still not collapsed even close the levels enjoyed by previous generations. So housing is NOT more affordable for people today than in the past. It is in fact significantly more expensive pretty much everywhere except Las Vegas:
http://money.cnn.com/real_estate/storysupplement/price_to_re...
Finally, since you explicitly make the claim that health care coverage has improved in your MRI/backpain comment and suggest that this is what people are spending their money on instead of cars and houses, it is interesting that the AEI paper explicitly excludes health care costs in its panegyric on how well-off American workers are, noting that "we exclude from consumption out-of-pocket health expenses because they are not closely tied to well-being." In other words, they realized that including basic health care expenses as income makes people relatively worse off now as compared to the past.
On a final point -- it is worth commenting that your other link to the labor participation rate shows the exact opposite of what you claim: the average labor participation rate is visibly much higher throughout most the 1980s than at present, except for a brief crash during the 1982 recession. If 2008 was anything like 1982, the participation rate now would be well into the 60s again and growing.
See table 1 & 2. Housing consumption is measured in terms of square footage, number of rooms, fraction of homes owning a car, and other similar objective properties.
I didn't claim housing was "more affordable" (whatever that means), I claimed people have more of it.
At worst your argument and sources conflate wages and income and standard of living in order to make insinuations that are statistically wrong. At best they can be interpreted as making the fairly non-controversial claim that the AGGREGATE standard of living in America has improved over the last 30 years, despite the fact that there has been a clear reduction in the relative purchasing power and affluence of younger Americans over the last 10 years.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. I give them some credit for mentioning this, since it should be obvious even to the uninformed that aggregate measures of "housing consumption" are going to go up when you find new forms of housing to count half-way through your survey.
As far as the reputation of the AEI goes, it stopped having any when it fired David Frum for being too far left [1]. Mainstream economists find the institute laughable [2], and even conservative economists like Bruce Bartlett mock its employees as "scholars" (his quotes) [3]. Poor quality ideological broadsides like the one cited above are the norm rather than the exception. Charles Murray's "The Bell Curve" is broadly derided for racism, while Kevin Hassett and James Glassman are ridiculed in the mainstream media for backing pump-and-dump schemes like "Dow 36,000" and for seeming to be unaware of such basic economic concepts as discounted cash flow.
[1] http://www.washingtonpost.com/wp-dyn/content/article/2010/03... [2] http://delong.typepad.com/sdj/2011/10/the-uncertainty-argume... [3] http://capitalgainsandgames.com/blog/bruce-bartlett/1601/gro...
"You should also ask yourself why the authors go through such contortions to count things like rentals as purchases..." <- Misrepresentation. The authors attempt to measure consumption of housing, as does thaumaturgy. You are the only person discussing real estate investments.
"Their "income" figures are equally shoddy since they include government transfers through programs like food stamps as part of the "market income" of poorer people..." <- Misrepresentation. The authors explicitly distinguish between earned and unearned income.
To cite just one example as evidence that you need to read AEI "research" more carefully, you can find the authors mention the mid-1980s inclusion of mobile homes and trailer parks as new forms of "housing consumption" in the first paragraph on page 15. <- Misrepresentation. The "re-definition" was done by the government, not the AEI. It's also irrelevant, since I compared square footage in 2009 to 1989 (i.e., both stats are after the redefinition).
Unfortunately I don't have the time to do the research and math myself to tease out these relationships.
You're probably right, but that doesn't lead to a conclusion that the effect is caused by the economy.
In absolute dollars, cars are more expensive than they used to be, but for your dollar, you get much more car. That is, there are more features (stereo, A/C, power everything), more safety (both structurally as well as ABS, better restraints, etc.), more reliability, and much greater life expectancy [1] from a modern car. In short, it's a better investment.
If you've got enough money to meet the minimum threshold for buying a new car, you're going to get more for your money than you did in 1980. But that minimum threshold has definitely been raised. Part of this is from consumer demand; part of it (particularly in areas related to safety or emissions) is government mandated.
So it looks to me like the car market just evolved itself out of the reach of many young people.
[1] We just got a new car for the wife, trading in her old car at 200,000 miles. My car has 128,000 and is still running strong. In this age those numbers are expected; back then, a 200K mile car would be a minor miracle.
(1) The variety of mid-high end luxury cars (i.e. $50k+), and the number of such cars sold, far exceeds the choices available in 1980. For example, you now have a variety of choices if you want to drop >$50k on a pickup truck. (2) We simply have more disposable income to spend on cars. That we’re so rich we can afford to spend a higher minimum wage multiple on a frivolous expense isn’t really a bad thing.
This of course also overlooks the fact that today, right now, you can buy a brand new car for about $7,200. (I just bought a Ford Ranger for about that, but there are numerous other choices in that range as well.) Even these very cheap cars are so much better in every tangible and intangible metric than even “decent” 1980's cars that it’s laughable. Step up to cars in the $15k range, and you’re able to buy cars that are better in just about every way, except for upholstery, than even luxury cars in from 1980.
http://en.wikipedia.org/wiki/File:US_incarceration_timeline-...
Incarceration rates: it's a hockey stick! Incarcerated people are all unemployed, and most of them, if in the job pool, are likely to be in the minimum wage or similar bracket.
The equivalent of a $3.80 minimum wage in 1980 is also nearly $9 today with inflation, so the group of true "minimum wage" workers is much larger for yet another reason.
This is not economically motivated - I have comfortable free cash flow and a healthy balance sheet free of personal debt. I pay for a car service and take taxis more than public transportation and pay more than the average U.S. homeowner's mortgage payment in rent. I also spend a great deal more than my parents, who find my behaviour and preferences baffling, on travel and technology.
I won't disagree that a significant fraction of decreasing home and car ownership may be explained by economic factors, but would caution that (a) there is a significant minority that is making these choices as a matter of preference, and, (b) for the rest, these behavioural changes, initially motivated by economic conditions, could become ingrained to where they persist beyond economic weakness. With the second point I'm not saying we will be a "cheap" generation, just cheap traditionally, as we spend in categories we value more than piles of sticks and little steel boxes propelled along asphalt by exploding chemicals.
There may be a cultural factor to it as well. I don't find the need to drive everywhere like I did growing in the 90s, but I certainly don't have a ton of income left over for car and fuel (let alone even more debt for a mortgage and the other costs that entails).
My behavior is driven more by economics than culture.
Your lack of desire for a car has a LOT more to do with living in NYC than your age or social status. You sound just like friends of mine from NYC.
Edit: last sentence was unclear
Thus our (and my) psychological shift could be explained as simply as a preference for the hyper-connected urban lifestyle, with decreasing home and car ownership flowing from that change in preferences rather than a direct change in beliefs about cars or houses. Either way, the symptoms look set to persist.
Until you have kids, and you see how most urban school districts are run. This is the same reason our parents left the city and moved to the burbs. Things are not really as different now as we think.
Though now there is a huge opportunity to reduce the cost and drastically improve K12 education. If our generation can break the entrenched bureaucracy of public education, then I would say urbanization in the US could be more than a consequence of Gen Y being poor and delaying starting a family.
As soon as you even think about having kids, absolutely everything about how the suburbs are designed suddenly makes sense.
I still prefer an urban setting though.
The thing with age that young(er) people will never believe is that you change. It really doesn't matter what you think or believe now. It is unlikely to remain constant for 20 years.
And wanting to not be reliant on a car is a big part of the reason I moved into the city in the first place. I did the calculation many years ago, and figured out that even from a purely financial perspective it's better - the rent's higher, but cars are impressively expensive to own, fuel, and maintain. And there are a bunch of other financial perks. Living within walking distance of numerous bars saves a mint in cab fares, for example. (Not to mention that suburban taxi service tends to be an enormous PITA.)
This has nothing to do with economy, this is behavioral change. Freedom in all forms is the thing we value most of all and ready to spend a lot of money for, and houses and cars have negative value in this respect, they bind you.
MYSTERY SOLVED.
Of course you don't want to own a car in NYC.
I live in Toronto and don't want to own a car. We will need to get a replacement for our current car because there are enough things that we need to do that car services would not benefit us (we also live just outside of the core service area for every single one of the three—or is it four?—car services in Toronto).
The other reason I own a beater is that I live near a major city and can take public transit to and from work. If my car is going to sit in front of my house most of the time, why pay for a nice one?
Public transportation is much better near cities, and the Millenial generation is the most city-bound American generation ever. Americans in general are migrating to cities, and young people more than most. I think the article grossly underplays the importance of this demographic trend.
I would bet this is a major factor in declining car ownership, AND home ownership--since it is so much easier to find reasonable rent near a city. In small towns and even many suburbs, there are typically few rentals, so you have to purchase if you want to live there. Real estate tends to be more affordable there too.
Not that this is anything more than anecdata, but in my peer group, this isn't true. I get around by bike and don't own a car, but could afford a new car if I wanted one, and this is true of many of my friends. Ideas stemming from New Urbanism are a pretty big deal in at least a certain sector of our generation; we're much more likely to consciously decide to prioritize proximity to things over cars, and even if we can afford cars, we're (I'd like to think) more mindful of the sustainability consequences of the modes of transportation that we choose than our parents' generation was; further, I have a fifteen-minute commute and don't have to worry about traffic or parking, and it would take a lot for me to be willing to give that up. This is in Washington, DC, but I know people in similar situations in New York, San Francisco, Portland, and Seattle.
When I owned a car it was simply a means to an end and not an identity. A method of getting from one place to another. Living in the city (I've lived in several) the car gets beat to hell, so having a new car is largely impractical without an off-street parking space. I also have absolutely no desire to live in distant cul-de-sac style suburbs, and I'd prefer to walk to the store if I can, even though I'm at the point where I'm thinking about buying a house and raising a family.
So whatever assumptions you're making about minimum wage or driving an older car or walking / biking are not applicable to me, and pretty much anyone in my circle of friends in the demographic which spans both coasts and multiple cities.
Ah, but the shift in housing desirability also plays into this. Those few places in the US that do have great walkability/bikeability/public transit are booming and in huge demand.
I think many young people do aspire to walk and bike everywhere, which is why they aspire to be able to live in vibrant, much-denser-than-suburban environments. That this is true is obvious when you compare housing prices. People pay a huge premium for it.
Biking almost everywhere is awesome if you're fortunate enough to live in a place that makes it safe and convenient to do so. I take trips by bike at least four times more often than by car, purely by choice since I own both.
When we visit family out in more typical America, my young son gets frustrated by so much time spent in a car seat. He's "spoiled" by always being able to interact much more with his surroundings, whether walking, in his stroller, or on my bike with me.
Not enough people understand this concept, and it's been documented from at least the Great Depression from what I'm aware of.
Certain sectors of the economy are doing well. The aggregate economy is tanking.
Individuals will find their way, more or less effectively. The lauded "U.S.A." may well not remain what their parents envisioned -- probably quite often really in turn that generation's parents' vision assumed whole by those children and presumed, without much critical thought, to somehow be "inviolate", no matter their (those children, the current generation's parents) own personal actions.
How about poorest generation. Wages are stagnant and down in real terms. Debt burden out of the gates (thanks to educational loans) are through the roof. Social norms around employment security have collapsed. Returns in the stock market have been flat to down their entire sentient lives. They've seen home purchases wreck the financies of their parents (and especially their X-er older siblings who bought at the peak.)
Oh, and under/unemployment is running over 50% for under-30's.
I don't know, Atlantic, maybe that little recession thing we were told was over has something to do with it.
Is everything we read here such an extreme case that the rest of the world has no chance of catching up or competing (except in the überextreme sport of Startup)?
Rates for drivers under 25 are upwards of $200/mo in most urban areas, and that's for the utmost basic 'one-way coverage' insurance. Under one-way, if you are deemed even partially at fault in an accident, however minor, the insurance pays the other's bill only - and essentially ensures you cannot drive for the next three years as premiums quite literally skyrocket.
Anecdote from my university years: friend of mine was driving his van, had a lady sideswipe him and send him into the median, immediately crashing into a tree. She kept driving. The van incurred damage from the sideswipe. He was found 100% at fault regardless. His insurance went from an already preposterous ~$240/month to over $900. Nine hundred dollars per month - isn't that what they charge for Lamborghinis? Fully licensed, clean record for 4+ years at the time, I believe he was 21. It was over two years until the rates finally lowered to 'a more affordable' $300+/mo, which is AFAIK still what he pays.
I currently pay $250/month, one-way of course. I could drive a '95 Civic or an '08 BMW, my rate would differ ~$20/mo. The difference between dozens of insurance companies is about the same - $20 more or less. I am 24.
FWIW, bikes are not exactly feasible for over half the year in our climate (Toronto).
I used to live in Toronto, bought my first car when I was 20, got into an accident at 21; I couldn't afford insurance and hence a car again until I moved to the US at 23. It isn't the same here, my wife and I now pay $200 every 6 months which is 3rd party and liability (the one-way you mention) and convers both of us. Also 1 accident in every 3 years is forgiven. (I live in California)
The article cites the percent of new car sales that were from 21 to 34 year olds in 1985 versus 2010 and find that it falls. What they really want to look at is the percent of 21 to 34 year olds that buy cars. You could have an increasing percent of young people buying cars AND a fall in the percent of car sales driven by young people if young people are making up a smaller proportion of the car buying demographic. Indeed, 21 to 34 year olds make up a smaller proportion of the general U.S. population in 2010 than in 1990 (http://www.censusscope.org/us/chart_age.html). It probably isn't enough to reverse their result, but it soaks up some of the claimed behavior.
They make the same type of mistake looking at the percent of teens with a license. Well, 13-15 can't even have a license, so what is happening to the age distribution within "teens"?
Then you have all of the other causal effects that other commenters address. I've come to expect this type of thing from the Atlantic blog posts, so I was surprised to see that this was a magazine article.
I would like to explain to the author, very slowly and carefully, that something happened in 2008 which made banks a bit more wary of lending to people they would call "subprime." I tried to get a mortgage this spring and failed, even with a good income and 35% down payment.
Since I live in an urban area well served by subways, buses, taxis, Zipcar, and Uber, letting go of that high fixed monthly expense in favor of an a-la-carte approach has been a great financial benefit for me.
Of course, if I had two kids, lived in remote suburbs, or had to commute to suburbs, the equation would be very different.
But for now, for me and many other urban dwellers, the value of owning my own car just doesn't compute.
Gen X matured into a world not quite as harsh, but generally took on huge amounts of debt to fund first school (not quite so much as current students), vehicles, homes, and marriages. Only to be hit by multiple periods of very uncertain economic times (recessions in 1989-92, 2001, 2007-2009), each of which was followed by increasingly weak recoveries. The early 1990s recovery not really picking up steam until 1995-6, the 2000s in 2005-6, and the most recent recession still not really over.
In the early 1990s, it was popular to call Gen X the "slacker generation", which I suspect was largely due to the economic conditions of the time. A few years later, they were the dot-com generation, beavering away in the first generation of Internet start-ups.
The 2000s are already being called a "lost decade". The 2010s are well on their way to much of the same. Some sectors, notably tech, have been countertrending, which may affect YC/HN impressions. But overall, economic trends have been downward.
I'll give him this: at least he's not blaming his customers or the market, unlike some other industries I could name. I just wonder what he will do if when he "understands them" he will have figured out that they don't care about owning a car.
So there are two sides to this story.
Education is the “obvious outlet for the money Millennials can spend,” Perry Wong,
the director of research at the Milken Institute, told us, noting that if young
people invest less in physical things like houses, they’ll have more to invest
in themselves. “In the past, housing was the main vehicle for investment, but
education is also a vehicle.” In an ideas economy, up-to-date knowledge could
be a more nimble and valuable asset than a house.
With Lyft, they're brought the prices down enough so that I'm no longer thinking "can I afford to go there", lyfts become an impulse purchase. Mission to Soma is like, $6 - $8. Mission to Richmond is $15, Mission to Chinatown is $12 or so. If you're going with 2 or 3 friends, then it's basically about the same price as public transit.
Disclaimer: I'm friends with several of the Zimride staff but I'd equally be a fan, even if I weren't.
Commute costs, viable living distance, heating and cooling bills, construction costs, amenities (pools, landscaping, toys including boats and RVs), and consumer goods are all directly tied to energy costs.
Housing is an expensive, illiquid, geographically fixed investment. You're investing not only in the property and structure, but the neighborhood, local job markets, and/or anticipated commute costs.
Oil prices have had a very direct effect on the present and future value of suburban and exurban housing. Both positive (in the era of cheap energy, 1945 - 1974), and negative (as prices increased from the 1970 oil shocks onward).
I pay $150 month for my family talk, text, and data plan, plus another $50 for high speed internet into my house. The payment on my car is $207 a month (own, not lease).
I probably spend another $2k-$4k a year on other piece of technology, while doing the bare minimum to keep my car running.
And I live in the suburbs in the midwest. I bet HNers in cities have a much stronger bias towards personal technology than personal transportation.
- Millennials with children
- Millennials living in rural areas vs those in the cities
- Millennials with college educations
- Nonwhite Millennials
Is this why university costs more than a house now?