Posted on October 6, 2016 by Yves
Smith
Even though Lambert and I
dislike the use of marketer-created generational cohorts like Gen Y and Gen X,
because age groups do not have political agency and the range of experiences
within a group will be greater than across groups, a
survey of 1200 Millennials by Ernst & Young and Economic Innovation Group
shows how precarious their economic condition is. Admittedly, that is a
long-standing feature of young adult life that is seldom discussed in polite,
as in posturing-as-successful company. I recall two successful professionals in
their 40s recounting how they lived paycheck to paycheck, on pasta, in their
early-post college years, fearful that a personal emergency would leave them
destitute (neither had relatives in the wings to bail them out; one was from a
desperately poor family whose escape depended in part from someone making sure
she got elocution lessons so as to eradicate her class markers; the other was
estranged from his family by virtue of having come out). But for most college
educated young adults in the post-World-War-II era, prior to the crisis, lean
years in their 20s were a transition period, not a permanent status.
By contrast, this study shows
that quiet desperation is a state of life for most Millennials. While the shock
of the financial crisis did enormous damage to many people in all age groups,
as anyone who lost their home to foreclosure will attest, Millennials faced a
job market that left even normally-always employable new college grads out of
work or employed at well below their potential as baristas, temps, or in
low-level retail jobs. This has a huge impact on their lifetime earnings, not
only by depressing income in their early years, but even when they find
better-paid work, even then putting them on a lower income track than those
that landed higher-quality roles straight out of school.
Read this
short but important survey in full; it gives a grim picture. I’ve
highlighted a few findings below (emphasis original).
Coming of age during a
historic economic downturn has severely impacted Millennial life
30 percent of respondents
live with their parents, which rises to 40 percent for single
respondents.
Nearly one-third believe
their local community is still in a recession.
Stress levels run high for
Millennials
78 percent of Millennials
are worried about having good-paying job opportunities.
74 percent are worried
they won’t be able to pay their healthcare bills if they get sick.
79 percent are worried
they will not have enough money to live on when they retire.
Only 6 percent of
Millennials feel they are making a lot more than required to cover basic needs.
For Millennial women, the figure is only 3 percent.
63 percent would have
difficulty covering an unexpected $500 expense.
44 percent would dedicate
$5,000 in lottery winnings to paying off bills and loans, signaling a
struggle to launch, save, and invest.
One of the things I found sad
is the degree to which Millennials have bought into societal hype about
entrepreneurship. Historically, the most common trait of an entrepreneur was
that he’d been fired twice.
The idolization of
entreprenuership has bolstered the bogus idea that it’s a reasonable employment
option for many people. I’ve heard far too many adults who’ve spent their lives
on a paycheck argue that people who’ve lost their jobs should go out and create
their own work.
As someone who has been in
business for myself for 27 years, I can tell you that anyone who has a decent
gig and can manage corporate politics should seriously question the idea of
going out on their own. Independence comes at a very high price. Having a
company take care of the large amount of grunt work in running a business, as
well as considerably buffering your downside risk (like draining your savings
and retirement accounts to keep a listing business going, as I’ve seen way too
many people do), is worth a lot. As a colleague put it, “The difference between
being self employed and unemployed is fine indeed.”
The myth that lot of people
can sally forth and start a venture that will provide them a decent living
serves as a convenient excuse for the failure to create enough jobs. Very few
people have the temperament and mix of skills and experience (and luck) to make
a go on their own. 90% of all new businesses fail within three years. And it’s
also hard to make partnerships work.
Yet Millennials romanticize
entreprenuers as successes when the data consistently shows that most fail:
Few Millennials may be
starting businesses of their own, but the generation deeply admires
entrepreneurs
Millennials overwhelmingly (78
percent) consider entrepreneurs successful
62 percent of Millennials
have considered starting their own business.
55 percent believe their
generation is more entrepreneurial than past ones, even if the data say
otherwise.
The biggest obstacle keeping
Millennials from starting their own business is money
42 percent of Millennials
lament that they don’t have the financial means to start a business.
Across demographics, white men
are least concerned with finance, with only 40 percent citing it as
the biggest obstacle compared to 53 percent for black women and 59
percent for Hispanic women.
While it may seem rational for
Millennials, faced with a crappy job market and short job tenures, to try to
pull themselves by their bootstraps, they much less likely to succeed than
others who launch new ventures.
The most common characteristic
of successful entrepreneurs, per extensive research by Professor Amar Bhide in
his classic book, The Origin and Evolution of New Businesses, is that via
their experience working for others, they’d identified a niche that was
underserved and started a business to fill the gap. Young people with no or
little business experience are unlikely to have the opportunity, on someone
else’s nickel, to get a sense of how an industry works and identify
opportunities. Nor will they have had much opportunity to learn other skills,
like negotiating, qualifying suppliers, vetting and hiring professional
services providers, and managing subordinates.
Nevertheless, despite the
considerable distress of many Millennials, many are still hopeful about the
longer term. While people have a remarkable capacity to endure, one has to
wonder how long Millennials will remain acquiescent if most of them continue to
languish economically while the top 10% and higher income strata continue to
accumulate more income and wealth at the expense of the rest of us.
