Seriously, it may be the biggest issue for the generation of Americans under 40 years old. Apathy. Not really caring about much. Statistics are already showing that the millennial generation does not look to live life the same way as their parents or grandparents. Gone are the dreams to own a home. Too many of them either were burned in the housing bubble of 2008 or witnessed friends and family get burned.
So what does this mean? How does it translate to the world of Economics and Personal Finance? We have heard time and again that Millennials, (those born from 1982-2002), don't care to save that much, especially for retirement. They prefer to buy tech items like ipods, ipads and google glass. What we have not heard a lot about is how NOT spending money, especially on certain big ticket items, could hurt the economy. To further explore this topic lets take a look at some recent articles on the issue.
According to Census.gov, the home ownership rate among Americans age 35 and under has dropped from a high of 43% in 2004 to 37% in 2013.
This article form Yahoo Finance tells us about the "Delayed Adulthood" problem that causes the Millennial generation to not purchase big ticket items at the same age and rate that their parents did.
Rick Newman on US NEWS.com also speaks to the issue of Student Loan debt keeping Millennials from buying homes.
1) Less people buying cars means less jobs at OEM's (original equipment manufacturers), like GM, FORD and Chrysler, as well as car dealerships, mechanics, aftermarket stores, etc. The automotive industry, including dealerships, accounts for approximately3.5 percent of U.S. gross domestic product. In addition the auto parts industry accounts for 2.3 percent of the nations GDP.
2) Less people are buying houses and that means less jobs for real estate brokers, construction workers and little guys working at Home Depot. Private Residential Investment accounts for 5% of GDP according to the Bureau of Economic Analysis.
3) The economic impact of reduced purchasing by millennials breaks down like this:
- U.S. GDP in 2013 was 16.8 trillion dollars
- 6.8% of GDP (Automobiles) reduced by an estimated 3.5% = a $39.98 billion dollar hit to the economy.
- 5% of GDP (Housing) reduced by 7% = a $58.8 billion dollar hit to the economy.
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business owners and the rich create jobs, and that is why we also see something else very interesting happening here. The transfer of wealth from those in the Millennial generation to those in generation X and the Baby Boomers. That is,
with Millennials choosing to rent more in the housing market as well as to find alternative means of transportation, they are leaving money on the table. No longer are they building equity in a home as previous generations did. Because they have massive student loan debt, (about 30,000 per person average), they are forced to pay on that instead. Investors are picking up real estate at depressed prices and renting it out to these individuals in the 18-35 year old range. This, as well as the creation of companies like Zipcar and Uber, means that less people in the 18-35 age range are building wealth while a few in that age range and many in the 36-65 age range are building wealth. It is, however, not a big 99% vs. 1% conspiracy. It is simple economics. And when it comes time for these individuals to support the economy by themselves in 10-15 years......they will not have the requisite assets to do so.
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