Millennials and the next recession

Millennials and the next recession

November 18, 2019

In recent months, there’s been much talk about a looming recession. And whenever there’s mention of another recession, millennials get embroiled in disastrous scenarios. Hence, headlines like these: “The Next Recession Will Destroy Millennials” and “The Next Recession Will Wreck Millennial Parents.” Yikes.

To help put the doom-and-gloom into perspective, we consulted Hani Mansour, PhD, associate professor of economics. “First of all, we don’t know if a recession is coming,” Mansour said. “I don’t like to speculate.” Despite Mansour’s calm assurance, others are speculating. A survey by the global trading platform eToro found that “more than two-thirds of U.S. investors fear a recession is looming.” A model created by Bloomberg Economics is less fear-inducing, estimating that there is a 27% chance of a recession within the next 12 months.

Whenever the next recession does arrive—and it’s certain to arrive because “we know they are cyclical,” Mansour said—are millennials really in trouble? 

Unfortunately, the answer is yes. “If another recession hits, there’s a good chance that it will affect Millennials disproportionately,” Mansour said. 

The term Millennials refers to the generation born from the early 1980s through the 1990s or early 2000s. Products of both the Information Age and positive-psychology parenting, the generation has “become a convenient scapegoat for a host of modern societal ills,” according to a recent article in Monthly Labor Review. They have been called “Generation Me” and labeled narcissists. They have been attacked for their perceived lack of social skills, inability to make eye contact, and difficulty networking IRL (Millennial for “in real life”). They have been lampooned as beanie-wearing, safe-zone promoting, smart phone addicts who are best friends with their parents. In short, they haven’t fared well in a popular culture that still reflects the perspectives of their Boomer predecessors.

halved avocados on purple background; photo by Curology via Unsplash
Millennials haven’t fared well in popular culture, being blamed for everything from increasing narcissism to popularizing avocado toast.

The Millennial disadvantage

More importantly, they haven’t fared well in reality—at least financially. Many Millennials graduated college and/or entered the work force during the Great Recession of the late 2000s and early 2010s. They have “lower earnings, fewer assets, and less wealth,” according to a report by the Federal Reserve entitled “Are millennials different?” They have more student debt, partially due to having attended college during a time of exponentially higher tuition rates. They have put off marriage, home ownership, and having children—all traditional markers of the transition to adulthood. 

Assistant Professor Edelina Burciaga, PhD, who teaches in the Sociology Department, explains that the “usual model that characterizes the transition” goes something like this: “You go to college, take 4-5 years to finish, start a family, and buy a home.” 

Millennials are not doing this.

To be sure, the Great Recession contributed to Millennials deferring these milestones. “College students who graduate during a recession have lower wages, which is not surprising,” Mansour notes. “What is surprising is that the recovery is very slow. Where you start has really big implications over where you end up in say 10 years, even after the economy recovers,” Mansour explains.

photo of young couple in forest. Photo by Allef Vinicius on Unsplash
Millennials have put off marriage, home-buying, and child-rearing, partly due to financial concerns.

Are Millennials delaying big life events for purely financial reasons? 

The Federal Reserve report finds that “millennials do not appear to have preferences for consumption that differ significantly from those of earlier generations.” This would seem to indicate that Millennials simply can’t afford the car, house, and baby that would ostensibly deliver them to adulthood. 

Mansour isn’t so sure. “The recession is not responsible for everything that is different about Millennials,” he said. “You can imagine a hypothetical where they would have delayed marriage regardless of the Great Recession.” 

Burciaga is also skeptical that the Millennial transition to adulthood is solely a result of economics: “As a sociologist, I think about the context that people are growing up in. They are a product of significant social change … movement toward more freedom and choices and options—the positive outcome of that is perhaps more tolerance and acceptance for alternative life trajectories.”

Hip man in hat and scarf in front of round window; photo by Clem Onojeghuo via Unsplash
Millennials are not a homogenous group, even though they are often portrayed as white college graduates.

Millennial narrative has been racialized

Both Mansour and Burciaga point out that Millennials are not a monolithic group. While people may think of Millennials as white college graduates living in their parents’ basements, the generation includes people of color and people from all socio-economic backgrounds. In fact, Millennials are more racially diverse than previous generations. This also negatively affects their economic situation, as people of color are often paid less. And if their parents are racially diverse, then they are less likely to be able to help their Millennial children with something like a down payment on a house. 

“Racial diversity means lower wealth, lower parental wealth,” Mansour said. Additionally, Burciaga points out that “Millennials in African-American and Latino communities are not only building their own wealth but also helping their parents financially,” which adds another level of economic difficulty.

Millennials aren’t the only victims

Whenever the next recession hits, Millennials will undoubtedly be negatively affected, but other groups will also suffer, Mansour stresses. “Anyone who graduates during the next recession will likely experience similar long-term impact on their career earnings that the Millennials endured,” Mansour said.

The internet is abuzz with frightening words like looming and inevitable. There is a lot of talk about inverted yield curves, zombie companies, and tariff wars. What’s happening? When is it happening? Is a recession around the corner?

“Economists are not magicians,” Mansour said. “It’s very hard to predict the future.”