Dispelling myths: ‘Millennials aren’t so different from past generations’
Two Wells Fargo economists discuss the Wells Fargo Securities Economics Group’s series of reports about millennials and “what the data actually says about this generation.”
In the past year, the Wells Fargo Securities Economics Group has released a series of reports about millennials. We asked two of the authors, Economists Sarah House and Erik Nelson, what they’ve learned. Their most recently published report, “Are Student Debt Burdens Crippling Millennials?” is available at wellsfargo.com/economics.
Q: How did you decide to create a series of economic reports focused on millennials?
Sarah: Many of our team’s reports focus on different sectors of the economy, but the economic experience of sub-groups can sometimes get lost in these trends. We wanted to use that data to take a deeper look at what’s often missed in the headlines when it comes to millennials. As millennials ourselves, we feel there are a lot of generalizations put out there, often by non-millennials, and we wanted to examine what the data actually says about this generation.
Erik: We thought about the big themes people often mention when they discuss millennials: housing preferences, personal finances, student loans, etc. We wanted to build on these themes by really drilling down and seeing what the data were telling us rather than relying on anecdotes.
Q: One of your reports focused on whether millennials are giving up the suburbs for cities. What did you learn?
Sarah: The rate at which millennials are moving to cities has picked up the past few years but still trails the rate at which this generation moves to suburbs. This is particularly true for older millennials who are more likely to be settling down and starting families.
In addition, even though this generation is thought of as highly mobile, millennials are moving less than young adults were 15 years ago. The lower rate of moving is a trend we’ve seen across all age groups and suggests millennials are not that different from the rest of the population.
Q: Several of your reports focus on renting and homeownership. What did you discover?
Sarah: My takeaway is that millennials still want to own homes. But they do have obstacles such as paying off student loans, and they’re also tending to settle down a little later. The data suggest that student loans won’t prohibit many millennials from eventually owning a home, but it’s just going to take them a little bit longer.
Erik: You hear that rents are increasing faster than wages for millennials and limiting their ability to consume, and there certainly is some truth to that. Millennials have seen slower wage growth than other age groups, and they tend to be disproportionately affected by higher rents. That said, the double dose isn’t as significant as some make it out to be, and millennial wage growth has outpaced that of older cohorts more recently. Of course, it is important to keep in mind that not all millennials are created equal, and this holds true for all of the issues we’ve covered. But in aggregate, the problem isn’t as severe as some have made it out to be.
Q: What did you learn that surprised you?
Sarah: I think the work we did on the Urban versus Suburban divide surprised me. Perhaps one of the most common things you hear about millennials is that they all want to live downtown and in walkable areas, but the data show there are still a significant share of millennials who are moving to suburbs. Another interesting finding was that millennials moved into lower-paying jobs faster than older adults in the wake of the recession. I thought that composition shift in their employment was an important nuance when you look at their overall finances.
Erik: One thing people like to say is that millennials are holding jobs for less time, but the data suggest that’s not the case. Job tenure for young adults has actually been pretty consistent over the past 30 years, and that really shocked me. It gets back to the idea that millennials aren’t so different from past generations of young adults. If you’re in your early 20s, you’re probably not going to hold your job for 10 or 15 years — and that’s always been the case.
Q: What did you learn from your latest report, “Are Student Debt Burdens Crippling Millennials?”
Sarah: Student debt is probably one of the things most associated with this generation, so we wanted to look a little deeper at the financial toll student loans were having on millennials’ day-to-day finances. We found that student debt service has ticked up a little bit since the recession, but it hasn’t exploded for the typical millennial paying back student debt. It is concerning, however, that millennials will be paying off student loans later in life, and that there is a rising subset of millennials not paying back their loans at all.
Erik: Another phenomenon to note is that many of today’s young adults graduated into a recession, so some of the trends we’re seeing among them are more cyclical in nature. Not all of these phenomena are necessarily permanent or reflective of “millennial preferences.”
Note: Other reports are available at wellsfargo.com/economics.
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