The Federal Reserve’s Generational Report and What it Could Mean for Cypress Ranch Students

December 12, 2018

The United States Federal Reserve System has recently released a report, detailing the economic well-being of the Millennial (Y) generation. In the report, the Federal Reserve divisions of Research & Statistics and Monetary Affairs found that while the millennial generation are ethnically more diverse and more educated than Generation X, on average Millennial are less well-off than previous generations, amassing less wealth, fewer assets, and ultimately receive lower earnings, adjusted for inflation.

The Millennial generation has widely been perpetuated in the news cycle of being a lazy, selfish generation that doesn’t contribute to the work force compared to earlier generations, with much of the criticism coming in light of the 2007 financial crisis. In the report, the Federal Reserves cites that in the fields of business and economics, “the unique tastes and preferences of millennials have been cited as reasons why new-car sales were lackluster during the early years of the recovery from the 2007–09 recession; why many brick-and-mortar retail chains have run into financial trouble (through lower brand loyalty and goods spending); why the recoveries in home sales and construction have remained slow; and why the indebtedness of the working-age population has increased.” However, the reasons for these may less be about cultural and taste shifts, but rather socioeconomic changes that inherently affect Millennial purchasing decisions and purchasing power.

Regarding income, the report found that on average, Millennial households earn 11% less than demographically comparable Generation Y households, and 14% less than demographically comparable Baby Boomer households. This regression is exacerbated in the average earnings for young male household heads, with Millennial men earning 18% less than their Generation Y counterparts, and 27% less than their Baby Boomer ancestors.

In terms of net worth, the average net worth of Millennial households “was about $92,000, around 20 percent less than baby boomer households in 1989 and nearly 40 percent less than Generation X households in 2001,” according to the report. A large part of this decrease in net worth comes from the increased debt that the average Millennial takes on, especially in student loans. In 2017, more than 33% of all Millennials had a student loan balance, compared to only 20% of Generation X students, and Millennials, on average, took out $5,000 more in those loans.

So, what does this mean for Cypress Ranch students?

Well, if you’re currently enrolled at Cypress Ranch, you’re likely a part of Generation Z — which currently has no official name, but has been often dubbed the iGeneration. So, how does a report detailing the economic and socioeconomic well-being of a previous generation affect you?

Well, there are many similarities between the two generations and it could possibly paint a grim future for the next generation. For one, Generation Z will be moving into the same housing market as Generation Y — a market that the Millennial generation themselves cannot afford, or do not want to finance a loan out for, as the Great Recession continues to resonate in people’s economic decisions, Generation Z could also see greater wealth disparity as wage growth remains stagnant, and as college tuition continues to rise. Worries only compound as the next recession draws near; with the Trump administration driving up the U.S. national debt, the United States will not be prepared to pay for the fiscal policy which will be required to reinvigorate the economy, for fears of sinking further in national debt, especially since the United States’ largest expenditure is on track to be debt.