Wednesday, May 10, 2017

Post-Millennials or Generation Z Behaviors: How much is economically societal?

In his latest article, Angst in America, Part 7: The Angst of the Millennial Generation, John Mauldin hits on some important aspects of our millennial kids that might provide some insight.  As I sit here typing this, I can readily think of six families that have their college graduated kids living at home with them.  Calling them millennials is actually misleading as they are post millennials or Generation Z (mid 1990s to early 2000s) kids.

Regarding these kids, we have noticed behaviors that are very strange for us to understand.  The most noticeable are that they do not go and do things together often in concerted efforts.  They are more than willing to use technology to do something together and never leave the house, at least until they are 21 and “legal”.  They do not have a drive to accomplish necessary things like getting a driver’s license as soon as they can do so.  They are content to wait until they feel ready.  One family I know has an 17-year-old and he is just now getting his permit.  He does not live in a big city.  They nor we understand how to comprehend this and it is very easy for us to jump to laziness when it could be some kind of societal shift we do not understand.  I personally find it difficult to believe that a whole generation is suddenly lazy.

Tyler Cowan has a book entitled, The Complacent Class: The Self-Defeating Quest for the American Dream.  Edward Luce reviews the book in the Financial Times on February 17, 2017. 

“In this book Cowan expands the scope of argument to sociology.  He believes America’s restlessness of spirit is giving way to a safety-first society. Instead of pushing on to the next frontier, Americans are busy gentrifying the neighborhood.

We used to suffer from the Nimby syndrome – ‘not in my backyard’. Now we have graduated to Banana – ‘build absolutely nothing anywhere near anything’, says Cowen. Public life is stymied by Cave (‘citizens against virtually everything’) in which politicians fall back on Nimey (‘not in my election year’). Politics has reduced itself to a theatre of symbolic gestures in which pressing issues are left unaddressed.”

I find that analysis spot-on.  Where does this generation find its heroes?  It’s not astronauts risking everything to tackle a new frontier in the face of a dismantled NASA.  This spirit of risk-aversion has infected corporate America and the U.S. Government.  Corporations used to have significant R&D budgets, but now they spend it on legal compliance and human resources to avoid lawsuits or meet government regulations.  The government sets the pace for avoiding all risk to the point of self-defeating rules of engagement in war.  The idea of risk, and therefore of having a real live hero, is becoming a lost commodity.

This may or may not because the majority of the population is aging and older societies take fewer risks.  Older people also try to hold on to what they have.  With such an influence, should it surprise us that the millennial generation is the least entrepreneurial of all? 

It is important for us to consider these thoughts of societal influence, which many of us have noticed before, and couple them with Marc Faber’s thoughts in his March 2017 Gloom, Boom, & Doom Report.

“The generation of millennials born after 1995 have been shaped by the debt-growth induced 1990s’ period of boom and prosperity, which was driven largely by rising asset prices. The good side of generation Z is that they are not interested in wars (they seldom ever belong to warmongers) and care little about politics. Unfortunately, they have only a scant knowledge of the meaning of “freedom” and “personal responsibility”.

However, they are concerned about political correctness, about having the latest-model iPhone and the number of likes their photos receive and how many followers they have on Facebook. But most of all, they are concerned about extracting as much as possible from the government in the form of subsidies and other kinds of benefits. It is a generation that avoids hard work (such as on the factory floor), and is content to work part-time in bars and restaurants, and to live a carefree existence. It is also the generation whose major contribution to civilization may be the invention of “retirement before working.”

Needless to say, this concept of retirement before working has been fostered and encouraged by governments, which, with their generous transfer payments, make it more economical for some people not to work, and to collect all kinds of tax-free benefits, than to have a low-paying occupation and pay taxes.”

I actually disagree with this assessment in regard to the politics.  I think many do care about it and discuss it.  They seem to be even more polarized than the rest of America in my opinion and settle on the left or right fringes. 

“Retirement before working.”  I personally love that concept.  Enjoy life and do things while your health is good and you are mobile, before you are saddled down with responsibilities like kids, houses, and jobs.  The problem is it isn’t realistic - it simply isn’t reality.  This concept is definitely something most people of my generation would never understand and the reason is when we graduated we had no money or resources.  How could you possible do anything with no resources? 

I personally believe that a major unknown problem for these kids is the lack of a purpose.  Our purpose was to be able to take responsibility for ourselves.  To become self-sufficient and make enough right decisions so we might live a better life than our parents.  That’s what our parents wanted and it’s what we wanted.  Today, I don’t see that as a driving force in a culture where there is a knowledge that no quantity of wrong decisions will make it possible for you not to be taken care of by the government.  So, with that purpose not immediately self-evident and not instilled as a required step of life in this world, everyone has to go find a cause.  They want to believe they are making a difference.  It might be very daunting to look up at those who have gone before you and realize you most likely can’t do better than they did.  That is the reality of the current economic situation in America.  So, if society grades your worth on what you earn and you can’t earn or conceive a way to accomplish even what your parents did, then how are you going to have worth?  A spiritually ignorant person with no training in personal responsibility as a first goal for themselves and to society must grab onto a cause and believe that by protesting/marching they have a purpose and as a result, worth. 

Those who do not fall into this trap simply do very little because they don’t know what to do.  They might be brilliant or athletic, but with no direction or deep desire inside they “float on” until conditions require change and they can find stasis again.

I personally find this deeply disturbing.  Hitler was able to tap into the youth in his rise to power and they served him against those who could have toppled him before he got too far.  I can easily see a very charismatic leader with the press behind him creating a movement that could be very difficult to counter.  I saw significant signs when Obama was the leader of how this could occur.  I think we are at a fragile time and the country needs a father-figure leader to reinforce the youth into responsibility.  Otherwise, there will not be a middle-class and that will create a very unstable economy and the economy is the strength of America in the absence of a defined spiritual conviction.

Joel Kotkin writes in the strangely titled column, The High Cost of a Home Is Turning American Millennials Into the New Serfs, that

“The problems facing millennials include an economy where job growth has been largely in service and part-time employment, producing lower incomes; the Census bureau estimates they earn, even with a full-time job, $2,000 less in real dollars than the same age group made in 1980. More millennials, notes a recent White House report, face far longer period of unemployment and suffer low rates of labor participation.”

More than 20 percent of people 18 to 34 live in poverty, up from 14 percent in 1980. They are also saddled with ever more college debt, with around half of students borrowing for their education during the 2013–14 school year, up from around 30 percent in the mid- 1990s.

All this at a time when the return on education seem to be dropping: A millennial with both a college degree and college debt, according to a recent analysis of Federal Reserve data, earns about the same as a boomer without a degree did at the same age.”

Marc Faber continues, “This is a serious problem. According to a study by the Huffington Post (February 3, 2016), “President Barack Obama has said that a college degree ‘has never been more valuable.’ But if you borrow to finance your degree, the immediate returns are the lowest they’ve been in at least a generation, new data show.

Wages for the typical recent college graduate working full time have risen just 1.6 percent over the last 25 years, after adjusting for inflation, according to the Federal Reserve Bank of New York.” At the same time, student debt burdens for the typical bachelor’s degree recipient who borrowed for college have increased about 163.8 percent (see Figure 2).”


This shows us that in 1990 a typical college student with student debt graduated with that debt equivalent to 28 percent of their annual earnings, but in 2015 that number is equivalent to 74 percent of their annual earnings.  If we plot out the current trend of the last 25 years, in 2023 the average college graduate will owe more in student debt than they can obtain in annual earning.  Today, 42 million Americans owe $1.3 trillion in student loans, of which, 90% are owned or guaranteed by the U.S. Dept of Education.  Currently, about 7 of every 10 college graduates borrows to pay for their education, this is up from 5 of every 10 in 1990.

So, not only are college graduates not making an equivalent income as they did 25 years ago with relation to the cost of living, they are in significantly more debt.  John Adams said in 1826, “There are two ways to conquer and enslave a nation.  One is by the sword.  The other is by debt.”  In addition to this student loan debt, auto loans have risen a record $30 billion in the third quarter of 2016 alone.  In 2010 there were $700 million in auto loans, today there is $1.1 trillion.  This is a startling statistic.  How, in the face of stagnant wages, student debt, and a no-growth economy can there be so many auto loans?  I find myself considering that responsibility conversation again.

All of that conversation regarding debt and we have yet to discuss home ownership, the average person’s single largest debt of their lives.  I find it awkward and frightening.  In LA, San Fran, NYC, and Miami, rent costs take 45% of a worker between the ages of 22 and 34’s income.  In NYC, it’s above 50%.  Is it any wonder then, that rather than strike out on their own, many millennials are simply failing to launch?  The number of people between 18 to 34 living at their parent’s home has shot up over 5 million since 2000.  Between the years 2004 to 2016, home ownership for the age group below 35 declined by 21.2%.  Home ownership for the age group of 35 to 44 declined by 16.7%.  That’s a 38% reduction for the youngest among us according to a CNBC Census.

It is a simple economics decision for them with such staggering debt.  It is not that they do not want to buy homes or are part of some “evolution of consciousness”.  Survey after survey indicates that 80% of renters express interest in acquiring a home of their own.  Roughly 80% of millennials indicate they plan to get married, and most of those are planning to have children one day. 

Plotting such a future is a terrific challenge.  In a society where instant gratification is a real influence and objects you buy are throw away and replace, teaching the patience and wisdom of apprenticeship along with wholesome values that will lead to health and wealth are nearly impossible and are certainly not encouraged anywhere.

The Frenchman Alexis de Tocqueville warned that the tyranny of the majority is conformism.  He warned that this modern tyranny (of conformism) would “degrade men rather than torment them.”  Let us hope that these new generations are not a complacent class because of such debt mountains before them.  Edward Gibbon wrote in his description of the Athenians societal downfall: “In the end, more than they wanted freedom, they wanted security. When they Athenians finally wanted not to give to society but for society to give to them, when the freedom they wished for was freedom from responsibility, then Athens ceased to be free.”

The greatest economical gifts parents can provide to their children is an education where their child has no debt and an auto that is reliable and paid off.  This alone puts them ahead of 70% of their peers. 

In my opinion, the real question is what kind of education is necessary in a world of educated people in debt?

John Mauldin comments that one of the most difficult chapters to write in his new book is on the future of work:

“New technology, while destroying old jobs, would create new jobs and opportunities. A clear example of this is the use of drone technology by the military. It requires about 100 people to prep and launch and maintain an F-16 for a single mission. Keeping an unmanned predator drone in the air for 24 hours requires about 168 workers laboring in the background. A larger drone, such as a Global Hawk surveillance craft, needs about 300 people working in the background to make the mission feasible. One of the real problems for the Air Force is recruiting enough people with the savvy to fill these needs.

But here’s the problem. The world is dividing into people who can manipulate information using computers and those who can’t. The differential in wages between these groups is significant.  …  Enter Tyler Cowen, whose book Average Is Over I have been reading and mulling over for some time now. Cowen says the ability to mix technological knowledge with the ability to solve real-world problems is the key to being a big earner in a polarized labor market. The productive worker and the smart machine are becoming ever more complementary. As one reviewer said, “Only those who can learn to think like smart machines or at least enough to understand their operation will get success. Individuals who work with genius machines will need to retrain and learn new systems constantly.

The new jobs will only be available to those who have real aptitude and real training. You may be highly educated, with a PhD in music or literature or even in economics, but the demand for your skills is nowhere near as high as the demand for a super nerd who dropped out of college and can sling code in his sleep. If, on the other hand, you understand how to generate leads and new subscribers using Facebook – something that really doesn’t require a computer science degree but does demand a highly focused and integrated understanding of web technology and marketing – you’ll find people lined up to throw money at you.”

I have to admit that for the first time in my life, I feel the pressure of not knowing enough about how to manipulate the computer programs and operations to make it do exactly what I want it to do.  I know I am behind in this area of technology.  My biggest problem is do I find a way to educate myself back into it to be current or just hire young-uns to do it?  It is a real dilemma and the absence of time for the education while doing my normal job will most likely answer this for me. 

I assume I am not the only older person in the work force feeling this way.  So, I have to express some validity to Mr. Mauldin’s thoughts above.  On the opposite side of that spectrum, less than 2% of the population works in the agricultural field.  We are one new insect we can’t kill or some new plant disease away from not having enough trained people in this field of work to produce in new locations to feed ourselves.

With so many new cars on the road, one would have to assume auto mechanics will be a growing field for a long time as well.  I can attest that finding a reliable, fairly priced mechanic is a difficult thing to find. 

There will always be a viable employment out there for the hard worker, eager to learn and always be learning, and especially one who can mix technology into their productivity.  Even the farmer and mechanic must do this in today’s world.

No comments: