Millennials are poorer than any living generation

Millennials are not eco-hipsters - they are a generation threatened with in-work poverty

Most of the explanations of millennials' consumer behavior are wrong. Above all, they serve to reinterpret economic and social problems.

Exotic beings live among us. At least that's what numerous media, market researchers and opinion leaders are spreading. We are talking about the millennials, the generation of 20 to 35 year olds in industrialized countries. Exotic because they supposedly work very differently than the generations before them. The consumption preferences of millennials, it is said, are so different from those of previous generations that it is causing economic upheaval; many companies would have to reinvent themselves in order to survive in this changed environment.

But compared to previous generations, not only have the consumption habits of millennials changed, the importance of consumption itself is different. Millennials care about sensible consumption, and ecological considerations play a central role. Organic is in, status symbols are out. The buying priorities of millennials explained the sales difficulties of such illustrious brand heavyweights as Harley Davidson, Heineken and Nestlé. But millennials would also be reluctant to stay overnight in hotels, cars or real estate due to changed consumer preferences.

Millennials are short of cash

To assert a connection, however, is easier than to prove it. Three economists at the US Federal Reserve, Christopher Kurz, Geng Li and Daniel J. Vine, wanted to know more precisely whether millennials are really as different as some media reports suggest. To do this, they compared the consumption behavior of millennials with that of their parents and grandparents when they were the same age, and they looked at the age-congruent incomes and wealth of the generations.

The result: the consumption habits and preferences of millennials do not differ from those of their parents and grandparents. In particular, there are no different preferences for the purchase of food, cars and real estate.

There is, however, a difference between the generations that has an impact on purchasing behavior: When the parents and grandparents of millennials were their age, they had more real money available than their children or grandchildren today. Millennials have less money than previous generations.

That fact means that millennials are not the eco-minded hipsters they are often described as. Millennials don't skip Gillette razors and breakfast frosties because they think other products are cooler; they have to do without expensive branded products because they cannot afford them. Cars and motorcycles do not fall victim to the ecological awareness of the young generation, but to their lack of money. Therefore, Uber and Airbnb are the answer to tight budgets, not a particular technology affinity among millennials.

It's not just about the sales difficulties of a few companies. Millennials' living conditions have macroeconomic and societal consequences as they reinforce long-term social trends. Due to financial restrictions, millennials live longer with their parents and marry later. And they have fewer children.

For example, the birth rate in the US has fallen significantly since the financial crisis. The generation of today's 22 to 37 year olds is responsible for this. Millennials do not have fewer children because they are too immature or too self-centered to take on parenting responsibilities. They have fewer children because their financial possibilities limit any desire for children.

Millennials pay a heavy price for growing up during and after the financial crisis. Although they are the best educated generation, their job prospects remain bleak. Anyone entering the world of work during a recession has to face permanent disadvantages. The wage is lower compared to workers who started their careers during a boom, even decades later. In addition, “recession beginners” tend to work for smaller, less respected companies that pay less.

All of these things were known even before the study by Kurz, Geng Li, and Vine. Therefore the question arises: Why is the story of the millennials as eco-hipsters so prominent and widespread, while the story of the millennials as financially weak losers of prosperity is only told sporadically? There are five main causes of this one-sidedness.

Millennials as Instagram-loving eco-hipsters who drink latte macchiato serve the exoticism of the older generation, who can be amused or upset about the impossible youth. It's not about explanations, but about easily digestible bizarre things. The narrative of the otherness of millennials also helps to promote tangible financial interests. When millennials have completely different preferences than previous consumers, this opens up a huge market for consulting services. Millennials' money shortage doesn't do that. In addition, millennials serve as an exculpation for management failure. Nobody can foresee fashion trends, not even when it comes to consumer preferences. So it is not the fault of the managers and their strategies if they are suddenly faced with sales difficulties.

The young generation as a fascination, as a point of contact for consulting services and as a reason for sales problems, that existed before. But there are two additional, weighty reasons why millennials are primarily described as eco-hipsters and not as a generation at risk of in-work poverty.

Vehicle for self absolution

A major social problem in some countries is that capitalism no longer keeps one of its most important promises. That promise is that the children are financially better off than their parents. Switzerland was able to avoid this problem; real wages in this country have risen by 14 percent in the last 20 years.

But in the US a typical employee earns practically the same amount as it did 50 years ago. In the UK, wages fell 10 percent after the financial crisis and have still not recovered. In Japan and Italy real wages have stagnated for 30 years. And despite the enormous strength of the economy, real wages in Germany have risen by only 10 percent since 1991.

The story of the millennials' voluntary reluctance to buy turns the actual causal relationship in a propagandistic way. If the younger generation is responsible for the biggest problems in the economic system, the solution is simple: you just have to get these selfish youngsters to consume more. This view is a convenient excuse to avoid grappling with issues like stagnating real wages, falling upward mobility, and rising inequality. All that is required is to pretend that millennials' reluctance to buy is the cause of the problems, not their effect.

Millennials also serve as a cover for another social problem, environmental degradation. The common narrative that the young generation is extremely ecologically oriented is a welcome pill to calm down. If young people attach such great importance to the environment that companies experience declining sales, they are obviously more environmentally conscious and ecologically much more sensible than the generations before, so the implicit argument; this relieves other generations of the urgency to seriously address the problem of environmental degradation. Millennials voluntarily refrain from consuming so that the older generation does not have to act. What a wonderful arrangement.

The real millennials, however, do not act more ecologically than the general public; The greatest explanatory value for their consumer behavior is the fact that they are short of money. One point corresponds to reality: Millennials are exotic. Because they are the first generation who are financially worse off than their parents. This inconvenient fact is disguised and reinterpreted by the popular narrative of the millennials as hip eco-consumers.

At the same time, the fairy tale of the millennials' voluntary consumption deviance serves a wide range of business interests, and important social actors use it for self-absolution or to deport responsibility. They are symptoms of a dysfunctional system: The economy causes environmental problems that threaten civilization; at the same time, the majority of young adults are poorer than their parents. And what is the main reaction of the industrialized nations? The production of calming stories. It looks like they'll need loads of these in the future.