I will admit to being a Baby Boomer. It has been a good run. We have always thought of ourselves as very important. Our music is, of course, the best, and our opinions have mattered the most. So it comes as a shock to realize the baton is passing. Millennials now outnumber Baby Boomers.
It is difficult to know how the new generation (born generally between 1980-1996) will be different. The Economist newspaper argues that this group is pragmatically idealistic, meaning they are hoping for a better world but without the self-important certainty of Baby Boomers. Millennials are socially liberal on things such as interracial marriage, same-sex marriage and legal marijuana, and are also environmentally conscious. They do not like Donald Trump, at least not according to polls, but they also don’t vote much, so their influence is still untested.
On the economic front there are worries. Ninety percent of American children growing up right after World War II achieved a higher standard of living, adjusted for inflation, than their parents. Today that figure is only fifty percent and is going lower. The Great Recession in 2008 was a major setback and incomes in general have not been growing. Globalization, automation and the decline of labor unions have all been blamed for the lack of higher paying jobs, and then there is the education factor. Millennial graduates with college debt owe on average between $30,000 and $35,000, which works out to a payment of $300 to $400 a month for ten years. A lot of consumption will be put on hold due to low income and high debt.
But Millennials are not just in the U.S. The chart below shows the dramatic number of Millennials in Asia. Chinese Millennials are especially optimistic about their future. They are confident their incomes will be higher than their parents and they are spending. Experiences and services are taking a bigger share of their pocketbook than hard goods. Travel, wellness, healthier foods: these are all areas of rapid spending among Asian Millennials.
Back here in the U.S., Millennial spending may be supported by transfers from their Baby Boomer parents. But in any case, the changing of the guard has started. Be prepared.