The Key Difference between Millennials and Baby Boomers? Money
The one thing that everyone seems able to agree on is how awful Millennials are. The public derides anyone born between 1981 and 1997 as heinously terrible, what with their fancy cheeses, taxi obsession, credit cards and tiny Thanksgiving turkeys. But is there any cold, hard evidence to support the awfulness of Millennials?
Apparently not. A paper recently published by the Federal Reserve reveals that the selfie-obsessed, app-obsessed, ‘it’s the taking part that counts’-obsessed group are pretty similar to their Baby Boomer parents. The only real difference is that Millennials are poorer than past generations, particularly compared to how Baby Boomers were doing at their age. This is thanks in large part to the 2008 global financial crisis.
The authors of the report, Daniel J. Vine, Geng Li and Christopher Kurz state that, after considering the impact of income, age and various demographic factors, Millennials do not engage in higher levels of consumption or have more expensive tastes than other generations. Analyzing income, debt, demographics, spending and net worth, the authors conclude that Millennials’ consumption similarities to other generations also hold true when spending patterns in relation to food, housing and cars, for example, are examined in isolation.
Thus, rather than differences in spending patterns, the authors argue that “[it] primarily is the differences in average age and then differences in average income that explain a large and important portion of the consumption wedge between Millennials and other cohorts.”
This appears to debunk the idea that Millennials favour the ‘experience’ economy. Moreover, it makes a lie of the ‘snowflake’ spending of Millennials as the report reveals that this group generally spends money on the same categories of products and services as people of any other age group. Nonetheless, Millennials typically spend less on food (N.B. expenditure on avocado on toast was not specifically tested for) and housing than older people and more on education.
The paper also highlights that the constant complaining about the younger generation is nothing new and something all generations have to deal with. Baby Boomers were also the much-reviled younger generation a few decades ago and now it seems to be their turn to roll their eyes at their kids.
The authors explain that two decades ago, the profligate spending of the Baby Boomers was being unfavourably contrasted against the tendency to save apparently displayed by the Silent Generation. The authors recount that Sabelhaus and Manchester (1995) spoke in a debate on this issue and successfully dispelled this spending myth, showing that the income of Baby Boomers had increased at a faster rate than their consumption, making Baby Boomers not bigger spenders but bigger savers and asset-accumulators than the older generation.