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Two stories are told about millennials that seem so different they cannot possibly both be true.
On the one hand, people born between 1981 and 1996 make up the generation that shrugs “yolo” (“you only live once”) as they hop in an Uber instead of the bus, sip their artisanal gin and plan their next mini-break.
On the other, they are the generation that came of age in the middle of a global financial crisis; they drink less, smoke less and study harder. They cling to job security and worry that they will never own homes.
At the minute, both stories are used as bludgeons in the interminable squabble between millennials and baby boomers. Millennials say: we are paying a price for a global crash we did not cause. Boomers say: it’s hard to take you seriously when you’re frittering away your salary on smashed avocado on toast.
The evidence for millennial spending habits is real enough. The Financial Times has been running a series of articles exploring the ways in which this generation is reshaping consumer trends.
But it is a mistake for critics of millennials to consider their enthusiasm for new products and services to be proof that young people have decadent lives.
Like every generation, the millennials are unequal. And as with any age group, the people at the top with the most spending power are the most visible and influential. Most of the world’s 1.8bn millennials are not spending £7 on an artisanal gin and tonic.
Better to look at the data. Even in a rich country such as the UK, young people are on average more austere, not less. In 2001, 25 to 34-year-olds spent roughly the same amount of money as 55 to 64-year-olds on goods and services other than housing. Now, the younger group spends 15 per cent less.
The second mistake is to assume that widespread spending on taxis and holidays is evidence that millennials have the money to pay for expensive luxuries. Low-cost airlines, Airbnb and Uber have made such services far cheaper, benefiting millennials and older generations alike. But while these frills have become more affordable, the vital building blocks of a life — housing and education — have become vastly more expensive. As one 31-year-old woman told the FT: “You guys got houses and we got slightly nicer shampoo.”
Are millennials right to feel aggrieved about housing? Well, millennials in the UK are half as likely to own a home at age 30 as baby boomers were. But this is not a new development. Home ownership rates for young people have been declining for decades as house prices have detached from incomes.
But the young did suffer two big blows in the wake of the 2008 financial crisis. First, the Bank of England cut interest rates and launched quantitative easing. It was trying to shore up the economy, in part by propping up house prices. A recent working paper by BoE staff examined the distributional consequences of their actions, which did not prevent house prices from falling, but did limit the slide. The paper found that 20-somethings were the relative losers, while every other age group were winners.
At the same time, young people faced another post-crisis hurdle: in an effort to make the financial system safer, regulators limited how much banks could lend to housebuyers. Suddenly, many young people needed far bigger deposits to buy their first home, effectively locking them out of the market.
In other words, young people — who were not at all to blame for the crisis — bore the costs of repairing the economy that everyone else broke.
Baby boomers are right about one thing, though: millennials should stop whining about it. Many of us are now in our late 20s or 30s. We are no longer disempowered and we are no longer particularly young. Let’s stop spending energy on this endless argument with boomers, which puts us in the position of relative adolescents. Instead, we should work out how to fix what has gone wrong.
Loosening credit standards to help more millennials buy homes would be one method. But that would leave them highly leveraged and exposed to falling prices, just at the moment when central banks begin to raise interest rates.
It would be better to build more houses in areas of high demand, including more social housing; take measures to boost productivity so incomes rise; and rebalance the rights of tenants versus landlords to make the UK more like Germany. There, the alternative to home ownership is not poor quality housing with no security.
Millennials: it’s time for us to flex our political muscles. Don’t get mad, get even.