The Cheapest Generation

[downtown]

Here is today's reading folks. It's a little long (2 pages, I know), but it will make an interesting discussion I think. Here is an snippet.

All of these strategies share a few key assumptions: that demand for cars within the Millennial generation is just waiting to be unlocked; that as the economy slowly recovers, today’s young people will eventually want to buy cars as much as their parents and grandparents did; that a finer-tuned appeal to Millennial values can coax them into dealerships.

Perhaps. But what if these assumptions are simply wrong? What if Millennials’ aversion to car-buying isn’t a temporary side effect of the recession, but part of a permanent generational shift in tastes and spending habits? It’s a question that applies not only to cars, but to several other traditional categories of big spending—most notably, housing. And its answer has large implications for the future shape of the economy—and for the speed of recovery.
Since World War II, new cars and suburban houses have powered the economy and propelled recoveries. Millennials may have lost interest in both.

Half of a typical family’s spending today goes to transportation and housing, according to the latest Consumer Expenditure Survey, released by the Bureau of Labor Statistics. At the height of the housing bubble, residential construction and related activities accounted for more than a quarter of the economy in metro areas like Las Vegas and Orlando. Nationwide, new-car and new-truck purchases hovered near historic highs. But Millennials have turned against both cars and houses in dramatic and historic fashion. Just as car sales have plummeted among their age cohort, the share of young people getting their first mortgage between 2009 and 2011 is half what it was just 10 years ago, according to a Federal Reserve study.

Needless to say, the Great Recession is responsible for some of the decline. But it’s highly possible that a perfect storm of economic and demographic factors—from high gas prices, to re-urbanization, to stagnating wages, to new technologies enabling a different kind of consumption—has fundamentally changed the game for Millennials. The largest generation in American history might never spend as lavishly as its parents did—nor on the same things. Since the end of World War II, new cars and suburban houses have powered the world’s largest economy and propelled our most impressive recoveries. Millennials may have lost interest in both.

http://www.theatlantic.com/magazine/archive/2012/09/the-cheapest-generation/309060/1/

Here is the general thesis: Americans 18-35 are going to be much less likely to buy a new car or a house. Part of this is for economic reasons (high student debt has ruined credit, and poor economic opportunities leave the generation without the funds to buy them), and partly for philosophical ones. They argue that the sheen from home ownership or a new car that our parents felt isn't shared by younger Americans. We'd rather share a car and get a smartphone.

Given that the US economy has relied on home ownership, and the blue-collar manufacturing jobs that come from construction and home and car related consumption, this could have negative impacts on economic development moving forward. It could also have positive impacts (environmentally, and with urban issues)

What do you think?

 

[IdiotsOpposite]

Speaking as an American 18-35... I just don't see the point. A new car won't do anything for me that a $3500 used car from the Classifieds won't. A new house CERTAINLY won't do anything for me that a nice 1-bedroom apartment won't. And I'll be honest - I, and I feel a lot of the people around me as well, don't like the idea of going even FURTHER into debt over stuff that we don't really need, like a new car, or a new house. I just don't see the point of getting these things.

 

[ELITEOFWARMAN8]

Speaking as an American 18-35... I just don't see the point. A new car won't do anything for me that a $3500 used car from the Classifieds won't. A new house CERTAINLY won't do anything for me that a nice 1-bedroom apartment won't. And I'll be honest - I, and I feel a lot of the people around me as well, don't like the idea of going even FURTHER into debt over stuff that we don't really need, like a new car, or a new house. I just don't see the point of getting these things.

I 100% agree with you. I don't need to buy all this new stuff to be fancy or popular.

 

[Cutlass]

For a generation now we've been warning that this coming generation is going to be the first one that will be materially worse off than their parents. I think that this is an indication that the truth has finally sunk in. People are lowering their expectations that they will be able to succeed through their own work.

 

[IdiotsOpposite]

I 100% agree with you. I don't need to buy all this new stuff to be fancy or popular.

And honestly, I can't afford it. I've gone without car insurance for the past two months because it's just too expensive. I know I'm driving illegally, but I just can't afford the insurance. I've got too many things to pay for on my minimum-wage job already (and note, this is minimum-wage in WASHINGTON, so that's no small feat). Right now, I'm applying to everything in town that'll give a higher than minimum wage in the hopes that I'll get one before my debts start shutting services down. I've already had to tell my landlord (who is also my father) that I probably won't be able to pay rent this month.

 

[BvBPL]

This ties directly into the movement back towards the city you previously brought up, downtown. Cars are less important with shorter communities into the city & renting is often more reasonable in the city than in the 'burbs.

 

[metatron]

You guys are arguing from different premises here.

Either said generation spends less on housing and car ownership as result of having to economise due to simply having less overall than previous generations or they do so as a result of having a different set of values which means they may possibly spend more on other things than previous generations have.
It may very well be a combination of both (i presume it is). But since those two factors come with very different following arguments it seems worthwhile to sort this out first.

 

[ELITEOFWARMAN8]

And honestly, I can't afford it. I've gone without car insurance for the past two months because it's just too expensive. I know I'm driving illegally, but I just can't afford the insurance. I've got too many things to pay for on my minimum-wage job already (and note, this is minimum-wage in WASHINGTON, so that's no small feat). Right now, I'm applying to everything in town that'll give a higher than minimum wage in the hopes that I'll get one before my debts start shutting services down. I've already had to tell my landlord (who is also my father) that I probably won't be able to pay rent this month.

Same here. I can't afford all these fancy new clothes or going out to eat every week or to get a new car. Besides, I don't want to get into 30K right now.

Sometimes you have to do what you have to do.

 

[holy king]

more consumption is certainly what everyone needs.

 

[luiz]

I agree our generation is probably the cheapest in memory (at least in the New World, people in Europe have been cheap for a long long time).

In fact yesterday when me and my girlfriend broke up (yeah, I'm still bummed about it, we were together for almost 3 years) one of the things she threw in my face is that supposedly I'm a cheap bastard. Even though I think in the last couple years I spent way more than I should have. It's comforting to know it might be a generational issue

 

[History_Buff]

Yeah, I think there's definitely two things at play. First, the millennials probably don't want the same things as their parents. Second, they probably couldn't afford them either way.

The first is cultural, and it comes and goes. Us Millenials seem to love urbanism in a way that our parents did not. The second is a consequence of rising costs of living and thirty years of stagnant wages.

 

[Formaldehyde]

For a generation now we've been warning that this coming generation is going to be the first one that will be materially worse off than their parents. I think that this is an indication that the truth has finally sunk in. People are lowering their expectations that they will be able to succeed through their own work.

Yep. I don't think it isn't due to lack of desire. It is due to economic issues. But I think it has been occurring far longer than this generation. The previous generations since the 50s tried to still do it by both parents working. Now, even that no longer works.

Suburban sprawl was largely a result of affordable homes being located further away combined with access to fairly cheap personal transportation. All that is changing now.

Didn't we just have this thread in a slightly different form? You know, about how the suburbs were supposedly disappearing?

 

[ELITEOFWARMAN8]

Things cost a lot of money. I like to go to Croatia for a month during summer break once I am done with at least 1 year of 4 year university after I transfer. So most stupid kids 20 years ago going to Mexico would just take out a extra 5K and blow it in a week down there and rank up a extra 10-20K in debt going down there 2-4 times and now they probably still paying it off.

With me, I can probably get a good place to stay at for 300 a week, 1,200 for a month, not to bad. But ok, it will cost me 1.2K to stay a month location wise, probably at least 1K for round trip airlines as well. I am going to need at least 500 dollars, maybe 1,000 for food and any other junk I need to get.

So do I want to take out a extra 3.2K to take a relaxing trip there? Yeah I want to go, but I ain't digging myself deeper into debt to do so. Car loan can be wiped out, student loans can't.

 

[cav scout]

Perhaps millenials have been coddled so much that don't have the same drive and ambition as previous generations and crumble whenever they face any real challenge or adversity in life? So they automatically settle/give-up and accept whatever their immediate prospects seem to be?

Or perhaps they reject the rat race mentality of the 80s and the blind overconsumption that ultimately proved to be a hollow form of happiness for their parents?

Maybe a bit of both?...

 

[galdre]

Coddled? Doesn't that ignore the real economic differences between now and in the past? Long gone are the days of my grandpa, who could buy a house and support two children working as a machinist. Where he owned his house I would have a hard time even renting an apartment by myself on that salary, much less supporting a familly.

 

[Lord of Elves]

Perhaps millenials have been coddled so much that don't have the same drive and ambition as previous generations and crumble whenever they face any real challenge or adversity in life? So they automatically settle/give-up and accept whatever their immediate prospects seem to be?

Seems like you have a bit of an axe to grind.

 

[ELITEOFWARMAN8]

Seems like you have a bit of an axe to grind.

Shhhhhh.... Maybe's he's one of the baby boomers!

Coddled? Doesn't that ignore the real economic differences between now and in the past? Long gone are the days of my grandpa, who could buy a house and support two children working as a machinist. Where he owned his house I would have a hard time even renting an apartment by myself on that salary, much less supporting a familly.

Agreed. I don't think it's coddled. It's just called a hard life. I don't see everyone going bankrupt because they are weak. Because they just don't have the money to pay their bills.

 

[Renner]

I agree our generation is probably the cheapest in memory (at least in the New World, people in Europe have been cheap for a long long time).

In fact yesterday when me and my girlfriend broke up (yeah, I'm still bummed about it, we were together for almost 3 years) one of the things she threw in my face is that supposedly I'm a cheap bastard. Even though I think in the last couple years I spent way more than I should have. It's comforting to know it might be a generational issue

I'd take thrift as a compliment.

 

[madviking]

I do feel that a lot of my friends (and I) wouldn't feel comfortable in a house with a white picket fence and 2.5 kids.

 

[ELITEOFWARMAN8]

I know I won't feel comfortable with any kids .