This week Advertising Age featured a long and excellent profile of Millennials as part of their annual Consumer Issue The article was written by a Millennial, Thomas Pardee who interviewed me for the story. The focus of much of the article is the battering Gen Y is receiving by the economy:
“Today, many millennials are unemployed; according to a Pew Research study released in February, a staggering 37% of 18 to 29-year-olds don’t have jobs, the highest share in three decades. Those who can afford to attend college are going to less-expensive state schools or community colleges and many are moving back home after graduation. More than a third depend on family members for regular financial assistance. They’re tightening their belts and re-evaluating what makes them happy — and they’re spending money accordingly.”
Often ‘spending money accordingly” means spending as little as possible. Pardee quotes Gabi Gregg, a 24-year old graduate of Mount Holyoke College, now MTV’s ‘Twitter Jockey’ making $100,000-a-year, position as saying:
“Almost everyone I know is living paycheck to paycheck, just trying to survive. It’s easier to interact online than to go out and pay for dinner, or go to a movie.”
Millennials’ entry to the job market, and consequently the consumer market, is slower than expected. At a presentation to a Chicago ad agency yesterday, one young recent college grad said he is the only one of his friends who has a full-time job. Without income, it’s hard to be an economic force.
Yet the numbers suggest it would be unwise to ignore them for too long.
There are currently 48.7 million adults age 18-30, about 22% of the total 18+ adult population. That’s about twice the size of the Senior population (66+ years). And yet Gen Y does not claim its fair share of households. The far less numerous Seniors account for nearly 18% of all households, while Gen Y accounts for only 10%, a staggering discrepancy.
While the picture is certainly grim, it is not permanent. Longer term, math is on their side.
Eventually today’s young adults will move out of their free rent, and shared rent housing. When that happens, the household figures will align more closely with the population statistics. In many categories, their impact will be disproportionate to their size. Certainly the markets for real estate, financial services and travel will enjoy a needed lift. According to Forrester, people ages 18 – 29 (Gen Y) will account for 40 % of online banking households by 2014.
The question on most marketers’ minds however, is what will their spending priorities look like? Will they match the free-spending Boomers, who are by some measures the most spending generation in history?
According to Ad Age, Boomers spend twice as much as other generations. The Bureau of Labor statistics says Boomers spend about 48% of their income on housing and transportation, which is a pretty healthy percentage. Millennials proportionately spend about the same, but off a lower income base.
As they have more to spend, will they continue to invest in houses, rent and vehicles? My intuition says no.
I don’t see them moving to the suburbs with all the trappings. The Recession has caused them to stop and think about what they really need and what really matters. The answer increasingly is ‘not more stuff’. Here’s what I told Thomas Pardee of Ad Age when he posed the question about long term impact on Millennial spending:
“Ms. Phillips says millennials are now tinged with a sense of frugality that will likely remain for the rest of their lives. Her research suggests they’re big into redistribution of materials, into sharing smaller houses and taking public transit or walking. They’ve dropped their cable and never used landline phones; they’re not eating out as much, and they’re paying down their debt. Though they will splurge on necessities (which now include smartphones) and rationalize that occasional Coach bag as a career investment, “they’ll go online and ask their friends for recs. They’re very careful shoppers.”
An recent article in the Wall Street Journal by Richard Florida titled “How Soho Can Save the Suburbs” caught my eye. Florida contends that changing lifestyles signal a shift away from big homes and long commutes in favor of more convenient ‘walkable’ communities.
“Even before the recession, our changing demography had begun to alter the texture of suburban life in favor of denser, more walkable mixed-use communities. The average age of marriage has been rising, households have gotten smaller, and home-buyers—surprising numbers of them single women—are looking for smaller houses closer in, with access to parks and cultural amenities. ….These are the places where Americans are clamoring to live and where housing prices have held up even in the face of one of the greatest real-estate collapses in modern memory. More than that, as my colleague Charlotta Mellander and I found when we looked into the statistics, the U.S. metro areas with walkable suburbs have greater economic output and higher incomes, more highly educated people, and more high-tech industries, to say nothing of higher levels of happiness.”
The key insight is in the last sentence. Millennials are seeking happiness. Even in these hard times, they have retained their trademark buoyancy. According to Pew, 9 out of 10 still fully expect to reach their goals by the time of retirement. The secret appears to be in adjusting the goals.
What will a Millennial-dominated economy look like? My prediction is smaller, greener, less impulsive, and more inclined to do without unecessary frills and thrills — not because they are ‘anti-consumerist’ but because they are simply more inclined to save than spend. And that may in the end, save us all.
