After accounting for the present crisis, the average millennial has experienced slower economic growth since entering the workforce than any other generation in U.S. history.
Millennials will bear these economic scars the rest of their lives, in the form of lower earnings, lower wealth and delayed milestones, such as homeownership.The losses are particularly acute on the jobs front. One brutal month of the coronavirus set the labor market back to the turn of the millennium. The last time there were about 131 million jobs was January 2000.
For millennials who came of age then, it’s as if all the plodding expansions and jobless recoveries of their namesake epoch evaporated in weeks.
The milestones will get even more dire in the next jobs report, but for now the economic regression back to Y2K is a fitting symbol for a generation that — more than any other — has been shaped by recession.
The losses aren’t merely symbolic. This recession steamrolled younger workers just as millennials were entering their prime working years — the oldest millennials are nearing 40 while the youngest are in their mid-20s. Millennial employment plunged by 16% in March and April this year, our calculations show. That’s faster than either Gen X (12%) or the baby boomers (13%).
Proportionally, the even younger generation, known as zoomers, suffered worse than all of them. A third of their jobs vaporized in two months in 2020. But Gen Z is only just entering the labor force — the oldest zoomers are in their early 20s — so their losses weren’t as large in absolute terms.
At the beginning of 2019, millennials became the largest generation in the U.S. full-time workforce, surpassing Gen X. But the coronavirus crisis walloped millennials so disproportionately that they’re probably giving the top generational spot back to Gen X in the next month or two.
Gray Kimbrough, an economist with American University who we’ve previously and accurately branded a serial millennial myth debunker, points out the oldest millennials, such as himself, lived through the 9/11 terrorist attacks and entered the labor market in the recession that hit around the same time. They spent their early years struggling to find work during a jobless recovery, only to be hit by the Great Recession and another jobless recovery. And, of course, yet another recession.
“The story here is not just that it’s a bad recession, and that it’s hitting young people more, but that it’s hitting people who have already been hit,” Kimbrough said.
The Great Recession pushed young workers a few steps down the wage ladder. Research shows they never recovered, even as their older colleagues regained all the ground they’d lost. It’s happening again, to many of those same young workers.
In a 2019 working paper, Census Bureau economist Kevin Rinz used regional differences in the Great Recession’s severity to calculate that while millennial employment recovered from the Great Recession within a decade, millennial earnings never did. Building on earlier work from the University of California at Berkeley’s Danny Yagan, Rinz based his findings on more than a dozen years of annual data for more than 4.1 million people in a government database.
Thanks to the Great Recession, the average millennial lost about 13% of their earnings between 2005 and 2017, Rinz found. That’s worse than Gen X’s 9% setback and almost double the 7% loss faced by baby boomers. By the end of the period, baby boomer earnings had recovered, even as millennials remained well below where they should have been.
Millennials, suffering through high unemployment during the recession, ended up less likely to work for high-paying employers and less likely to complete as much education as workers in places where the recession didn’t hit as hard.
They had to settle for worse jobs early in their careers, depressing their lifetime earnings potential. The employer side changed, too, Rinz finds. Big employers in the hardest-hit areas consolidated power over labor markets and, in turn, offered less to young workers who had few other options.
“If people enter the labor force during a recession, and they get into lower-paying jobs, that carries forward for much of their lifelong working careers,” said Ana Kent, a policy analyst at the Federal Reserve Bank of St. Louis. “That’s going to have impacts on not only their income but their wealth and also their ability to save for a down payment and their ability to meet other lifetime goals.”
Millennials had much less of a financial cushion than previous generations did at their age, Kent said, even though they had been doing many things right.
Millennials are getting married later and having children later, and, at an age when boomers and Gen X were building equity, millennials have no housing net worth, Kimbrough’s analysis of Federal Reserve data show.
Yet millennials spend within their means more so than Gen X or boomers did at the same age, Kent’s analysis of separate Federal Reserve data show. That is, they’re more likely to spend less than they earn, and 52% of millennials were saving for retirement at age 34. At that age, just 42% of boomers had retirement savings.
“This narrative of, ‘Oh you should just work harder, sink or swim by your own effort?’ It’s very American, but it ignores the fact that the tide is much stronger now, and many millennials are swimming upstream,” Kent said.
Millennials are the most educated, most diverse generation in history — at least until zoomers pass them. Those distinctions come with burdens.
William Gale, a senior fellow at the Brookings Institution, said millennials’ rising debt burden outstrips gains they have made in education. “Their parents and public authorities funded less of their college education than previous generations,” he added.
That’s compounded by the large African American and Hispanic millennial populations, as these groups continue to suffer the effects of generations of systemic discrimination. The wealth gap between black and white households continues to grow, even after controlling for differences in age, education, marital states and even income, Gale and several collaborators found in a working paper circulated by the National Bureau of Economic Research.
It’s part of trend of more marginalized groups falling behind. Millennials with a college degree aren’t far behind previous generations in terms of wealth, Kent found, but their less-educated peers have a bit more than half of the wealth they’d expect at this stage, based on previous generations.
“Not every single millennial is going to be doing more poorly,” Kent said. The 29-year-old points to herself as an example. She identifies as Hispanic, a category that’s been hit disproportionately hard by the downturn, but her PhD and white-collar job insulated her from a crisis that first hammered less-educated workers in the service industry.
“Some millennials — particularly those who are black, Hispanic or women, or who have less than a bachelor’s degree — were already financially vulnerable going into the pandemic,” Kent wrote earlier this week.
Nationally, about 12% of all workers couldn’t cover a $400 emergency expense — even with the help of family or credit cards — according to Kent’s analysis of Federal Reserve data. The 12% number holds for non-Hispanic white millennials, but the figure leaps to 32% for non-Hispanic black millennials, 20% for Hispanic millennials and 17% for millennial women. For all millennials with less than a bachelor’s degree, the figure is 25%.
“Even after so many years of economic expansion, they’re still below where we’d expect them to be,” she told us.
Not coincidentally, Kent’s analysis of Labor Department data shows women, Hispanic workers and the less-educated also are overrepresented among unemployed millennials during the pandemic.