ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Boomers and the Millenials Provide Clues About the Future of the US Economy

Updated on November 3, 2012

The Baseline Starting Point

Before looking into the future, it is instructive to understand where the US Economy is standing now.

Median Salaries

Source

Salary Recession

US salaries have been in free-fall since the recession began in 2008. The recovery was widely reported to have begun between late 2009 and early 2010; but this certainly was not reflected in salaries. Salaries continued in their free-fall until late 2011; and have yet to establish a convincing pattern of consolidation that can lead to growth.

Elevated Unemployment

Source

Don't Tell Me, Show Me

The American people are unlikely to make decisions based upon what their central bankers and political leaders tell them. They are more likely to base their decisions upon the real data inputs that they receive from the economy. These inputs tell them that their wages have fallen; and that unemployment is at an elevated structural level, which policy makers have been unable to address.

Boomers Work Till They Drop
Boomers Work Till They Drop | Source
Deleverage Continues
Deleverage Continues | Source

Demographic Drivers

The current working population is deleveraging, so they cannot move the needle in terms of economic growth. In fact, this demographic group is having a negative impact on economic growth.

One must therefore look to the Baby Boomers and the Millenials for signals about the future.

The Baby Boomers are important because they have accumulated assets and savings; which they will presumably monetize in order to live in their retirement. This conventional wisdom and expectation of the Baby Boomer generation is however being challenged by the facts. The evidence suggests that the Baby Boomers have in fact decided to work longer and harder. The value of their homes and assets are therefore not high enough to sustain them through life in the future. The graphical evidence from the St. Louis Fed shows that the Baby Boomers reacted to the fall in the value of their wealth, during the Credit Crunch, by going back to work. They were thus forced back to work; by the realization that they did not have enough wealth to meet their current and future liabilities. This may also have something to do with the soaring costs of healthcare and medicare, which have been amplified by the fact that life expectancy has risen. The Baby Boomers cannot be expected to be drivers of the economy; outside of the sectors of healthcare and medicare. Their ability to drive these sectors is also challenged by the fact that they must work to pay as they go, rather than cash in their savings policies and spend the proceeds.

Education and Employment Trends

The Recession and Recovery were better for those with higher education qualifications
The Recession and Recovery were better for those with higher education qualifications | Source
"The Cheapest Generation"
"The Cheapest Generation" | Source

Millenial Demographic Challenges

This then leaves the Millenials. So far policy makers and producers have struggled to understand this demographic and its economic potential. Thus far, it has been analysed and evaluated through the narrow prism of education. Empirical evidence suggests that employment opportunities improve for those who remain in tertiary education. Young people are more likely to get a job, if they at least have a college degree. Unemployment appears to be highest amongst young people with no college degree. It is therefore assumed that the Millenials will stay in school and migrate up the value and salary chain to get higher paid jobs.

This assumption is however challenged by the behaviour of the Millenials. It would seem that this demographic has been scarred by the experience of the recession; and has read the signals coming from the current salaries and employment data. Their belief in the utility of education is being challenged; not as a principle, but because it is too expensive. Many young people are doing their own math; and coming to the conclusion that it makes no economic sense to incur large debts to get an education, when the salary levels are falling. An education may improve the chances of employment; however the salary may not be attractive. Ironically, an education is now becoming an economic privilege of the wealthy; not those who aspire to be wealthy.

The Millenial generation looks for value for money in everything that they consume. Going forward, if their behaviour remains the same they will become a deflationary force; that does not create economic demand of any significance.

Source

Policy Makers' Responses

The Obama Administration was viewed as a beacon of hope for the Millenials; that has become disillusion. The economic conditions necessitated a narrow focus on those in the immediate laborforce who had become unemployed. In addition, the Baby Boomers were supported by monetary policy designed to raise asset prices; so that they could subsist off their accumulated assets. Thus far the Millenials have been ignored; and unfortunately have also been given the fiscal bill to pay for the policies aimed at the unemployed and the Baby Boomers. Left to their own devices, the Millenials have found their own economic model for subsistence. In so doing they have become disengaged from the rest of the American economy. Future policy must be aimed at bringing them out of economic isolation back into the American family.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)