The US Economy is Failing Young People

The US economy is improving, so we are told. With the financial crash receding into the distance, almost out of sight, things are looking up, the future is finally brightening. Unemployment reached a 50-year low in 2019, falling to 3.5%, while US employers have added almost 5 million jobs in just two years. These are ‘the best economic numbers our country has ever experienced’, the President declared at Davos, with characteristic humility. And bombast aside, his sentiment is not without foundation, the US economy is posting some good numbers. In addition to jobs, GDP has been growing at close to 3 percent annually, and the Dow Jones has increased by 49% is the last 3 years - all of which is great election fodder for the coming campaign. Democrats should be wary.

But what of people's lives? With records being broken, and figures heralded as ‘the best ever’, you'd be forgiven for presuming people’s lives were improving in parallel, that the numbers translated into more than just useful soundbites. For most this is yet to happen. In explanation, economist, Joseph Stiglitz, has denied that the nation’s economic health has experienced a marked improvement, claiming ‘neither GDP nor the Dow is a good measure of economic performance, for neither tells us what’s happening to ordinary citizens’ living standards’. Indeed, if one looks to more tangible metrics - life expectancy (falling and among the lowest in the developed world), disposable income (on the decline), and household debt (skyrocketing) - a vastly different picture of American life emerges: one of stagnation, uncertainty and strife. It’s with this picture that young Americans, in particular, most identify.

Instead of prosperity, millennials (Americans born between 1981 and 1996) anticipate economic future of precariousness, Trump’s creation of ‘the greatest economy… in the history of the country’ having no recognisable bearing on their reality. Optimism, the characteristic for which they were once known, is fading, and in its place has grown a shrewd pragmatism, accompanied by an acceptance that the US economy, regardless of its supposed merits, is deeply flawed. Whoever is experiencing its much touted ‘improvements’, it’s not them.

Broken promises

Remember, this was the generation that were told a college education was everything, the ticket to a comfortable life. Having held up their end of the bargain - becoming the most educated generation ever in the process - they’re now finding out the social contract to which they committed was sold on false pretences. High on the list of grievances are tuition fees - they are eye-watering. Having risen a further 25% in the last decade, they average $48,510 and $21,370 per year for private and public institutions, respectively. No one, of course, can afford this outright, and as a consequence, student loan debt has become the second highest consumer debt category, behind only mortgage debt. Added to the stagnating real wages graduates face when entering work - median purchasing power has been static for 40 years - and the rising cost of living, and you have a demographic cohort with a collective debt in excess of US$1 trillion, the highest in history.

With respect to tuition at least, the accumulation of debt is not inherently bad, presuming the interests that stand to be gained are of appropriate size. Primarily, and rather obviously, this interest has typically been a job - ideally, one that's fulfilling and well paid. Nowadays, though, these are in short supply. The problem isn't an actual lack of jobs, although figures on this are nothing to celebrate; it’s the quality of jobs relative to the skills of the applicant. Millennials have been struck by underemployment, ‘the underuse of economic capacity’, or, in other words, lots of history grads working in Starbucks. According to data from the New York Fed, in September 2019, 34% of college graduates were underemployed, working in jobs that do not require a college degree. Among those more recently graduated, aged between 22-27, the rate was as high as 41.3%. And this is no post-recession fallout, either. In fact, these figures have remained relatively stable over the past 25 years. No cyclical fluctuations, as one may expect, and no identifiable long-term trends. It’s perverse. Students spend billions of dollars every year to earn degrees, and over a third of them add no value to the workforce.

Ambition blocked

Underemployment is also by no means the sole preserve of graduates, as the 2019 GenForward Survey, conducted by the University of Chicago, has shown. Using a nationally representative sample of 18-34 years olds, the survey reported the extent to which young people feel their aspirations are stymied. Many, for instance, believe they’re denied ‘access to good jobs, either because they are unavailable in their area or because they cannot get to them by driving or using public transportation’. A full 44% of Latinxs, 39% of African Americans, 31% of Asian Americans and 29% of whites subscribed to this sentiment, claiming that decent employment existed inaccessibly elsewhere. Moreover, those working were commonly found to dislike their jobs, large numbers citing ‘just to get by’ as their reason for being there, despite a majority strongly desiring a career-driven path. Even then, second jobs for around 25% was still needed to actually ‘just get by’, given inadequate pay. Far from exploiting the gig economy for its flexibility - its supposed redeeming quality - the data strongly suggested participation was the result of necessity, of the lack of an alternative.

Candidates must listen

Relative to their parents, the future for millennials is one of ‘lower earnings, fewer assets, and less wealth’, so concludes research from the Federal Reserve. The median income for 25-34 year olds has fallen in every major industry but healthcare since 2008, contributing to millennials owning just 4% of real estate value, when at the same age baby-boomers owned 32%. This is far from the picture Donald Trump describes. It’s a picture populated by physicist waiters, engineer baristas and sales people who boast an extraordinary knowledge of international relations. Ultimately, it’s picture in which talent is being squandered. With millennials on the verge of overtaking baby-boomers in number, and thus becoming a potentially election-defining voting block, candidates for President should really be taking note.