Millennials spend less than previous generations because they literally have less money, Fed says

Why millennials are struggling in a booming economy

In recent years, slow home construction, declining new-car sales and the poor performance of brick-and-mortar retailers have all been blamed on the "unique tastes and preferences" of those born between 1981 and 1997. That means millennials have been accused of killing everything from canned tuna to the suburbs.

Actually, though, millennial habits are not so different from that of previous generations, "once the effects of age, income, and a wide range of demographic characteristics are taken into account," according to a new paper by the Federal Reserve.

Younger people are spending less because they have less money to spend, the Fed concludes.

"Millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth," write authors Christopher Kurz, Geng Li and Daniel J. Vine.

"For family income," they write, controlling for age and work status, "Generation X and baby boomer households have a family income that is 11 percent and 14 percent higher, respectively, than that of demographically comparable millennial households."

That jibes with recent research showing that the median millennial only has $2,430 in savings and that a growing percentage of millennials have absolutely nothing saved. In fact, that generation is still largely relying on Mom and Dad for help: Most American adults between the ages 21 to 37 receive financial assistance from their parents or guardians, according to a report from Country Financial.

That doesn't necessarily indicate they're bad at putting money away — it could mean they just have less to work with. In 2016, millennials had more in their retirement savings accounts than other generations at comparable ages, the Fed says, though that may reflect the replacement of pensions with defined-contribution accounts.

Nearly a third of millennials would end a relationship for a raise

So, what gives? Why are young people today less wealthy than young people were in previous generations?

Millennials are likely paying a price for coming of age during the Great Recession, "when new entrants to the labor market faced historically weak labor demand and unusually tight credit conditions," according to the Federal Reserve report.

The increasingly steep costs of health care and education have likely contributed as well, they note.

Alissa Quart, executive director of the Economic Hardship Reporting Project and author of the recently released book, "Squeezed: Why Our Families Can't Afford America," reached a similar conclusion: millennials are struggling, she says, because wages are not keeping up as day-to-day costs soar.

Higher education is more necessary and less affordable: Adjusting for inflation, compared to college tuition in 1988, private school tuition in 2018 has increased 213 percent and four-year public school tuition has increased 129 percent. As a result, much of the generation is drowning in student loan debt.

Meanwhile, the average annual deductible for employer-sponsored health care plans was $1,505 in 2017, compared to only $303 in 2006, according to the Kaiser Family Foundation. Many younger Americans must resort to drastic measures to afford medical emergencies. Some have taken to raiding their retirement accounts, while others wait until they get a tax refund to access medical care they had been putting off, the JPMorgan Chase Institute found.

Life really is more expensive for you than it was for your parents and grandparents

However, the news from the Federal Reserve isn't all bad. Its report finds that millennial households hold roughly the same levels of debt as Generation Xers, though they have more than Baby Boomers.

Millennials are also more racially diverse and more educated than previous generations, though those characteristics seem to be "consistent with secular trends in the population and are therefore not the aberrations of a single generation."

At the end of the day, the way millennials choose to spend and not spend their money may indeed be hurting some industries. BuzzFeed lists 18 things the generation has killed, while Ranker puts the total at 25 and Mashable identifies 70, including "Everything."

So if the boomers running those industries want millennials to stop killing, as Quart's research suggests, perhaps they ought to pay them better.

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