In the USA, the weight of the welfare/warfare state rests on the shoulders of the next generation. They are expected to support $211trn of debt and unfunded healthcare and pension liabilities.
Not only that, but they must also join America’s consumer economy… by having children, and buying houses and automobiles – just like their parents and grandparents.
If they shirk… the whole edifice of the modern US economy comes crashing down.
And, based on the evidence, the “millennials” are shrugging:
How do you sell cars to Millennials (aka Generation Y)? The fact is, today’s young people simply don’t drive like their predecessors did. In 2010, adults between the ages of 21 and 34 bought just 27 percent of all new vehicles sold in America, down from the peak of 38 percent in 1985. Miles driven are down, too. Even the proportion of teenagers with a license fell, by 28 percent, between 1998 and 2008.
Since World War II, new cars and suburban houses have powered the economy and propelled recoveries. Millennials may have lost interest in both.
Half of a typical family’s spending today goes to transportation and housing, according to the latest Consumer Expenditure Survey, released by the Bureau of Labor Statistics. At the height of the housing bubble, residential construction and related activities accounted for more than a quarter of the economy in metro areas like Las Vegas and Orlando.
Nationwide, new-car and new-truck purchases hovered near historic highs. But Millennials have turned against both cars and houses in dramatic and historic fashion. Just as car sales have plummeted among their age cohort, the share of young people getting their first mortgage between 2009 and 2011 is half what it was just 10 years ago, according to a Federal Reserve study.
When Zipcar was founded, in 2000, the average price for a gallon of gasoline was $1.50, and iPhones didn’t exist. Since then, it has become the world’s largest car-sharing company, with some 700,000 members. Zipcar owes much of its success to two facts.
First, gas prices more than doubled, which made car-sharing alluring. Second, smartphones became ubiquitous, which made car-sharing easier. The typical new car costs $30,000 and sits in a garage or parking spot for 23 hours a day. Zipcar gives drivers access to cars they don’t have to own.
Car ownership, meanwhile, has slipped down the hierarchy of status goods for many young adults. “Zipcar conducted a survey of Millennials,” Mark Norman, the company’s president and chief operating officer, told us. “And this generation said, ‘We don’t care about owning a car.’ Cars used to be what people aspired to own. Now it’s the smartphone.”
Millennials, of course, are sharing more than transportation: they’re also sharing living quarters, albeit begrudgingly, and with less gee-whiz technology involved. According to Harvard University’s Joint Center for Housing Studies, between 2006 and 2011, the homeownership rate among adults younger than 35 fell by 12 percent, and nearly 2 million more of them—the equivalent of Houston’s population—were living with their parents, as a result of the recession. The ownership society has been overrun by renters and squatters.
If the Millennials are not quite a post-driving and post-owning generation, they’ll almost certainly be a less-driving and less-owning generation. That could mean some tough adjustments for the economy over the next several years. In recent decades, the housing industry has usually led us out of recession.
When the Federal Reserve lowered interest rates in the midst of the sharp recession of the early 1980s, for instance, a construction boom helped fuel the “Reagan Recovery.” With the housing market moribund, the Federal Reserve has lost a key means of influencing the economy with lower interest rates. The service-led recovery we’ve gotten instead is not nearly as robust.
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