Young adults, burdened with debt, now face an economic crisis
The last time a severe economic recession hit in 2008, Evan Schade was in high school and the crisis seemed like a topical event that happened to other people. This time like the coronavirus brought the economy to its knees, it has become a personal matter.
When non-essential businesses were closed last month in Kansas City, Missouri, where he lives, Mr. Schade, 26, lost his job in a carpet store and almost every shift in his second job at a cafe. His girlfriend, Kaitlyn Gardner, 23, was fired from another cafe.
The money they have in their bank accounts, just over $ 1,000, is enough to cover just April’s $ 800 rent check – forget about his $ 300 student loan payments or health insurance. which he hoped to finally subscribe to. The couple spent their time at home applying for unemployment and looking unsuccessfully for new work.
“I know so many people my age who are going through the exact same thing,” Ms. Gardner said.
The youngest American adults face what is, for most of them, the first serious economic crisis of their working lives. By most measures they are unfortunately not prepared.
While the past few years have been largely good for the U.S. economy, it has done little to give Millennials a solid financial foundation. Overloaded with credit card and student debt, and under-represented in the housing and the stock markets, they entered this uncertain period with large obligations and few resources.
Their position seems doubly precarious when measured against today’s older generations and against generations of the same age, from 23 to 35 years old.
At the onset of the 2008 financial crisis, Gen Xers were roughly the same age as millennials today, but on average had twice the total assets millennials now have when all bank accounts, stocks, and loans. are added up, according to an analysis done for The New York Times by economists at the St. Louis Federal Reserve.
Now Gen Xers, aged 40 to 55, are in a strong position compared to Gen Y, even after being battered by the 2008 crisis. They have around four times the assets and more. twice as much savings as today’s youngest American adults.
Those with a university degree, a minority of the youngest adults, do better on average than previous generations when they were the same age. But everyone does a lot worse, according to an analysis by the Pew Research Center Last year.
“Even in this situation, young adults were in a very precarious situation,” said Reid Cramer, who led the Millennials Initiative to New America, a left-wing think tank. “A sudden shock is really going to have a pretty big impact on this generation.”
Coronavirus turmoil has already brought out more generational divisions. Students partying on Florida beaches have angered older Americans who face more serious health risks when young gatherings spread the virus.
But while young adults may face fewer health problems, they are more vulnerable to the financial costs of the recession. Millennials are much more likely to be involved in part-time work and the odd-job economy, according to government reports, and these have been hit hard. Such work usually offers little benefit to cushion the blow of bad times.
The sudden disappearance of paychecks, combined with a wide range of monthly debt payments and declining investments, is forcing some millennials to take desperate action. Social media has been full of discussions on how best to withdraw money from 401 (k) retirement accounts to pay rent.
Dan Gamez, 22, who lives with his parents near Boston, sells his video game consoles on eBay to make the next payment for his car after losing his job at an AT&T store.
“I just stayed home and played video games, so I’m a little upset that I have to do this, but I have no choice,” he said.
Andrew Lawson, 29, made between $ 500 and $ 600 a week delivering food for DoorDash on the Big Island of Hawaii. After the state closed non-essential businesses, most restaurants closed. In three days of work in a week, Mr. Lawson earned less than $ 60, which was not enough to cover gasoline to get to Kona, the city with the jobs.
“Nowadays, I could get a $ 5 order from McDonald’s after three hours of waiting,” he said.
Mr. Lawson has a 2-year-old child and a pregnant wife, who is not working. They were ready to eat plain noodles until he went to a food bank and received a bag of potatoes and carrots. He created accounts on all social networks to broadcast his need for work – any work.
“Give me something that I can feed my family with,” he said. “I don’t care what it is.”
The inequality between millennials is even more evident when race is taken into account. Young black families at all levels of education have lagged behind their white peers over the past two decades in measures such as household wealth and homeownership, according to search for New America.
“Over time, it becomes more and more difficult for young families to accumulate wealth,” said William R. Emmons, senior economist at the Center for Household Financial Stability at the Federal Reserve in St. Louis. “We thought they might catch up later, but the current situation doesn’t give me much reason to believe that is going to happen.”
These drawbacks are already shaping the long-term prospects of young Americans. They are much less likely be married, have children, or own a home than Americans of the same age in decades past.
Ms Gardner said that she and Mr Schade ultimately wanted a family and a home. But she said, “We’re both going to be in debt for a while, and having kids just isn’t doable.”
While there is a chance that the recession will be short, economists assume that the turmoil that has already occurred will have long-term consequences for young households.
The 2008 crisis made young Americans then more reluctant to invest in the stock market. According to data from the Federal Reserve in St. Louis, Millennials today hold, on average, only one-third of the stock market holdings Gen X had before the 2008 financial crisis.
This means that young households have not taken advantage of the market gains that have occurred over the past decade. Today, the average member of Generation X has 10 times more stock market wealth than Generation Y.
Jack Ankenbruck, 25, who until last month made a living playing drums in a band in Nashville, began putting money into an investment account with start-up Acorns the last year and got it up to $ 2,000 in February. The account’s value has plunged nearly half in recent weeks, causing him to question his decision to put it there in the first place.
“I’m like, ‘What if I just kept that $ 30 a week – I would still have that money,’ and I could use it now,” said Mr Ankenbruck, who tried to make money by playing concerts online.
Jayci Cumberledge, 23, of Amherst, Ohio, does not have a retirement account and spent his last $ 80 in savings to make the monthly payment for his car shortly after the gastro pub where she was working in mid-March.
Ms Cumberledge’s parents have also lost their jobs in recent weeks – her father at a Ford factory, her mother driving a van for disabled children. It made her realize how much better prepared they were for it, she said, with a house they own and no rent payments to pay.
To cover her mobile home’s utility bills, Ms. Cumberledge borrowed $ 200 from a friend. She has since made money selling pictures of her feet to fetish people who found her online after posting a joke on Twitter.
“You compare it to the older generations – they worked and saved money,” Ms. Cumberledge said. “I feel like I will never have a stable job with benefits and health insurance.”