No matter what they do, Minnesota millennials feel like they 'can't get ahead'
In an economy built on booms and busts, timing is everything, and for the generation that graduated around the worst recession since the Great Depression, their economic timing couldn't have been much worse.
Minnesota millennials saw their average wages plummet in the years after the 2008 recession, according to new data the Federal Reserve Bank of Minneapolis compiled, even as older workers saw earnings recover at a faster rate.
"The labor market you're born into ends up affecting your entire lifetime income," said Louis Johnston, professor of economics at the College of St. Benedict and St. John's University.
Those who enter the workforce during an economic downturn "have lower long-term earnings, higher rates of disability, fewer marriages, less successful spouses and fewer children," according to a recent report from the National Bureau of Economic Research. Now as these millennials approach middle age, that slow start means many still feel financially behind, no matter their current income.
"I think a lot of people are really quite well off, but they don't feel that way because they don't see a path toward the future," said Alfred Marcus, professor at the University of Minnesota's Carlson School of Management. "They feel stagnant."
Alex Jones of Edina knows that sense of inertia despite recently changing jobs for better career-growth opportunities.
"Here I am at 34 years old starting over at an entry-level wage," Jones said. "I can survive on that as a single person in the Twin Cities, but I can't get ahead."
Forward, not up
Economic mobility — doing better financially than the situation one is born into — is supposed to be a hallmark of the American experience. The Great Recession is just one reason many born in the 1980s are less likely to be outperforming their parents at this age than previous generations.
The cultural expectation to attend a four-year college in the early 2000s left many graduates overqualified, underpaid and saddled with student loan debt. Adjusted for inflation, millennials on average paid triple what their parents did for a four-year degree.
And since 1987, rent has tripled and the average cost of a house is five times higher. That, plus enormous child-care bills relative to what previous generations were paying, eat away at any wage gains.
"Your money doesn't go as far," Jones said. "There are advantages we have they didn't have, of course. But my parents had two kids in their mid-30s. I can't imagine that right now."
Matt Rodriguez, 36, and his wife pay nearly $40,000 a year for their two kids to go to day care, a typical sum for the metro area.
The Plymouth couple had good timing with the housing market, have healthy savings and are upper middle class by most measures. They're grateful for their good fortune, yet still feel unable to build financial momentum.
"It feels like we've done everything right in seeking higher education and having good careers, but we can't get past the reality of constantly struggling to increase our net worth," Rodriguez said. "It has limited our travel, and we find that even with our high-earning status, we are unable to live a life as good as the generations before us."
Mike Prall also has two kids in day care, a low interest rate on the mortgage and a six-figure household income. But he's three years younger than Rodriguez and might have missed the worst of the recessionary effects on his income and outlook. Prall, an accountant who graduated from college in 2013, said it still takes strict budgeting to keep his Lino Lakes family on track, albeit while living "a more boring life than others" by rarely dining out and taking few vacations.
"If I was a millennial who hadn't bought a home five years ago and hadn't been able to afford a 5 percent down payment, I don't know what we'd do," he said. "I feel very fortunate. It takes a village, and if you're trying to do it alone, that's the hardest thing."
Fair comparisons
In 1989, when baby boomers were starting families, that cohort collectively held 20% of all wealth in the U.S., according to the St. Louis Federal Reserve Bank.
Last fall, millennials had less than 10%, despite making up a third of the population.
This might offer another reason why, whether making $40,000 or $150,000, 30-somethings today feel financially stunted: They have a far smaller share of the nation's wealth than their parents did at their age.
"Our generation, regardless of current earnings, started [far] behind our parents in the race to financial freedom," said Scott Haws, a 36-year-old bank credit risk manager in Fargo. "If you think about what your parents could afford versus the life we live, you can see that we do not have the same spending power our parents had."
Rapid inflation has even further diminished that spending power. Skyrocketing property values and taxes priced Caitlin Benson out of her house. In six years, her monthly housing payments had doubled, and even with going back to work after being a stay-at-home mom, the family of three had to move.
"What stuns me is the fact that working a full-time job, and then also operating within the gig economy, somehow that's not enough to own and maintain property," she said. "I think it's really hard for other generations to fully understand what it is that we're battling."
Benson, now divorced and renting in Uptown, makes ends meet as a freelance music teacher and plays cello with her band, Paper Chain. She doesn't have a car, but feels lucky she can make money with music instead of less-fulfilling jobs she's had in the past, like waiting tables.
"When I have these conversations with my mother, she comes from the perspective of, 'I never needed to like what I did. I just needed the money to raise a family and buy a house,'" Benson said. "I understand that and respect that. But doing what I hate doesn't pay the bills any better."
That generational friction has been part of the human story for thousands of years, and there is an explanation for why a younger generation's woes are often chalked up to individual error. University of California-Santa Barbara researcher John Protzko calls it the "kids these days effect," or more scientifically, a memory bias called "presentism."
"The bias is so ingrained in our memory systems that it's unlikely we'll ever stop thinking the kids these days represent a decline in our society," the university summarized about Protzko's research in 2019. "These gripes cut across not only generations, but also cultures."
Uncertainty reigns
Marcus, the U professor, said the repercussions of this generational income disparity are playing out in surveys that measure happiness. Young Americans are far less happy than they used to be, according to Gallup, bucking the normal trend of happiness dipping from youthful highs then moving up again in old age.
"There's a lack of predictability that leads to uncertainty," Marcus said. "What the hell's going to happen in the next 40 years? What should I do to prepare for it?"
Millennials of a certain age have been slower to buy homes, start a family and adequately fund retirement accounts because of a late start or slow rise through the income ladder.
"If folks are not experiencing that earnings growth early in their careers, I think it makes it harder for them to hit those milestones," said Abigail Wozniak, director of the Minneapolis Fed's Opportunity and Inclusive Growth Institute. "Once that milestone isn't reached in a certain amount of time in the life cycle, it has these longer-run effects."
The World Happiness Report shows only in America are millennials and the younger Generation Z so strikingly less happy compared to those 60 and older.
That's not just income and wealth disparities but the weight of the world, at everyone's fingertips, casting doubt on a thriving future.
"You have to have an open society where your mobility is based on merit and hard work. And if that goes away, it just makes you unhappy," Marcus said. "What we always said in the United States is: You're going to do better than your parents. I don't think that's as prevalent. I don't know how real it is."