Millennials, Money and The Washington Monthly

Dear Colleagues:

I would like to alert you to the publication of the latest issue of the Washington Monthly, which was produced in collaboration with New America. Inspired by the Millennials Rising policy symposium, organized last fall, the issue features an excellent series of articles that broadly examines the relationship between Millennials and money.

The cover story by New America Fellow Monica Potts offers a critical assessment of the “sharing economy” which has emerged as a means to cope with the effects of the Great Recession. While there may be advantages in avoiding some of the commitments of ownership, her piece explores how an inability to begin accumulating wealth is fostering an extended period of economic instability. The upside is that some young adults are creating virtues out of necessity, but we are already seeing how the downward mobility of Millennials will have long-term consequences. For those of us who look at the world from an assets perspective, it reads as a both a cautionary tale and a clarion call. Perhaps more importantly, it sets up an important policy conversation about economic security and mobility.

Another piece by Phil Longman, Policy Director in New America’s Open Markets Program, presents a novel take on inequality, arguing that perceptions of growing disparities might be best understood in generational terms. Rather than focusing on how exceedingly well the 1% is doing, it’s more instructive to recognize the decline of every generation born after the Boomers. If we look at the balance sheets of young Millennials, and even Gen-Xers, we see declining incomes and lower levels of wealth, not merely vis a vis the rich, but compared to previous generations of Americans. If people feel as though it is harder to get ahead than it used to be, it’s because it is. Turning around this growing generational inequality will require a broad set of policies, ranging from taking on the rising cost of education andhealth care to making sure the emerging “sharing economy” doesn’t leave younger Americans devoid of assets.

One way that young people have traditionally been able to build up the assets side of their balance sheets through is through entrepreneurship. However, Matt Connolly describes how Millennials are starting fewer businesses in recent years even though they are more inclined to do so. Out of necessity many have taken on temporary work, in effect creating a “Gig Economy.” The "Gig Economy" is characterized by a small, and less powerful, form of entrepreneurship that fails to spark the benefits we traditionally associate with small business creation.

Another impact of the Great Recession has been the delayed entry of young families into the economy as homeowners. Without savings to cover a down payment or the ability to qualify for a mortgage, Millennials are lagging behind previous cohorts in their rate of homeownership. Jordan Fraade sheds light on an innovative response, shared equity homeownership, which is gaining momentum in communities across the country. In shared-equity housing, the buyer gets a one-time subsidy that allows them to purchase a home that they would not be able to afford otherwise and in return shares the accumulated equity upon resale. This approach still offers the potential for wealth building but also provides access and stability. It is the type of innovative policy solution that we will need more of if we are to help the current crop of young families make the move up the economic ladder.

New America also recently hosted “Going (for) Broke,” a forum on the financial lives of Millennials and the potential of different efforts to strengthen their economic foundations. We were pleased to use the occasion to release a new report by Terri Friedline, Assistant Professor at the University of Kansas and Research Fellow at New America, entitled “Building Millennials’ Financial Health via Financial Capability.” While financial education efforts have shown mixed results, Dr. Friedline provides evidence that combining education with experiential learning is much more likely to produce positive outcomes like lower amounts of debt, more money for emergencies, and less reliance on predatory financial services.

I hope that this and other work contributes to a sustained exploration of public policy interventions that can address the economic challenges facing the current cohort of young adults. Please read these articles and share them if you like, and let me know if you have any feedback.

All the best,

Reid Cramer
Director, Asset Building Program
New America

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Author:

Reid Cramer is director of the Millennials Initiative at New America. Previously, he served as the Asset Building program's research director and as a co-director of New America's Next Social Contract Initiative.