Are Millennials Different
by
Christopher Kurz, Geng Li, and Daniel J. Vine1
November 2018
Abstract
The economic wellbeing of the millennial generation, which entered its working-age years around the time
of the 2007-09 recession, has received considerable attention from economists and the popular press. This
chapter compares the socioeconomic and demographic characteristics of millennials with those of earlier
generations and compares their income, saving, and consumption expenditures.Relative to members of
earlier generations, millennials are more racially diverse, more educated, and more likely to have deferred
marriage; these comparisons are continuations of longer-run trends in the population.Millennials are less
well off than members of earlier generations when they were young, with lower earnings, fewer assets, and
less wealth.For debt, millennials hold levels similar to those of Generation X and more than those of the
baby boomers.Conditional on their age and other factors, millennials do not appear to have preferences
for consumption that differ significantly from those of earlier generations.
Keywords: consumption, generations, millennials, balance sheets, motor vehicles, and households.
1 We thank our colleagues at the Federal Reserve Board for helpful discussions and comments.Special thanks to
James Calello and Bo Yeon Jang for invaluable research assistance and feedback.The views presented here those of
the authors and do not necessarily reflect those of the Federal Reserve Board or its staff.I. Introduction
Over the past decade, millennials have received a substantial amount of attention as they
have transitioned into adulthood.In the fields of business and economics, the unique tastes and
preferences of millennials have been cited as reasons why new-car sales were lackluster during
the early years of the recovery from the 2007–09 recession, why many brick-and-mortar retail
chains have run into financial trouble (through lower brand loyalty and goods spending), why the
recoveries in home sales and construction have remained slow, and why the indebtedness of the
working-age population has increased.2
The general narrative is that the consumption behavior of millennials differs so much
from that of earlier generations that the transition of this generation into the prime working-age
cohort has induced meaningful changes on macroeconomic outcomes.The narrative sounds
plausible, especially if there are no offsetting changes to the spending patterns of the other
cohorts as they age.
However, distinguishing the shifts in the population’s spending patterns that reflect the
unique characteristics of its rising generation from those that reflect secular trends or cyclical
forces can be challenging.First, the population includes many generations, and each is unique in
some way: Each generation’s members were born within a particular range of years and were
2 For discussions of declining auto sales, see, for example, “Why Car Companies Can’t Win Young Adults,”
Fortune
(2013). For retail spending, see, “Millennials aren't spending money like their parents did,”
Business
Insider,
and “Retailers should be terrified of millennials and Gen Z,”
Business Insider
.Similarly, an analysis by
JPMorgan “The State of the U.S. Consumer,” (2016) also finds a larger share of “experiential” spending, with the
share of spending on travel, entertainment, and dining different between the general population and millennials, and
the discussion in “NOwnership, No Problem: Why Millennials Value Experiences Over Owning Things,” found in
Forbes (2015).In terms of housing construction, see “Homebuilders are targeting millennials — but it will hit their
margins” CNBC (2017) and for a summary of delayed homeownership and the possible causes, see Bleemer et al.
(2017).For debt, see “Younger Generation Faces a Savings Deficit,”
Wall Street Journal
(2014) and, more recently,
Chien and Morris (2018).subject to a new set of initial conditions.Each generation was also surrounded by particular mix
of actors, cultural changes, and world events during its formative years.As a result, change
between generations is a fairly permanent source of change in the population.3
Second, economic trends, such as the introduction of new goods and technology, can
affect each generation differently, with younger generations typically being more willing to
adopt these innovations.Accordingly, some economic behaviors that appear to reflect the
unique tastes and preferences of a new generation might actually just reflect general
technological change.
Third, the effects of the business cycle on economic behavior—especially large
downturns—can vary for households in different age groups.Some of these effects likely
dissipate as the economy recovers, even though they can mimic generation-specific tastes and
preferences for quite some time.But some of these effects may become part of that generation’s
permanent tastes and preferences.For example, the severity of the 2007 Global Financial Crisis
and the recession that followed may have left a lasting impression on millennials, who were
coming of age at that time, much like the Great Depression left a lasting impression on the
Greatest Generation.
In an effort to sort through these effects, this chapter uses survey and administrative data
to compare the saving and consumption patterns of millennials to those of earlier generations,
taking into account some important differences in their demographics (such as age, race, family
composition, education, and marital status) and economic characteristics (such as income and
employment).Using this information, we make an effort to distinguish the effects on household
3 For a discourse on generational research, see, for example, Pew Research Center (2015b).。。。