The perfect storm hitting millennials

My generation's economic anxiety is a political problem

Millennials report the most economic concerns of any generation we polled.

If you had asked me who was having the worst time in the modern economy, I would have said Gen Z.

COVID-19 disrupted either their education or their first years on the job market, and in some cases both. Now, hiring is drying up, probably for reasons related to AI. The research is clear that it matters a lot what labor market you graduate into; the “scarring” of graduating into a lousy labor market shows up even decades later.

So, until quite recently, I was most worried about the younger generation.

I was wrong.

In The Argument’s most recent poll, we asked respondents about various measures of economic sentiment, and the people who seem to be struggling the most are not Gen Z but millennials. And boy, are millennials struggling.

Nearly 60% of people over 65 said they were happy, as did roughly 50% of people in both the 18 to 29 and 45 to 64 age brackets. But only 42% of people aged 30 to 44 said that they were happy.

Millennials also reported the highest propensity to put things on credit cards because they can’t afford them, the most doubt that they’ll have a comfortable retirement, and the lowest agreement that “If I work hard, I will get ahead in life.” Nor are things looking up: They are effectively tied with 45- to 64-year-olds for the highest share reporting that their economic situation is much worse than it was a year ago.

Reporting on consumer sentiment is always a little complicated because the way people feel about the economy doesn’t always reflect more concrete measures of the economy. We’re all much richer than we were a century ago, but most people don’t really care about that. People feel poorer if there’s inflation happening, even if their wages are keeping up with (or even outpacing) inflation.

The questions we asked in our poll don’t really tell us whether millennials are in some uniquely poor position economically. But I do think they tell us that adults in the 30 to 44 bracket are experiencing some particular strain.

I was curious whether this was predominantly economic — is this group struggling more than other groups to find jobs? Is this group’s spending mostly in categories that have been harder hit by rising prices? — or whether this was a case where poor economic sentiment mostly reflects poor non-economic sentiment (for example, Republicans and Democrats both rate the economy as worse when they’re out of power).

It looks like a little bit of both.

Getting more specific about CPIs

We measure inflation by defining a basket of goods that many people buy and then checking how much it costs to buy those goods over time. This measure is called the Consumer Price Index.

In January, the basket was 45% housing, 16% transportation, 15% food and beverages, 8% medical care, 6% “education and communication” (a category that includes both childcare and phones for some reason), and a long tail of rarer stuff (pets, sports events, funeral expenses, tobacco …).

But of course, no household buys exactly the CPI basket of goods. Obviously, households of different ages buy different things, and they can experience different amounts of inflation. Historically, this sort of analysis often shows that inflation hits the elderly hardest, because medical care is a much bigger share of their expenses and is getting much more expensive.

But that’s not always the case: Working-age people are hit hardest when the cost of transportation spikes (which it’s doing right now; gas prices were probably extremely salient to our poll-takers). Housing, another area where costs are rising, is also a larger share of expenses for families with kids at home.

So millennials probably are hit harder by our current surge in gas prices and our ongoing cost-of-living crisis than the generations too young or too old to be commuting or feeding a family.

But I wasn’t satisfied that this was the whole story. After all, Gen Xers are also in the kids-and-a-commute life stage, and they are (hopefully) saving for retirement. Using consumption-basket approaches, they and millennials look pretty similar — lots of spending on transportation and the expenses of having a family. But Gen Xers are not generally as stressed about the economy or their lives as millennials are. Why are 40-year-olds so much unhappier than 50-year-olds?

In general, “generational” divisions are sometimes real and sometimes basically fake, but the Gen X-millennial division is unusually “real” because the 2008 recession created something of an economic discontinuity. So the division is meaningful — but it’s still easy to overstate it.

For instance, you might have heard that millennials are poorer than Gen X was at their age; that appears to have been true when us millennials were in our 20s, but it isn’t anymore. People who had a house before the 2008 crisis are definitely lastingly better off than people who didn’t. On the other hand, Gen X is much likelier to have been foreclosed on in the crisis.

Libbing out means dooming about the economy

There are clearly real economic factors driving millennial dissatisfaction, but I don’t think that’s the whole story.

Another factor: Millennials are libs, and libs are sad right now.

Donald Trump’s approval rating in the 30 to 44 bracket is -26 (35% approve, 61% against). In the 45 to 64 bracket, it’s -8 (46% approve, 54% disapprove). Thirty-five percent of millennials call themselves liberal or very liberal, and just 28% conservative or very conservative; for Gen X, nearly the reverse is true, with just 24% liberal or very liberal and 37% conservative or very conservative.

Is it a coincidence that the more liberal age bracket is also more pessimistic about their own economic prospects and their prospects of retirement? I think not.

Breaking down respondents’ optimism about their personal financial situation by their recalled vote in 2024, the same pattern holds. Only 7% of Harris voters expected their situation to get “much better” in the next year, and 44% of them expected it to get worse. Meanwhile, 21% of Trump voters thought their situation will get much better, and less than 16% thought their situation will get worse.

Gen Z, which is also liberal, is nonetheless not as pessimistic as millennials are about their economic conditions improving; there clearly is an age-cohort effect separate from the Trump effect. But the Trump effect is there and it’s large!

So the perfect storm that makes us 30- to 44-year-olds the unhappiest population segment, with the greatest expressed financial strain and the poorest outlooks, contains high exposure to inflation, high costs of living, and the fact that this cohort profoundly dislikes the administration and has zero trust that it is going to do anything to improve our financial situations.

Gen Z shares millennials’ distrust in the government but has less exposure to rising costs of living (and maybe AI upending the workforce is actually less terrifying if you’ve yet to sink any roots into it in the first place). Gen X shares the rising costs of living and the uncertainty about the future but likes the government more.

Dooming shouldn’t make you dumb

So what’s a gloomy millennial to make of this? I think there’s something to be said, on an individual level, for trying to avoid letting political pessimism cloud your sense of the state of the economy like the polls suggest my cohort is doing.

I feel generally doomy about the state of the world because people opposed to everything I believe in are in power, but it’s kind of embarrassing if this causes me to misunderstand economic matters. A swirling cloud of anxiety over the stampede of red states to restrict the rights of adults to transition is not economic anxiety, and if I get mixed up about the real causes of my anxiety, I’ll probably take the wrong steps in response.

But that’s only part of the story; millennials are also dealing with real difficulties related to cost of living. And costs of living are genuinely a huge barrier to people enjoying the standards of living that should accompany our extremely high incomes.

They’re a barrier to people living near economic opportunity; they’re a barrier to people starting families. And when so many people report that the cost of living is the most important thing to them, it’s political malpractice to not take them seriously.

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