A recent study published by Deloitte states that millennials are not actually that different from people in Gen X and baby boomers when talking about spending habits. The only significant difference is that millennials have less money to spend.
Many people have been condemned millennials for the death of industries like razor manufacturers or golf equipment makers, as their sales have dove down a few years back.
In their report, Deloitte has said this about millennials, “They are often branded as being more narcissistic, more idealistic, more socially-conscious, and more experience-oriented than any of their preceding generations. They have even been blamed for ruining everything from movies to marriage!”
Written by Jeff Simpson, Bobby Stephens, and Kasey Lobaugh, this study sets the record straight in the previous narratives about millennial consumerism.
This specific study by Deloitte involved 450 billion points of location data, around 4,000 consumers, government information, and over 200 billion credit card transactions. The conclusion shows that millennials use their money in a comparable way to how their parents spent theirs 30 years ago.
But, this study also concluded that millennials are in an extremely worse situation than the older generations when they were around the same age. According to the census data, the American consumer’s net worth under the age of 35 had slumped down by more than 30 percent since 1996.
Though the millennial image can make people think that they are wasting away their money on avocado toast, that is not the case. The funds that they spent on alcohol, food, and going out figure so much similarly to people of the same age back in 1997. Basically, do not blame the millennials if they are not rushing towards buying their own homes, they don’t have the money for it.
According to the chief retail innovation officer of Deloitte’s, “In many ways, the consumer hasn’t fundamentally changed. Instead, their behaviors have been triggered by a rise in non-discretionary expenses and the growing bifurcation between high- and low-income groups.”
Looking at consumers as a whole, people had spent 16 percent more on housing in 2017 against data ten years ago. The costs of healthcare boosted by 21 percent in 2017 versus 2007, while education expenses have leaped 65 percent higher amid student debts. In fact, student debt is now costing 160 percent more.
In totality, 17 percent of people in the income bracket of 25 to 34 years old are directed to these non-discretionary costs in 2017. To compare, in 1997, it was at 12 percent.
This growth in non-discretionary costs has damaged millennials with lower income the most. Looking at the bottom 40 percent of American consumers, they had scarcer discretionary income in 2017 compared to a decade ago. The next 40 percent did not achieve much better, and only the top 20 percent saw significant pay raises.
When studying the income growth over 10 years of a group of families earning more than $100,000 and comparing them to families earning less than $50,000 shows how severe this variation is. According to this specific report, the income growth for the former is 1,305 percent more compared to the income growth of the group with the lower income.
The conclusion released by Deloitte reverberates the 2018 study made by the Federal Reserve, which has found millennials to drop behind economically mainly because they lived in the time of a significant global financial crisis.
In this study, they also say, “Millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth. Conditional on their age and other factors, millennials do not appear to have preferences for consumption that differ significantly from those of earlier generations.”
In finality, the study is painting this picture: millennials have limited money to spend than boomers and Gen Xers when they were this young. Because they have less cash on their hands, they are forced to be more careful in making decisions. If you look at larger purchases, like real estate or automotive, these remain out of reach for most millennials and therefore forcing a shift on how they use their resources.
While others regard that millennials are to blame with carrying some industries into a downward spiral, both the Federal Reserve and Deloitte have this to say: It is the current economy and not the preferences of millennials that are to blame for this industry killing spree.