Millennials now make up the largest age cohort in the US workforce, so employers have an interest in understanding the needs, preferences, and concerns of this generation in order to effectively attract, retain, and develop millennial talent. A common belief about millennials is that their consumption patterns and lifestyle choices are markedly different from those of previous generations: living with their parents longer, getting married later or not at all, and buying homes and automobiles at lower rates. A stereotypical view that has thus emerged of millennials is that they are simply choosing not to do the things their older peers expected them to do in their early careers. The growing consensus among observers of the economic data, however, is that the main reason millennials aren’t behaving like their baby boomer and gen-X predecessors is that they are not as well-off as these generations were at the same point in their lives, thanks in large part to having come into the workforce during and after the Great Recession of 2007-2009.
In the past few weeks, two studies have come out that complicate both of these narratives about millennials, but conflict in how they depict this generation’s financial health. The first is a working paper by Federal Reserve Board economists Christopher Kurz, Geng Li, and Daniel J. Vine, titled “Are Millennials Different?” Yes and no, the economists conclude:
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. (Emphasis ours.)
In other words, the paper debunks the idea that millennials are buying fewer houses and new cars because they want to live lower-consumption lifestyles, and instead supports the view that they just haven’t accumulated the wealth to afford these big purchases. On the other hand, economist Alison Schrager argues at Quartz that the Fed data can also be read a different way, and that millennials “are in fine shape, maybe even richer than previous generations, but they have just chosen to invest in different assets”—i.e., higher education:
Overall, millennials have less debt than previous generations. They carry lower credit-card balances at the same age—$1,800, compared with $2,500 for Gen Xers. The Fed speculates the financial crisis scared millennials from over-borrowing, which might make them more resilient and flexible in future economic downturns. They do have more student debt, and this is an oft-cited reason for low rates of homeownership. But choosing education over mortgage debt is not necessarily a bad financial choice. One is an investment in human capital which will probably increase their earnings for the rest of their working years, the other is a bet on a single house, the value of which can be affected by events outside its owners control. Besides, student debt often involves a lower interest rate than credit cards or sometimes even a mortgage, depending on your lender. If the Fed included interest payments into its projections, millennial net worth would look even better.
The other new study, published this week, is a Pew Research Center analysis of new US Census data, which seems to contradict the Fed study, saying that American households headed by millennials “now earn more than young adult households did at nearly any time in the past 50 years”:
The median adjusted income in a household headed by a Millennial was $69,000 in 2017. That is a higher figure than for nearly every other year on record, apart from around 2000, when households headed by people ages 22 to 37 earned about the same amount – $67,600 in inflation-adjusted dollars.
Pew used a different data set than the Fed economists, looking only at income and not at net worth. In relative terms, Slate writer Henry Grabar argues, the picture the study paints of millennials isn’t as rosy as it seems at first glance, as “while millennials’ household income is higher, it’s not great compared with what everyone else is making”:
In 1978, according to the Fed study from this month, young boomer households were making on average $77,500 in 2016 dollars—compared with the $88,000 national average. In 1998, the average Gen X household made $73,500 versus the national average of $103,800. In 2014, the average millennial household made $78,200—more than Gen X, but less as a percentage of the national household average of $112,000. Relatively speaking, then, millennials are underperforming.
One caveat to both these studies is that they are looking at household income, so they don’t account for the relatively high percentage of millennial adults who live with their parents and aren’t heads of households themselves.
Which study is right? And what does this all mean for employers trying to do right by (and get the best out of) their millennial workforce? In the end, it doesn’t really matter whether millennials are doing better or worse than previous generations in broad economic terms; we know that millennial professionals carry a particularly large burden of student debt and that they value benefits from their employers that help them pay that debt down.
In Gartner’s most recent survey of over 6,000 employees across the globe, we found that 61 percent of employees see education benefits like tuition and student loan repayment assistance as an important factor in making a decision about a job offer. Other studies specific to millennials have found that they are paying more attention to benefits packages, particularly financial wellbeing benefits, as they grow older and begin thinking more about their long-term financial goals and retirement readiness.
In a highly competitive talent market, employers have an opportunity to differentiate themselves and attract millennial candidates with benefits that speak to this generation’s concerns. Even if a millennial employee with college debt would have no trouble paying it off on their own, they might still be more likely to commit to an employer who will help them get out of debt faster. Currently, only 4 percent of US employers offer student loan benefits, but that number is likely to grow; meanwhile, employers are exploring creative ways to tie these benefits to retirement savings plans, and lobbying Congress to pass legislation that would introduce favorable tax treatment for student loan benefits, which don’t currently enjoy the advantages of 401(k) plans or health savings accounts.
Millennials (and employees in general) also want to know that the educations they invested in will pay off in rewarding careers. Our Global Talent Monitor research this year has found that a lack of development opportunities is the most common driver of attrition among US employees. In a recent survey of 5,000 millennial employees by LaSalle Network, while most respondents said they were satisfied with their current jobs, fewer than half said they were pleased with their career path or with learning opportunities at their company. These data points suggest that employers who want to attract, engage, and retain millennial talent should focus their employee value proposition on delivering a compelling career path with lots of opportunities to learn and grow.
For richer or poorer, the data is clear: American millennials want to pay off their college educations—and for their educations to pay off. Employers that help them meet these goals can give themselves an edge over the competition in today’s tight market for valuable talent.