Generation Squeeze: How Millennials are Feeling the Pinch from All Sides

Young adults are being squeezed from all sides.

The job market gains that other age groups have seen has yet to filter down to young adults. As Landon Dowdy recently reported for CNBC:

The good news is the job market is finally rebounding.

The bad news, at least for millions of millennials, is that finding a job is still not easy.

Even with the improvement in the job market, the unemployment rate among millennials remains stubbornly high at 9.1 percent—or 14 percent if you include those who have given up looking for work. (And that’s a sizable population at 1.1 million.)

The jobs that are available are disproportionately low-wage jobs in service industries like retail and hospitality, rather than the white-collar jobs that young graduates went to school for. That means there are several graduating classes’ worth of young adults competing for the same job, a fact that will keep youth unemployment high and wages low for a significant amount of time.

Despite a depressed labor market and income stagnation, young adults are being asked to pay ever-higher tuition costs, which, unsurprisingly, is leading to ever-higher student loan burdens. Colleges bear a significant portion of the blame. In recent years they’ve opted to focus less on the quality of the education (teacher salaries have remained largely stagnant since the 1970s) and more on accumulating baubles to purportedly attract students. Perhaps worst of all, colleges then turn around and look to blame government spending cuts for the need to increase tuition. Bunk, writes Paul Campos in the New York Times:

This is the story college administrators like to tell when they’re asked to explain why, over the past 35 years, college tuition at public universities has nearly quadrupled, to $9,139 in 2014 dollars. It is a fairy tale in the worst sense, in that it is not merely false, but rather almost the inverse of the truth.

In fact, public investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s. Such spending has increased at a much faster rate than government spending in general. For example, the military’s budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher. . .

Campos goes on to show how state appropriations to higher education increased fourfold in today’s dollars – from $11.1 billion in 1960 to $48.2 billion in 1975. Things haven’t slowed down from there. Even with the recession, state appropriations has soared to $81 billion per year and federal Pell Grants have more than tripled, goin from $10.3 billion to $34.3 billion over the last 14 years.

Even if the government should or could do more, they largely have their hands and our money tied up by entitlements, the vast majority of which is aimed at older Americans. In fact, the Urban Institute now calculates that Washington spends seven times as much per senior citizen as it does per child. Compare that to the 1960s and 70s when the federal spending on entitlements and investments in the future (defined as education and training, scientific research and infrastructure) each made up one-third of the budget. Unfortunately, as Catherine Rampell writes for Investors Business Daily, this trend is unlikely to change:

The fact that the country is aging bodes poorly for public spending on today’s youth. That’s not just because government commitments to the old, such as Medicare and public pensions, threaten to crowd out funds for others. It’s also because research suggests that older Americans generally do not support spending on the young.

One famous study by MIT economist James Poterba, for example, found that a rise in the share of elderly residents in an area correlated with a significant reduction in per-child educational spending. Disturbingly, Poterba also found that the reduction is especially big when elderly residents and the school-age population are from different racial groups.

Of course, young adults can’t fully pass the buck. Less than one-in-five of full-time students will earn a bachelor’s degree in four years, which means we’re putting ourselves behind the eight ball on loan debt. More young adults are using the pursuit of graduate degrees as an excuse to delay entry in to the workforce. And our educational choices often fail to reflect the modern needs and wants of employers (sorry, art history majors) and almost always reveal a bias against blue-collar work.

All told, young adults find themselves in a situation in which everyone is looking out for themselves. Older workers are hanging onto their jobs, college administrators are focused on the bottom line, older voters are supporting candidates that won’t cut entitlements, and young adults are too busy enjoying the college experience to recognize the changes swirling around them. Something, sooner or later, has to give.