Millennials have a bad rap. We imagine them spending their days updating social media accounts with headsets covering their ears and their parents' credit card numbers pre-logged into Amazon Prime accounts.
A nice life if you can get it, but the reality is far different, according to research by Standard & Poor's. Millennials — those born between the early 1980s through the early 2000s and also known as Generation Y— are shaping up to be a frugal and career-focused generation with the potential to lead a robust and sustainable U.S. economy. We I say potential because they're not yet the potent economic force that they could be; they are thus far a quiet group, economically conservative and waiting for better conditions to roar to life.
The success or failure of this generation will have widespread economic consequences. Already, millennials spend about $600 billion annually and are on track to spend $1.4 trillion a year by 2020.
According to our research, continued low wages for millennials could reduce U.S. GDP by as much as $244 billion through 2019, or $49 billion a year, relative to our baseline scenario. This suggests that policies around housing, wages, and the new threat caused by high student debt may have the greatest potential to help or harm millennials — things policymakers should heed as this generation grows as a political force.
We come to this conclusion in part by looking to the past. If you compare millennials to other generations you 'll find, somewhat surprisingly, that they share the most similarities with the so-called Silent Generation. These were Americans born in the mid-1920s through the early 1940s and who grew up during the Great Depression, but eventually drove a booming economy.
Just as their grandparents (and great-grandparents) before them, millennials experienced a major financial crisis during their formative years that has infused in them financial conservatism and a propensity to save. They are more likely to keep a larger amount of cash on hand, holding more than half their assets in cash, less than a third in equities, and 15% in fixed-income assets.
So why aren't millennials guaranteed a strong economy in their middle years? The differences with the Silent Generation come in two areas , in particular: a slow-growth economy with lower wages combined with crushing loads of student debt. The Silent Generation entered adulthood during a robust growth cycle in part due to programs, such as the New Deal and Works Progress Administration. Millennials, instead, have only seen slow to moderate growth in GDP, with near stagnant gain in wages as they enter the workforce.
[...]