Prosperous Times Still Ahead for Millennials
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Prosperous Times Still Ahead for Millennials

The next generation has faced socioeconomic challenges on their way to prosperity. Are Millennials just a luckless cohort?

The "Millennials," or Generation Y, are people who came of age after the turn of the century. It's fair to say that they have had a run of bad luck, most clearly in developed markets. The global financial crisis has dealt serious blows to young workers and savers. Rising student debt, tighter mortgage rules after 2008, higher house prices, increased income inequality and lower income mobility have all contributed to a somewhat bleak outlook. By contrast, in emerging markets, Millennial trends seem to have been more positive (see the Credit Suisse Emerging Consumer Survey 2018).

Millennials vs. Baby Boomers

The Millennial generation is often compared unfavorably with the baby boomers, whose wealth was boosted by a range of factors including large windfalls from property and share price increases. However, this comparison is not entirely fair, as all cohorts tend to have relatively high wealth when aged 50–70, and young people always struggle to settle in the labor market, establish families and buy homes. Income and wealth tend to increase with age – certainly for the average individual, but also usually in cross-sectional data. Since Millennials are just at the beginning of their wealth-building stage, we can expect to see substantial increases in their assets in future.

Education Influences Millennial Assets and Debts

Apart from in the United Kingdom, where debt exceeds two years' income for those aged 30–40, the ratios of average debt to assets or income do not appear alarming. Student loans have been an increasingly important component of debt in a number of countries. This is partly due to the fact that Millennials have experienced much higher education costs than preceding cohorts. The percentage of 25–34 year olds with tertiary education in OECD countries is on the rise: While it stood at 15 percent in 1970, in 2016 it reached 43 percent. Gaining higher educational qualifications may improve job and career prospects. Acquiring more education to overcome the "millennial disadvantage" is a strategy that will reap rewards for high achievers and those specializing in high demand areas like high tech and finance.

Chart 1

Global Wealth Report 2017

Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2017

Millennials as Entrepreneurs

Some claim that members of Generation Y are starting more businesses than earlier cohorts did, and that they are doing it at a younger age. But the official statistics suggest otherwise: only 2 percent of Millennials in the United States are self-employed, versus 8 percent of Generation Xers (those born between 1965 and 1980) and baby boomers, but this is in the context of a global drop in self-employment in general.

What is more, many of the Millennials willing to start a business were restrained for a time by tough economic conditions. This suggests a surge in millennial entrepreneurship may occur soon or may already be taking place, as has been seen in some emerging markets, such as China and India.

Billionaire Millennials

Some Millennials have become very prominent billionaires, for example the senior executives at Google, Facebook, Twitter, and other high-tech enterprises. Interestingly in 2003 and 2005, only one person under 30 appeared on the Forbes list. This jumped to five by 2010 and to nine by 2017. The number of billionaires aged 30–39 has also risen over time and their mean wealth rose substantially – from 3.2 billion dollars in 2010 to 4.1 in 2017. The upsurge of young, self-made billionaires in emerging markets has been seen as a sign of healthy growth and economic dynamism.

Chart 2

Global Wealth Report 2017

Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2017

In many respects, Millennials have not been a lucky cohort so far. They have faced the challenge rigors of the financial crisis, high unemployment, a sharp rise in house prices, rising student debt and increasing inequality. Some Millennials have prospered in spite of these difficulties, as reflected in the more positive picture we see in China and a range of other emerging markets, and the recent upsurge in the number of Forbes billionaires below the age of 40. Millennial consumers are already the driving force of emerging economies.

In developed markets, they were labeled the "unlucky generation" due to constant comparisons with the baby boomers. But though the next generation has not lived through particularly prosperous times so far, Millennials are still at the beginning of their wealth-building stage and we can expect that the time for financial prosperity is yet to come.