We all want to think that an explosion is pending in Millennial homeownership, but the numbers to justify that are hardly cooperating.
The last few months, we’ve reported consistently that the big problem facing housing (as well as the greater economy) is that of stagnant wages, and that until wages grow at the same rate of costs – think healthcare, student loans and even inflation – it will be mighty tricky for more people to enter the homeownership fray.
That truism, though, is particularly relevant in the most unfortunate of places – young adults, the group that represents the next great source of housing demand.
Young Adults Wages (Nearly) Down Across the Board
The numbers are not very encouraging. According to an analysis of the Census Current Population Survey by Konrad Muggleston, an economist with Young Invincibles (and a subsequent report over at The Atlantic), healthcare is the only field not to see wage declines since 2007 for Americans aged 25 to 34, though healthcare is hardly a beacon of wage increases:
Those numbers do not look any better when you consider that more than 25 percent of Americans aged 25-34 are employed in retail/wholesale and leisure/hospitality – and that wages are down in those sectors by more than 10 percent.
Things are even worse for Americans aged 18 to 24, 40 percent of whom are college students:
The Problem of Stagnant Wages
We should be clear that wages are not down in those graphs because they’re being slashed; rather, wages are failing to keep up with inflation. Why is that? As The Atlantic points out, there are two chief culprits:
•First, the Great Recession was particularly brutal on hotels, amusement parks and restaurants – aka, the industries that have seen the biggest decline in wages; and with unemployed/underemployed Millennials still high in number, companies know they can attract applicants without raising wages.
•Second, there have been structural changes – think globalization and technology – that have led to either outsourcing or automation, two trends that may not increase unemployment, but they do lower the number of decent-paying jobs, which are then replaced with cheaper service-sector jobs.
As Derek Thompson of The Atlantic put it, “Overall, U.S. wages are barely growing, and wages for young people are growing 60 percent more slowly than overall U.S. wages. How is a generation supposed to build a future on that?”