Darrell Berkheimer: Millennials stir major concern for economy
We may be heading toward a dire economic chasm in consumer spending unless our big corporations shift more of their profits to employee wages — and away from CEOs, stockholders and wealth accumulation.
Indications of a drastic sales decline in many services and products already are quite noticeable in the buying habits of our millennials, ages 23 to 39. And if members of Generation Z — born during 1996 through 2010 — continue with those trends, our economy likely will face some drastic changes.
Our economy is based on sales — sales of big ticket items, and high-volume sales of mass produced items. But as sales in many areas decline, our economists and the federal government are failing to sound the alarm — to warn of a potential major recession, or even depression, that awaits us unless more buying power is restored to lower-income workers.
All that’s necessary to see the dangers is an examination of how our millennials are spending their money — or rather not spending!
Many are not buying homes, cars, life insurance or stocks. And in all of their actions they are being more frugal, because they can’t afford to spend on many items as they struggle to make rent payments taking as much as half or more of their earnings. In addition, many have substantial college debt.
A large number of supporting statistics detail their lack of spending in a Jan. 30 report by Paige Steinman, writing for “icepop” features. Here are some of the items in that report:
As home prices rise, millennials are renting instead — partly because of they choose the ease of mobility to change jobs and locations. But many simply can’t afford to buy a home.
During the last eight years, in a big reversal from the past, the number of drivers age 18-25 was down nearly 25%. They aren’t even bothering to get a license. And in urban areas, young drivers simply are not buying cars because of parking issues and available ridesharing apps. So they’re eliminating the costly expenses of purchase, maintenance and insurance. Lower gasoline sales also are a result.
In the 1980s, two-thirds of people ages 25-34 had married. Today, more than half that age group are single as they save money on weddings, diamonds and the other accouterments to marriage. (Meanwhile, a 32-year slump in the U.S. birthrate was reported last year by the Centers for Disease Control and Prevention.)
75% of millennials do not have life insurance because they can’t afford it. And only 13 percent reported they would invest in the stock market, which experts attribute to their witnessing a stock market crash at a young age.
Millennials are creating major declines in leisure-time spending on such activities as movie theaters, golfing and home entertainment. Two thirds (66%) are living in totally wireless homes as 41% have no land line service, and 83% sleep next to their phones. Theaters and cable services are losing because millennials can stream films while stretched out on their recliner or couch. And golf is considered too expensive and too time consuming as they view driving around in a golf cart as boring — not their idea of an enjoyable afternoon.
Department stores are facing major sales slumps, and closings, as millennials choose internet buying, thrift stores and fast fashion brands rather than designer items. Sales of business suits and dressy casuals also have fallen as denim becomes more common in offices.
Food sales and casual dining also are seeing major consumer declines. Millennials are limiting restaurant visits to occasional upscale dining and spurning eating in booths. And fast food outlets are citing sales slumps as millennials place more emphasis on healthier eating.
That healthier eating has affected beef sales as many millennials have decided to skip red meat for a more green diet. In addition, dairy milk sales have dropped by 40% as they are buying alternatives such as almond milk, soy milk, coconut milk and oat milk.
And with millennials staying single longer and having fewer children, they have little need for buying at bulk sales outlets, where more declines are being noted.
Much of millennials’ spending habits, however, result from the failure of their employment to provide enough disposable income — after they pay for housing, food and the electronic gadgets they enjoy.
The consequences of those lost sales in so many different areas can extend way beyond stores and dealerships. The extended results can yield job reductions in a series of other businesses such as advertising and marketing, wholesale distribution and transportation, and especially production lines.
These are the consequences of the extreme income inequality that we are facing.
Obviously, millennials already are having a tremendous impact on our economy. And if Generation Z follows the same trends, the effects likely will be quite drastic.
All of which brings me to the conclusion that either big employers will need to share more of their profits with employees — or the seeds of a universal basic income will take root and yield widespread support for some form of Andrew Yang’s proposal.
These are the choices big employers and governments are facing.
To me, it appears evident that big companies would be wise to become more sharing with their workers, including adding workers to boards of directors — before they are forced to do so by legislation.
And we know that government regulations can become more restrictive than necessary.
Darrell Berkheimer, who lives in Grass Valley, is a frequent contributor to The Union. He has seven books available through Amazon. His sixth, “Essays from The Golden Throne,” includes 60 columns published by The Union, plus a dozen western travel and photo essays. Contact him at email@example.com.
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