Millennials: The Wealthiest Americans?

I am losing patience with the pronouncements that this is the first generation that expects to be downwardly mobile. The reality is that 18-24 year olds are among the wealthiest people in America. Just don't tell them that, they won't believe it.

According to the Bureau of Labor Statistics, 87.4.3% of 18-24 year old males had wages and salary in 2005. In 2006, households headed by persons 18-24 had earnings before taxes of nearly $29,057, up from just $20,120 in 2003 and up 7.5% 2005-2006 alone. For comparison, U.S. income grew just 1.1% in the same period. What makes these figures even more astonishing is that 18-24 year olds by and large do not have families to support. 43% of 18-24 year olds are college students (National Center for Education Statistics). Less than 10% of 18-24 year old males are married. 50% of 18-24 year men live with their parents, 33% of women live with the parents.

If you think starting salaries are down, you'd be wrong. According to Businessweek (5.19.08), the expected starting salaries of new MBA's exceeds $85K, up steadily every year but one since 2002. Starting salaries offered to undergrad business administration majors increased 7.5% 2006 to 2007. So why the angst? Why do most 18-24 year olds consider themselves poor now and their prospects even poorer?

My personal theory is that Millennials have a different idea of what constitutes a 'necessity' and what constitutes a 'luxury'. My college students consider themselves 'poor', yet nearly all sport ipods with thousands of songs, the latest laptops, expensive footwear, cell phones with $100+ plans. The data bears this out. According to the BLS, 18-24 year olds spend a disproportionate amount of money on virtually every category of spending other than food and housing (see table). Within these categories,they have luxury tastes. For example, Millennials are almost twice as likely as older consumers to purchase imported beers and almost three times as likely to pick up a craft beer.

Marketers are on to this insight, even if the Millennials themselves are not. 18-24 year olds represent a vast market for 'luxury' goods --- we just don't call them luxuries.