C&B Notes

Not So Different

For millennia, people including Socrates have been concerned about the behavior of future generations.  A new paper by the Federal Reserve suggests what we have always suspected: millennials have more in common with other generations than not.  To be clear, tastes and preferences evolve (and even come full circle), but major underlying motivations, desires, and needs from one generation to the next are more stable.

        From the introduction to the Federal Reserve-sponsored paper Are Millennials Different?:

We show that there are important demographic differences between millennials and earlier generations, illustrating the work of several extant studies.  However, we also show that these differences primarily reflect the continuation of existing trends in the overall population.  In the economic sphere, millennials appear to have paid a price for coming of age during the Great Recession: Millennials tend to have lower income than members of earlier generations at comparable ages, although the income of young households has not changed much; the difference likely reflects, in part, the rising labor force participation of women.  For balance sheet variables, we show that millennials own fewer assets than members of earlier generations and also have less debt at the individual level than Generation X.  The comparison is somewhat different for debt at the household level, as millennial households appear to have roughly the same debt as Generation X and higher debt than the baby boomers.  Conditional on these factors, we find that the spending patterns of millennial households are not very different from those of previous generations.  In particular, we find that the taste and preferences parameter of a consumption function that includes age, income, and other demographic and economic factors is not different for millennials than for members of earlier generations.

We also review the detailed data on certain categories of consumer spending and the associated spending shares, and we show that there is little evidence of generation-specific preferences after age, income, and other demographic and economic factors are taken into account.  For example, for spending on motor vehicles — which accounts for roughly 20 percent of retail sales and is highly sensitive to the business cycle — we find little evidence that millennial households have significantly different tastes and preferences than households of previous generations.  We find similar results for spending on food and housing-related expenses.

Referenced In This Post