From Steven Rattner of the NY Times: We’re Making Life Too Hard for Millennials

TO some, millennials — those urban-dwelling, ride-sharing indefatigable social networkers — are engaged, upbeat and open to change. To others, they are narcissistic, lazy and self-centered.

Saddled with debt and thin paychecks, millennials are delaying purchasing cars and new homes, low mortgage rates notwithstanding. By June of this year, homeownership among Americans under 35 fell to 34.8 percent, down from a high of 43.6 percent in 2004.

Agree. Maybe millennials appear conceited and narcissistic to older generations, but the new economic rules of the post-2008 era means millennials have to adapt, such as by living with parents longer and delaying family formation.

They are faced with a slow economy, high unemployment, stagnant wages and student loans that constrict their ability both to maintain a reasonable lifestyle and to save for the future.

The first problem is credentialism; second, students going to college who are not smart enough or mature enough graduate, taking on debt and then dropping out; third, federal student aid driving up tuition costs; fourth, students majoring in subjects that pay poorly instead of STEM. As I explain in an earlier article Countering Flawed Arguments of the Anti-College Movement:

Telling the truth, especially as it pertains to biology-based cognitive differences between individuals, often means losing your job. Teachers can no longer tell a parent his or her child his slow; now, it’s called ‘differently abled’, or whatever has become the latest iteration of the euphemism treadmill. A guidance counselor cannot flat-out tell a dull student he or she isn’t smart enough to benefit from higher education, so the student goes to college, takes on debt, drops-out, and the cycle continues…

Students who, a generation or two ago, would not have gone to college are being prodded into going, often dropping out with debt. ‘Some college’ provides very little benefit over only having a high school degree.

As shown below, the nice thing about a STEM degree is that it tends to be fungible, meaning that a STEM degree at a less prestigious, high-admittance school has the same ROI as a STEM degree from a prestigious school.

As the NYT journalist roster would suggest, a liberal arts degree from a prestigious college can payoff, but all too many students are getting low-ROI degrees from expensive, no-name private schools – a deadly combination.

And from the WSJ article, Federal Aid’s Role in Driving Up Tuitions Gains Credence, government student aid is boosting prices:

‘Well intentioned’ people are selling shovels to millennials to dig their financial graves.

Longer term, rising federal debt payments and increased spending on Social Security and Medicare will inflict a tremendous financial burden on them, threatening their own prospect of receiving promised retirement benefits.

It was a liberal, FDR, who signed the Social Security Act and Lyndon B. Johnson who in 1965 signed the Social Security Amendments (Medicare and Medicaid) into law, and now liberals like Steven Rattner are complaining about its costs? The left also complains about the weak job market, apparently oblivious to the fact Obamacare is a contributing factor, although the post-2008 obsession with profits and productivity is another.

Part of the reason why millennials are so obsessed with personal finance is because they understand that these social safety net programs are unsustainable and not may be available when they, the millennials, get older.

That’s a daunting challenge that would require revamping federal outlays to emphasize areas like education, infrastructure and research and development. Spending more on these areas would require higher taxes on my generation, which is getting a lot more from government than we are paying into it.

To spend money indiscriminately on broad programs like ‘more education’ and ‘more infrastructure’ is the wrong approach. If debt and spending is a concern, as it apparently is to the author, spending should be allocated and targeted in such a way that it provides the highest ROI possible. When you allocate money to the best and the brightest, some of those people create companies and technologies, which creates jobs and boosts the economy, and this may be enough to even create a post-scarcity society.

But of course there are a lot of unknowns. What if the Luddite Fallacy stops being a fallacy? Due to automation and other factors, the cognitive demands for middle-income work may rise beyond a certain threshold, requiring that even average-IQ people, who are not smart enough to find good-paying work, go on welfare, a situation that could be occurring today but could be much worse decades from now. People will rationalize that it’s cheaper to drop out and collect a government check than toil in low-paying service work. Or immigration? Or how the effect of Baby Boomers working longer, refusing to retire?

While the total labour participation rate has fallen from a peak of 67.3% in 2000 to 62.6% in June, the labour participation rate for Americans aged 65 or above has risen from 12.5% to 18.8% over the same period (see Figure 12). As for older people, GREED & fear’s view is simple. Many elderly people who can afford to retire do not want to. While in many instances those who do want to retire cannot afford to. The Japanese style collapse in interest income in America since the implementation of zero rates is clearly one issue here. Thus, interest income accounted for only 8.3% of total personal income in May, down from 11.5% in 2007 (see Figure 13). While in absolute terms, total personal interest income has declined by 9% since peaking in September 2007

Overall, it’s not that anyone is conspiring to make life harder for millennials – these are autonomous economic forces at work, forces that converged and accelerated since 2008 and show no signs of slowing. In the new era we find ourselves in, perhaps more unemployment and a weaker job market is a necessary but unavoidable byproduct of the transition to a type-1 civilization, with high-IQ millennials in STEM faring better than lower IQ ones. But liberalism as it pertains to job-destroying regulation, rent control, zoning laws, and the rise of credentialism is also to blame.