Economists at the Federal Reserve Board have published exhaustive research on Millennial spending patterns and generally find that they are similar to those of other generations (See: “Are Millennials Different?,” by Christopher Kurz, Geng Li, and Daniel J. Vine). The research examines Consumer Expenditure (CE) Survey data and the conclusion is summarized by the authors:
“Using data on household spending from the CE survey, we find little evidence that millennial households have tastes and preference for consumption that are lower than those of earlier generations, once the effects of age, income, and a wide range of demographic characteristics are taken into account.”
The Dubious Narrative
All of this make come a surprise to the many analysts that imagined the Great Financial Crisis had produced a “sea-change” in American attitudes. It was theorized that there was an increasing interest in dense urban living and an expectation that Americans would abandon suburban living in large numbers. Some even suggested that people were less interested in using cars, especially Millennials.
Even as this narrative was forming and becoming more popular, however, there was not a single year in which the core counties of major metropolitan areas (those with populations over 1,000,0000) gained domestic migration from suburban counties. Transit’s modest ridership increases relative to the market continued, but even that has to come to an end in recent years. Since just after the Great Financial Crisis (2010), nearly 90 percent of population growth in the major metropolitan areas was in functionally suburban and exurban areas, and outside the urban core. The share of the major metropolitan population continued to increase over the past five years and is now over 85 percent (See: “Suburbs & Exurbs Dominate Metropolitan Growth at Mid-Decade”).
Even among Millennials, who the density boosters imagined were “flocking to the cities,” were exhibiting an only marginally smaller preference for the suburbs than their predecessors, with nearly 80 percent of their population increase in the suburbs (See: "Suburbs & Exurbs Dominate Mid-Decade Millennial Growth”). Only one-fifth of the Millennial population gain has been in the urban core.
Overall Consumption Patterns
The new economic research indicates that Millennial consumption behavior is consistent with the broader trends cited above.
The research examined consumption patterns by age from 1986, 2001 and 2016. Overall, controlling for age, income, employment and demographic patterns, the researchers found “no evidence that the generation-specific tastes and preferences of millennials favor lower levels of consumption than the tastes and preferences of members of other generations.” Moreover, they found that the changes in consumption shares by category are “very similar to the changes for the entire population,” and that “that there has not been a dramatic taste shift from one cohort to the next with respect to a particular form of consumption.”
In fact, the researchers conclude that Millennials have a higher taste for consumption than some older generations.
“That is, controlling for age, income, and an array of other characteristics that affect consumption, we see that Generation X members and baby boomers actually have a slightly lower taste for consumption than millennials.”
Millennial Transportation Preferences
Perhaps the most often repeated “sea-change” narrative is related to automobiles, dating from the Great Financial Crisis. The authors make the point as follows:
“For example, Fortune cited the decline in the fraction of new vehicles purchased by young adults— defined as 18 to 34 year olds—as evidence that financial constraints for that age group had increased and their interest in driving had decreased. As quoted in the article, young adults “just don’t think driving is cool—or even necessary—anymore.” Similar stories abound and often attribute these changes to the rising popularity of social media, which reduces the need to travel, and alternative means of transportation, such as ride-sharing, public transportation, and biking, which reduces the need of owning a vehicle.”
However:
“As the recovery gained steam it became less obvious that these patterns reflected generational preferences. Some press articles as early as 2012 started to note that younger buyers had begun looking increasingly like their older cohorts as their employment and income prospects improved.”
As the authors indicate, “The share of new-vehicle purchases for young households dipped during the 2007–09 recession, but the shortfall was not particularly large, and the rate returned to its normal range after a few years.” Based on the 2016 data, the research concludes, with respect to both new and used vehicles:
“Importantly, we find no evidence that millennials have preferences for vehicle purchases that are lower than those of earlier generations.”
The Similarity of Millennials
As we have gotten farther away from the disruption of the Great Financial Crisis, there has been increasing evidence that Millennials are not really that different than other generations, especially when measured at similar ages. For example, a Harvard Business Review article by Bruce N. Pfau provided considerable evidence that Millennials have work preferences similar to employees of other ages. Now, not surprisingly, we find that Millennials have similar consumption preferences and that they spend their money much like everyone else.
They may listen to different music and adopt different attitudes, but essentially millennials are more like earlier generations than has been commonly believed.
Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the "Demographia International Housing Affordability Survey" and author of "Demographia World Urban Areas" and "War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life." He was appointed by Mayor Tom Bradley to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. Speaker of the House of Representatives appointed him to the Amtrak Reform Council. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.
Photo: Graphic via Bed Times.
Email this Story
