Millennials and the Coronavirus
The financial impact of the Coronavirus on families has been devastating, and as we enter a recession, one group will struggle to stay afloat more than others: Millennials.
Older millennials entered the workforce during the aftermath of the Great Recession, struggling to find work and dealing with low wages. They’ve already been destabilized by rough economic conditions, which has resulted in savings-focused attitudes towards money. They’re budgeting responsibly, and three quarters are saving money, despite the financial challenges they continue to face. But the impact of the coronavirus crisis will be a major setback for millennials, even more so than for other generations, for a few reasons.
Millennials Were Already Financially Fragile
When entering the Great Recession, Gen Xers, who were around the same age as millennials today, had an average of twice the wealth that millennials now have. They were more prepared to weather the hardship then, and they’re more prepared to endure the impact of COVID-19 today. They now hold about four times the assets as younger adults.
Stagnant wages, rising rent costs, and student loan debt contribute to a financially precarious situation for millennials. They’re earning about 20 percent less, when adjusted for inflation, than baby boomers did at the same age. That means less income for paying off student loan debt; the average millennial devotes 34 percent of their income to repayment.
The net worth of the average millennial is under $8,000, and only 44 percent of millennials have an emergency fund that will cover three months of expenses. Over one third don’t have anything set aside in a rainy day fund, leaving them especially vulnerable to job loss.
The 2008 financial crisis also changed attitudes about investing, causing young Americans to avoid putting their money in the stock market. Before the Great Recession, Generation X had an average of three times the stock market holdings that millennials have today. And Gen Xers now hold ten times more assets in the stock market than millennials. As a result of the pandemic, it’s possible that younger Americans could become even more hesitant to invest, leaving them with less opportunities to grow a retirement nest egg.
More Millennials Have Become Unemployed
Business closures have disproportionately impacted millennial workers, who make up 59 percent of the workforce in bars, 49 percent of food service and restaurant workers, and 48 percent of clothing store workers. Unlike white collar employees, workers in these industries aren’t able to work from home.
As a result, job loss has been especially prevalent among millennial workers. According to a report from Hearts & Wallets, more than half of millennials have lost their jobs or become furloughed without pay as a result of the pandemic. That’s compared to only 15 percent of Gen Xers and seven percent of baby boomers.
Millennials Will Further Delay Milestones
Largely due to rising educational, medical, and housing costs that have outpaced wage increases, millennials are already behind previous generations with regards to milestones such as homeownership. They’re waiting to start families and delaying career moves such as entrepreneurship as a result of their fragile financial status.
The coronavirus crisis has left millennials even less hopeful with regards to future homeownership. While 38 percent of millennials reported plans to purchase real estate in 2019, that share has dropped to just two percent since the pandemic hit.
And now that the pandemic is causing millennials to explore options such as withdrawing from their retirement accounts to make ends meet, they’re planning to delay retirement as well. The Hearts & Wallets report revealed that more people are now planning to work part time into retirement than before the pandemic hit.
Millennials have already suffered the long-term effects of graduating during a recession, experiencing huge losses in initial earnings, which studies show can take a decade to recover from. Those without a college degree fared even worse, depending on lower wages that remained stagnant.
With a lifetime income trajectory already hampered by the Great Recession and current earnings cut or reduced due to the viral crisis, millennials have been dealt a double blow. And their financial instability will have a huge impact on the economy in addition to straining government resources as they reach retirement age.
The CARES Act is providing some relief for millennials. It increases unemployment benefits and expands eligibility to cover the gig economy, which is saturated with millennial workers. And the $1,200 stimulus checks being sent to workers earning less than $75,000 per year will help millennials lacking a rainy day fund; but that money won’t last long. If business closures outlast the provisions of the CARES Act, the financial impact on millennials could be catastrophic.