Do you remember the movie “Failure to Launch”? In the 2006 romantic comedy, Sarah Jessica Parker’s character is paid by the parents of Matthew McConaughey’s character to make the 35-year-old bachelor fall in love with her so they could get him to move out. The chemistry between the two makes our hearts jealous, but for many parents they wish they could hire a real Sarah Jessica Parker or a Matthew McConaughey to woo their grown offspring out of their homes and into independence.
We know that the recession played a big role in why so many Millennials boomeranged to return home after college to live with parents. With a real unemployment rate that is still in double digits, finding work has been hard. Others waited out the recession in graduate school pursuing master’s, law degrees, and other higher degrees.
Surely with the “recovered” economy, American moms and dads should have their basements and spare bedrooms back to themselves. Not so according to a new Pew study. Millennials – my generation – is less likely to be living independently of our families and establishing households of our own than we were during the recession. It’s a head-scratching phenomenon.
In 2010, 69 percent of 18-34 year-olds lived independently, but in the first four months of this year, only 67 percent were living independently. Some 42.7 million were living independently from mom and dad in 2007 down to 42.2 million today. While the Millennial population has grown by 3 million people since 2007, the number heading our own households has not increased – in fact it’s dropped slightly from 25.2 million to 25 million.
We’re not just talking about young people working entry-level jobs or who lack higher education; both educated and less educated young people can’t seem to launch. The trend holds regardless of gender.
What’s keeping “adult children” – as President Obama calls us – at home? Among the factors are student loan debt, high rents, and a lousy economy that is not creating jobs.
The Wall Street Journal explains:
So what is keeping them at home?
Jed Kolko, an independent housing economist, suggested two headwinds were keeping young workers from living independently: declining marriage rates (married couples tend to form their own households) and rising rental costs, which have outpaced wage gains in many parts of the country.
In sought-after cities like New York, Miami and San Francisco, rental costs eat up 41% or more of the area’s median income. Burgeoning cities like Denver and Austin have also seen rents climb in recent years.
A study from the Federal Reserve Board also points to one factor that, unlike the labor or housing market, has resisted cyclical trends: student debt. As the Pew study notes, the recession drove many young adults towards higher education.
But all that schooling came with a serious price tag. Lisa Dettling and Joanne Hsu, economists at the Federal Reserve Board, found that mean balances on student loans rose to $12,000 by early 2014, up from $5,300 in early 2005. By analyzing individual-level credit data, Ms. Dettling and Ms. Hsu show that each additional $10,000 in student loan debt makes someone 4.6% more likely to move in with a parent.
This economy flummoxes us as we consider why Millennials are struggling to get ahead. In many countries young people live at home indefinitely, merging their households with that of their parents.
America is a little different. There’s a great sense of accomplishment when parents watch their children move out on their own after college or after getting married.
Yet, Millennials don’t feel they have the income and resources to be independent. There may be a level of laziness on the part of some who’d rather keep their earnings to themselves and live with mom and dad, but most who live at home likely wish they could afford to pay their own rent, save for a house, repay student loans, and feed themselves – especially in urban areas where they are able to find employment.
A generation that is deferring independence is not the plot for a funny movie, but has serious impacts on the rest of the economy as the Journal notes. If we’re not leaving home, we’re not buying or building property – affecting home builders, realtors, home renovators, architects, landscapers, furniture stores, repair men, utility companies, appliance stores, grocery stores, maid services and more. If we’re not purchasing cars what happens to car dealers, garages, car repair shops, auto parts stores, and AAA? And when we consider delaying marriage or childbearing we retard growth for many industries from clothing to food to vacations.
The aggregate economic impact of a generation's failure to launch is not negligible when we consider that millions of young people are still at home when they should be starting their own. If we had an economy that still provided opportunity, many of these young people would have different prospects. We need entrepreneurship, better schools, and lower taxes. The regulations and laws that interrupt these tools for success need to be removed.