Insights

The Milking of Millennials and GenZ by the Boomers

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© 2019 Peitho Publishing / Michael Froehls
Written by Michael Froehls

The recent movement to fight inequality (like the earlier Occupy movement) has the wrong target. The problem in the industrialized world, be it the U.S., Spain, France, Italy, Greece, or even Germany is not the super-rich. The real issue is Boomers vs. Millennials and GenZ. The older generations have taken the young population for an expensive ride. It is not the 1 percent. It’s the Baby Boomers and their international peers who have molded their respective economies, their rules, laws, and tax systems to benefit their age group (and retirees). They have been showing total disregard for younger and future generations.

The discrimination of the young

A very well educated generation is not only having trouble finding jobs (witness the high unemployment rates of the “young” across the industrialized world, reaching high double-digits in several European countries), but they are forced to play in a sandbox created by the Baby Boomers (the “old”) in which the “young” are disadvantaged along five dimensions, with varying degree depending on the respective country — labor laws, two-tier corporate benefits, tax laws, educational expenses, and public debts/entitlements.

Labor laws

The older you are and the longer you have worked, the more protected you are. While in the U.S. this protection is moderate (e.g., anti-discrimination laws), in some European countries it is almost impossible to fire somebody over a certain age. Some countries have two labor markets. The first one is rigid and protecting the “old” and their benefits. The second one is for the “young” and built upon temporary and no-benefit work arrangements. While protecting the “old” from the competition of the “young” might have made sense in good economic times, in a turnaround, be it a company or country, you have to cut the expensive areas with disregard of any past promises and put all your energy into nurturing the cost-efficient producers of future income.

Two-tier corporate benefits…and the gig economy

If you are “young” and have a job, chances are that you subsidize your “older” co-workers next to you in the office. Many tenured employees still have cushy defined benefit plans. They might also enjoy retirement health care plans. In contrast, new employees are getting lower value cash plans, if at all, and no retirement health care. Thus, new employees are subsidizing the long-timers, i.e., the “old.”

Another outcome is the gig economy. The media is putting a spin on it as a lifestyle choice for creative types, flexibility chasing individuals, and non-committal Millennials. In reality, it is a sign of a modern version of day-laborers. Millions work without safe paychecks. Moreover, they have no access to benefits like paid-for vacations, sick pay, maternity leave, or see a clear career path. There is a reason we see efforts for unionization of gig economy workers in some parts of the world.

Tax laws

With the exception of certain tax-advantaged college savings plans in the U.S. (e.g., 529 plans), there is not much help for the “young.” No way to deduct or carry forward educational expenses or initial vocational training costs. There is no tax help for (“young”) renters. On the other side, lavish housing mortgage deductions and mortgage help are available to (irresponsible) “older” owners. Lastly, no easy tax deduction of individual health care costs, while companies enjoy tax deductions for providing “Cadillac” health care benefits to the employed tax-free.

Educational expenses

College costs in the U.S. have risen above inflation for quite some time. Even in Europe, where education has been available for nominal value, things have changed. Countries have reduced educational spending, introduced tuition, etc. Students are willing to pay whatever is necessary to signal future employers their value. Thus, they try getting into the highest-ranking school possible. Most students act directionally the same but are of different ability. This means that many spend plenty of tuition on mediocre schools in the U.S. Expressed differently, the demand is price insensitive. It allows the suppliers, colleges, to do whatever they want tuition related, as long as there is no disruption through technology (e.g., online teaching), arbitrage (e.g., students study abroad), or any other collapse in demand (e.g., surge in vocational training programs).

Public debt/Entitlements

The exploding public debt and massive, unfunded “pay-as-you-go” entitlement programs are all expected to be paid for by the “young” and future generations. It is no coincidence that neither political party wants to touch these entitlements. It’s the great collusion of the “old” — no matter their political allegiance — to make the “young” pay.

Take it or leave for greener pastures

Taken it all together, the “young” shall finance the unsustainable entitlements of the “old,” subsidize them at work, receive fewer tax breaks. Additionally, they shall shoulder more of their own education expenses and accept a no-security labor world that has a bias against them. We can easily foresee that this inter-generational “arrangement” is going to collapse at one point. Just wait for economic conditions to deteriorate. The milking of Millennials and GenZ by the Boomers is real.

The voting power of the Baby Boomers and their international peers is immense. Consequently, it is unlikely that the overall situation will change anytime soon. That leaves the “young” who are not part of the “lucky sperm club” two options: to rebel and fan social unrest with questionable outcome. Or they can emigrate to a booming emerging economy with less anti-young-age bias. The earlier they leave, the better off they may be.

© 2019 Michael Froehls – All Rights Reserved

Photo Credit: © Michael Froehls

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