I was playing golf with my son’s father in law the other day and as we were discussing our kid’s futures he made the comment that Jason and Colleen’s generation may be the last generation for quite some time that has it better economically than their parent’s generation. My response was that I didn’t think our children will have it better economically than us. Here’s why…
Most of the kids my son’s age (30) and younger have entered the job market either right before or in the middle of the hardest recession we have had since the Great Depression. If they have been lucky enough to find jobs, salaries have been less and prospects for raises are slim. The ladder for advancement is crowded with older workers who also have seen their chances of retirement decrease because of the recent hard economic times. These folks aren’t going to give up their jobs and the younger generation will have to wait until much later in their working lives for advancement and higher wages.
Too many of the younger workers have come out of college and into the labor market with large amounts in student loans, something that didn’t happen in my generation. That, combined with lower wages and benefits, means that this younger generation has less income for housing, auto’s and discretionary spending than my generation did coming out of college. The student loan debt also makes it harder for them to borrow more money for big ticket purchases.
The tax burden that these younger workers will have to bear is going to be greater than what my generation has paid during our working lives. In nine more years, when I reach the age for Social Security benefits, there will be only 1.75 workers for each Social Security recipient (Bureau of Labor Statistics 2010 Annual Report). The national debt will have to be dealt with at some point in their working lives and it can only be dealt with by using both sides of the equation, raising taxes and reducing spending. All of this translates into more of their money going to Uncle Sam.
So, as a group, this younger generation faces the prospects of living with years of higher unemployment, lower wages, less chances for advancement, higher debt loads and higher taxes. Doesn’t sound like the road to better economic prosperity than their parent’s generation.
BUT, I don’t believe that it has to play out this way. This younger generation of workers is much more tech savvy than their parent’s generation. They are overall better educated and more globally oriented than their parent’s generation. I believe that it is this generation that will create and implement long term energy solutions that will power the world economies yet not destroy the world’s environment. It will be this generation that will find cures to diseases and promote preventative care which will drive down the costs of health care. I think this generation will come up with more innovative and cost effective ways to provide education, not only at the K-12 level but in college also. If this all plays out, jobs and opportunities will be created which is what every generation needs to have a good standard of living.
Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.
Copyright ©2012 Mike Berry. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.
