The Economic State of Young America: It's Not So Hot

Today’s young adults are the first generation not to surpass their parents’ standard of living. That’s the key finding of “The Economic State of Young America,” a new research report from Demos, which attributes this change to four main factors:

1. Declining incomes for most young workers. Most strikingly, the earnings for young men – ages 25 to 34 – with only high school diplomas fell by 29%. Unfotrunately, racial disparities continue -- the typical incomes for white young adults were 25% higher than for African Americans in 2006 and 30% higher than for Latinos. Asian-Americans had the highest incomes—11% higher than for whites

2. Growing debt. Here, the statistics are quite amazing:

• On average, credit card debt has increased by 47% between 1989 and 2004 for this age group.
•  Young adults with card debt in 2004 “spent on average 25 cents of every dollar of income to pay all their debt obligations—more than double what Baby Boomers of the same age spent on debt payments in 1989.”
• There has been a 734% increase in the amount college students borrowed in private loans, which typically carry higher interest rates and less flexible payment options than federal loans.

3. High costs – of education, housing, health care, and so on. For example:

• In 2005, 43 percent of young adults spent more than 33% of their salaries on rent, up from 18 percent in 1970.
• Young workers are more likely to have jobs with few or no benefits.
• One-third of young adults do not have health insurance, which makes this generation the one with the highest percentage of uninsured.

4. The expense of child care. Over half of women with a child under age one are in the labor force (up from 31% in 1976). Yet only 39% received paid maternity leave. Full-time care for a toddler costs them between $3,794 and $10,920 a year, according to Demos, while full-time care for an infant rages from $4,388 to $14,647.

"For this generation of young workers, the economy no longer generates widespread opportunity and security, and our public policies haven't evolved to pick up any of the slack,” explains Tamara Draut, director of the Economic Opportunity Program at Demos, who wrote the report. “In fact, many of the problems we see today are a direct result of a disinvestment in the policies meant to ensure that the opportunity ladder is firmly in place."

What Should Be Done?
The Economic State of Young America ends with a series of policy recommendations, many of which have to do with the creation of more good jobs, including:

• “Green collar” jobs, where people would be trained to install energy efficient technology or renewable sources of energy on homes and businesses.
•  Career ladder programs in health and education, where people can receive on-the-job training and time-off for certification to help them move up in these growing fields.
• The removal of barriers to unionization, for example, “in the ever-growing food and retail industry.”
• Making college more affordable and accessible, through what Demos calls “The Contract for College,” where the assorted federal financial aid programs would be transformed into one guaranteed financial aid package for students, with grants making up the bulk of aid for students from low and moderate-income families.
• The regulation of private college loan programs. Demos want Congress to restrict rates and fees, improve disclosures, and restore the right of borrowers to get relief from private student loans in bankruptcy court, which was taken away in the 2005 “reform” of the bankruptcy laws.

Demos also wants Congress to end abusive, deceptive, and unfair credit card practices (for example, universal default), and to create “a universal, easily accessible, portable, and equitable savings vehicle,” which would include incentives to save – for example, a matching tax credit could be direct-deposited into workers’ accounts, say for a down payment on a home. And if Demos has its way, there’d be an end to deceptive mortgage practices and a reduction in foreclosures for people with subprime mortgages. Finally, Demos supports legislation that would put families first, including paid parental leave and a universal, voluntary, early learning and care program.

These all sound like excellent ideas to me. What do you think? What policies would help the young adults in your life – including you, if you are one – to be on a better financial track?

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Comments

[Gerri Detweiler]

As a parent, I am very concerned about my child -- and every child's financial future. The burden seems to enormous when we look at their financial futures.

I am encouraged, though, that many kids seem so much more engaged in world issues than I was at their age.

My daugther's friend Quinn, who is only nine years old, spent two hours phoning people for Greenpeace, inviting them to a weekend event on climate change. His mom said he was given a phone, a list of names and numbers, a script, and told to get it at it!

I support Demos' work and hope it can help us re-energize and create more opportunity.