Millennials are the second largest age group surpassed only by their boomer parents. The road a head is anything but smooth. Millennials, born in the early 1980s, entered adulthood just as the dotcom bubble burst and terrorists took down the World Trade Center. Just a few years later the housing market crashed and the country plunged into the Great Recession. Even the youngest Millennials are entering a job market that is still recovering.
More than 70 percent of students leave college with school debt and the average loan balance is growing. The class of 2014 graduated with the most debt in history estimated at $33,000 per student and this year’s graduating class is on track to top that. Millions of college graduates are facing big loan payments and it may feel like the end is nowhere in sight.
A new study finds that Millennials, who will dominate the U.S. labor market, may face another problem. They’re less prepared for today’s job market than many of their international peers, putting them at a distinct disadvantage in an increasingly global economy.
A recent report by the Educational Testing Service (ETS) examined data from the Programme for the International Assessment of Adult Competencies (PIACC), which showed that American Millennials are badly lagging behind in numeracy, literacy and problem-solving skills. The study shows that even the top-performing Millennials are not measuring up to their counterparts overseas.
“We did not do well across the board in all three of the skills that we looked into, particularly in numeracy,” said Madeline Goodman, director of research at the ETS and one of the study’s co-authors, adding that the report presents troubling implications for the future of American competiveness.
Nearly two-thirds of Millennials scored below the minimum standard in math. “If these individuals are going to be trained for jobs that have remuneration … then they need to have basic skill level” she said.
Among the 22 participating countries, U.S Millennials 18 to 34 years old ranked 21st in numeracy — only Spanish Millennials had lower scores. In literacy, half scored below the minimum proficiency level, ahead of only Spain and Italy. For problem solving in technology-rich environments, 56 percent of American Millennials met the minimum standards, behind every other nation.
One of the central paradoxes of the ETS study is that the millennial generation is the most educated and the study’s authors make the case that many post-secondary institutions are not adequately providing students with the skills necessary to be successful in the job market. The skills from a liberal arts / general studies grads are not marketable. Another problem facing Millennials is their baby boomer parents are postponing retirement, working longer because of lack of retirement savings, which limits older Millennials access to higher paying jobs.
One-third of employers said they plan to offer higher pay than last year, according to a new CareerBuilder.com survey of 2,175 hiring managers. While 26 percent said they plan to offer salaries under $30,000, another 26 percent said they do plan to offer at least $50,000. (Certified nursing assistants, teaching assistants and bank tellers are among the worst-paying entry level jobs, according to an analysis by Wallethub.)
“Millennials are facing strong headwinds in securing satisfactory careers,” said Peter Miller, certified financial planner and president of Zoe Wealth Management in Charlotte, N.C. They’re also entering the workforce at a time when pensions are fading away, and unlike their parents, they’re wary of depending on Social Security payments to cover expenses later in life, he said.
Their pessimism has prompted many to start saving earlier and to participate more in their retirement savings accounts than baby boomers did at their age. Millennials have been less inclined to take on consumer debt, perhaps because many have seen their parents struggling with massive debt loads. It is difficult to take on more debt when they are already carrying the burden of large student loan debt.
Millennial investors have trust issues even though the stock market is booming and the economy continues to grow, the 2008 financial crisis is having a lingering effect on many young adults’ willingness to take risks. They have seen the executives of major banks continue to receive eight-figure salaries and bonuses even as they were belittled before Congress for causing a worldwide financial crisis. Millennials have avoided putting money into the stock market after watching what happened to their parents’ retirement portfolios in 2008.
They are equally wary of financial advice from the mainstream media and traditional “experts.” Millennials are more likely to form opinions based on what they hear from friends, social networks and their own research. They want tutorials and an interactive website with links, videos and smartphone-capability. They’ll consider all the information in making their determination.
A Bankrate report showed that Americans age 18 to 29 are more likely to choose cash as their favorite long-term investment over any other age group. In fact, 39 percent said cash was their preferred way to invest money not needed for 10 years or longer.
No surprise that Millennials have been forced to delay moving out from their parent’s homes. They are not getting married or starting a family until much later than their baby boomer parents. They are avoiding home ownership due to their inability to save enough for a down payment.
Canadian Millennials face the same challenges as their U.S. counter parts. Their student debt load maybe a little less based on provincial differences in tuition fees and living expenses. ($20,000 – $27,000)
Why should you care if Millennials are delaying adulthood? A recovery in housing depends on first time home buyers. Your house in the suburbs may take longer to sell and sell for less. If you invest in stocks, lower retail sales and slower wage growth could lead to years of below normal economic growth. Slower growth means future stock market returns could be in the single digits.
Ignoring the “ME” Generation could be hazardous to your financial well-being.
Part II : Top Ten Stocks Owned by Millennials