Last week while sitting in the back of a coffee shop, I overheard a young woman on her cel phone feverishly trying to explain to her new boss that she couldn’t make it in to work that morning. The reason was she had to appear before the magistrate as they were preparing to draw up a warrant due to her for failure to pay a traffic violation.
When I looked over at her I saw welling up and starting to cry. The young fellow at the table next to her looked on empathetically. When she finished I asked if she were ok. She then launched into how she had to choose between buying food rather than paying the ticket and now she was concerned about losing her job. And for her it was a good job, as it paid $12.00 and in this state, minimum wage is $7.25. I deduced she was single, living alone and had been working a couple of part time jobs. As we discussed her new job, her eyes lit up when she told me about the $12.00 an hour she was earning.
For her and many Millennials, $12.00 is a bounty. According to the US Census Bureau, young adults, ages 18 – 34 earn $2,000 less a year than Baby Boomers/Xers of the same age range made in 1980. Interestingly, young adults are more likely to have a college degree but also more likely to live in poverty than Boomers like myself who were entering the workforce back in 1980. According to a recent Wells Fargo Study, 44% of Millennials do not feel they are in a good position financially with 48% stating they live from paycheck to paycheck.
So let’s break down what poverty could look like through the eyes of this young woman. Let’s say she is earning $12.00 an hour and working full time. That would be $23,040 a year. Let’s take away $3,000 for Federal and state and local income taxes. That leaves roughly $20,000. That comes to $1,666 per month. Let’s say this young person rents an apartment or room in a house for $600 a month. That leaves her with $1,000. Let’s say she doesn’t eat out and purchases all her food from the supermarket. I think we can safely say that would be around $150.00 per week or $600 a month. That leaves $400. Now come the utilities, phone, car insurance, and gasoline to put in the tank. I think $294 would be a conservative estimate for these necessities, which leaves her with a whopping $106 at the end of the month. It is easy to understand how for her and other Millennials, a $200 traffic violation would cause a degree economic trauma.
In the above scenario I did not factor in the cost of health insurance, a car payment and student loans. According to this same Wells Fargo Study, ”approximately one-third (34%) of Millennials carry student loan debt, with a median balance of $19,978. Three-quarters of Millennials with student loan debt say their student loan is unmanageable. . .” It is easy to see how according to an article in the Christian Science Monitor that this is the first time since at least 1880, more young adults are living with their parents than with a spouse or significant other.
I pointed out earlier that in terms of real wages, Millennials are making less than Baby Boomers at the same age. However, that is not the only issue. Not only have wages dropped, but rising inflation has also eroded the buying power of Millennials (and most other Americans for that matter.) In David Stockman’s latest book he devised what he labels the “Fly Over CPI” which provides a more truthful and reliable index of inflation than reported by the government. He states, “In fact, constant dollar median household income— based on an accurate measure of inflation— is down 21% since the turn of the century. Working Middle America has never before had such a deep and sustained setback, even during the Great Depression.”
In short, the latest entrants to the workforce are on the whole earning less, paying more, in greater debt, and more financially insecure than the prior generation. And a quick look down the road doesn’t see things turning around any time soon.
Workforce participation rate is at its lowest since 1978. Contributing factors have been the offshoring of jobs and immigration that has led to the displacement of workers by cheaper foreign labor. But there is another factor and that is robotization. As Charles Hugh Smith Pointed out in his book, Why Our Status Quo Failed and is Beyond Reform, “what is not understood is the potential to replace human labor with digital and robotic technologies is as unlimited as opportunities for profit.”
In the course of this blog we have looked at the state of the economy on a very personal level and expanded it to a global macro view. All the elements are intertwined and we are dependent and interdependent on many forces beyond, and a few within our control.
The question is how do we make it work? How do we make it work for the young woman in the coffee shop, a generation that is now entering the workforce, a generation retiring, the country and world? This is a big question(s). It is my conviction that a good place to start is with population.
As Jonette Christian of Mainers for Sensible Immigration Policy aptly stated, “if you believe one person matters, you must believe the numbers matter.” I don’t think there exists a problem today that couldn’t be made better with fewer people and many problems today are exasperated by more and more people.
Fewer people will lead to greater labor scarcity in the workplace, higher wages, rising benefits and greater job security. The inverse, as we have come to experience, leads to the opposite.