Financial Roadblocks

Financial Roadblocks

Indiana’s Youngest Workforce Demographic Faces Uphill Battle
By Nick Dmitrovich, Using Data from Senator Dan Coats’s 2015 “Millennials’ Slow Start Down the Road of Life” Report

A recent report from the office of Senator Dan Coats (R-Ind.), Chairman of the Joint Economic Committee, illustrated a steep set of financial and economic circumstances that are currently challenging Indiana’s youngest workforce demographic. “Millennials,” or individuals born roughly between the year 1980 and 1990, have experienced delayed or outright stagnant growth in terms of financial stability, home ownership, and marriage – the traditional fiscal milestones of adulthood – due to lack of growth in starting incomes and wages, tremendous student loan debt, and increasingly competitive job markets driven by augmented sets of educational acquirement.

In his report, “Millennials’ Slow Start Down the Road of Life,” Sen. Coats wrote, “To compete in a job market where over a third of workers complete four years of college or more, young adults sit in classes longer and start working later. They spend more on education and take on larger student loans. Average student loan debt totals a record $35,051 for the class of 2015. Graduated and ready to work, they are struggling to find gainful employment relative to generations before them.”

The report stated that “with greater rates of higher education have come greater burdens of debt; more than one-third of Americans age 24-28 have debt that surpasses their assets, a rate which tops previous generations at that age. The composition of debt has also changed from generation to generation; millennials have taken on far more student and credit card debt in place of mortgage debt that baby boomers took on at their age. Only one-fifth of young Americans have mortgage debt, which is far below the near-third of young Americans in the 1980s and 43 percent in the mid-‘70s.”

This has led directly into a true catch-22 situation for many millennials, as higher levels of education has not enhanced the job prospects of many young workers. Specific statistics referenced in the report detailed that:

  • About 44 percent of recent college graduates are “underemployed,” working in jobs that do not require a college degree; this puts graduates at a disadvantage that prevents them from gaining experience applying their skills and reduces their ability to meet college debt payments.
  • 42 percent of working respondents in a recent Federal Reserve Board of Governors survey had a job related to their field of study.
  • 28 percent of working respondents reported they are overqualified for their current job, with bachelor and associate degree holders most likely to respond this way; less than one-third of the overqualified are in a field related to their education.
  • 23 percent reported that the cost of their education outweighed the financial benefits, and were more likely to have student loans. Job satisfaction is driven by schedule and compensation.

Some large looming concerns are starting to arise out of this situation – mainly due to the fact that millennials are not investing in the traditional ways that previous generations have, primarily in terms of property ownership and having children. Two key statistics were mentioned in Sen. Coats’s report:

  • The New York Federal Reserve Bank found that “young workers lack the ability to purchase homes due to a number of factors, including: (1) inadequate savings or too much debt (56 percent); (2) insufficient income (53 percent); and (3) lack of good credit (41 percent).”
  • Jed Kolko, Chief Economist at Trulia, Inc., noted that “The trend in postponing homeownership is closely tied to delayed marriage and parenthood.”

Property investment and population growth are two essential elements of a growing economy, and if the aforementioned data remains true into the future, it could potentially spell trouble for many regions throughout the country. But these issues don’t even encompass the largest hurdle that millennials face – a jump in federal spending during the Great Recession and recovery has driven federal debt to $18 trillion. The report stated that each millennial’s share of the debt is almost twice the amount of their average student loan debt, spelling out a very complicated set of problems facing the current young workforce.

So how does the country begin to rectify this scenario? It’s going to take a multi-pronged approach. Sen. Coats outlined four distinct strategies that could potentially serve as a solution:

  1. Stand behind strategies that encourage savings and personal responsibility; address the federal long-term fiscal shortfall with policies that account for the effects of any change across generations.
  2. Support financial literacy that strengthens an understanding between education choices and career income, with a model to weigh loan costs and benefits; value both vocational and college-bound STEM training.
  3. Maintain family-friendly policies that enable household formation and homeownership; with encouraged personal savings, develop a vibrant and sound private mortgage market to keep flexible, affordable mortgages easily available.
  4. Target pro-growth policies to assure jobs with rising wages and advancement opportunities; affirm that the family structure offers income stability and support that enhances lifetime success.

Regardless of whatever combination of factors come to fruition, it seems essential that policies begin to take shape immediately given the fact that the nature of the problem is constantly growing. We encourage our readers to remain informed on this topic with us as new research is made available. Building Indiana will be bringing you all the latest updates.

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