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News

Despite Higher Wages, Gen Z Hit Hard by Economic Circumstances

By:
S.J. Steinhardt
Published Date:
Jun 24, 2024

GettyImages-1023100168 Debt Deficit Money Owed

Generation Z is having a tougher time economically than its immediate predecessor, the millennial generation (Gen Y), The Washington Post reported.

Zoomers are spending more on housing and car insurance that millennials did at their age; they have been bit by higher prices and have larger student and overall debt, despite higher wages and more jobs.

They are also spending more on necessities than millennials did at the same age, according to a Post analysis of Bureau of Labor Statistics data. While they are more likely to go to college, have jobs and make more money than millennials did, they also pay 31 percent more for housing than their counterparts a decade ago. They also spend twice as much on car insurance and 46 percent more on health insurance. These numbers are adjusted for inflation.

“Gen Z consumers have seen their finances significantly impacted by the pandemic and its aftermath, even more so than the challenges faced by millennials as a result of the global financial crisis,” said Michele Raneri, head of U.S. research at TransUnion, in an interview. “Both of these cohorts have emerged from a difficult financial situation, but Gen Z is having a harder time affording this new cost of living.”

Compared with millennials at the same age, Gen Z has more debt of all kinds, such as credit card, car loan and mortgage, after adjusting for inflation, according to TransUnion’s internal records. Debt made up about 16 percent of Gen Z’s income at the end of last year, compared with 12 percent for millennials a decade earlier.

Roughly one in seven Gen Zers are maxed out on their credit cards, more than any other generation, the Federal Reserve Bank of New York reported in May.  

“Even if you adjust for inflation, these credit card balances [among Americans in their early 20s] have gone up by about 25 percent. Delinquencies are higher among young adults now than they have been in the past,” said Ted Rossman, a credit card analyst at Bankrate. “To be just starting out and already falling behind the eight ball can be a tough cycle to break.”

This generation is also suffering from rising prices. Adults under 27 devote more of their spending to basics such as housing, dining out, gas and car insurance, all of which have gotten far pricier in recent years, data from Moody’s show.

“We’re at an inflection point: [Gen Z is] coming to age in a time of rising inflation and rising interest rates—and that will stay with them,” said Jimmie Lenz, a financial economics professor at Duke University whose work focuses on generational behavior “There’s the immediate impact: higher monthly payments on your credit card. But there are also going to be long-term impacts, like it’s going to be harder to buy a home.”

Members of Gen Z are not only more likely to have student loans, but they also have higher debt balances than millennials did, according to the St. Louis Fed. As of June 2022, borrowers in the 20-to-25 range had an average student debt of about $21,000, 13 percent more than millennials at the same age, after adjusting for inflation. They also comprise the first generation in which recent college grads are more likely to be unemployed than the general population. In a reversal from long-held norms, recent college graduates have been having a harder time finding work than the rest of the population, the New York Fed reported.