The Economist: How Gen Z is continuing to strike it rich

The Economist
The Economist
7 Min Read
They’re better off than millennials and baby boomers were at this stage, and have their pick of the jobs, so they have a lot to be happy about — even if some feel they are defined by anxiety.
They’re better off than millennials and baby boomers were at this stage, and have their pick of the jobs, so they have a lot to be happy about — even if some feel they are defined by anxiety. Credit: The Nightly/The Nightly

Generation Z is taking over.

In the rich world, there are at least 250 million people born between 1997 and 2012. About half are now in a job. In the average American workplace, the number of Gen Zers (sometimes also known as “Zoomers”) working full-time is about to surpass the number of full-time baby boomers, those born from 1945 to 1964, whose careers are winding down.

Gen Z is also grabbing power: in the US, there are now more than 6000 Zoomer chief executives and 1000 Zoomer politicians. As the generation becomes more influential, companies, governments and investors need to understand it.

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Pundits produce a lot of fluff about them.

Recent “research” from Frito-Lay, a chip-maker, finds that Gen Zers have a strong preference for “snacks that leave remnants on their fingers”, such as cheese dust. Yet different generations also display deeper differences in their personalities, in part due to the economic context in which they grow up. Germans who reached adulthood during the high-inflation 1920s came to detest rising prices. Americans who lived through the Depression tended to avoid investing in the stock market.

Many argue that Gen Z is defined by its anxiety. Such worriers include Jonathan Haidt, a social psychologist at New York University, whose new book, The Anxious Generation, is making waves.

In some ways, Gen Zers are unusual. Young people today are less likely to form relationships than those of yesteryear. They are more likely to be depressed or say they were assigned the wrong sex at birth. They are less likely to drink, have sex, be in a relationship — indeed to do anything exciting. Americans aged between 15 and 24 spend just 38 minutes a day socialising in person on average, down from almost an hour in the 2000s, according to official data.

Mr Haidt lays the blame on smartphones and the social media they enable.

His book has provoked an enormous reaction. On April 10, Sarah Huckabee Sanders, the governor of Arkansas, echoed Mr Haidt’s arguments as she outlined plans to regulate children’s use of smartphones and social media. Britain’s Government is considering similar measures. However, not everyone agrees with Mr Haidt’s thesis. And the pushing and shoving over Gen Z’s anxiety has obscured another way in which they are distinct.

In financial terms, Gen Z is doing extraordinarily well. This, in turn, is changing the generation’s relationship with work.

Consider the group that preceded Gen Z: millennials, who were born between 1981 and 1996. Many entered the workforce at a time when the world was reeling from the global financial crisis of 2007-09, during which young people suffered disproportionately. In 2012-14 more than half of Spanish youngsters who wanted a job could not find one. Greece’s youth unemployment rate was even higher. Britney Spears’ Work Bitch, a popular song released in 2013, had an uncompromising message for young millennials: if you want good things, you have to slog.

Gen Zers who have left education face very different circumstances. Youth unemployment across the rich world — at about 13 per cent — has not been this low since 1991. Greece’s youth unemployment rate has fallen by half from its peak. Hoteliers in Kalamata, a tourist destination, complain about a labour shortage, something unthinkable just a few years ago. Popular songs reflect the zeitgeist. In 2022, the protagonist in a Beyonce song boasted, “I just quit my job”. Olivia Rodrigo, a 21-year-old singer popular with Gen Zers, complains that a former love interest’s “career is really taking off”.

Young people, following Beyonce’s protagonist, can quit their jobs and find another one if they want more money. 
Young people, following Beyonce’s protagonist, can quit their jobs and find another one if they want more money.  Credit: The Nightly/The Nightly

Many have chosen to study subjects that help them find work. In Britain and the US, Gen Zers are avoiding the humanities, instead going for more obviously useful things like economics and engineering. Among those who do not attend university, vocational qualifications are increasingly popular. Then they go on to benefit from tight labour markets. Young people, following Beyonce’s protagonist, can quit their jobs and find another one if they want more money.

In the US, hourly pay growth among 16 to 24-year-olds recently hit 13 per cent year on year, compared with 6 per cent for workers aged 25 to 54. This was the highest “young person premium” since reliable data began. In Britain, where youth pay is measured differently, last year people aged 18 to 21 saw average hourly pay rise by an astonishing 15 per cent, outstripping pay rises among other ages by an unusually wide margin. In New Zealand, the average hourly pay of people aged 20 to 24 increased by 10 per cent, compared with an average of 6 per cent.

Strong wage growth boosts family incomes. A new paper by Kevin Corinth of the think tank the American Enterprise Institute and Jeff Larrimore, of the US Federal Reserve, assesses Americans’ household income by generation, after accounting for taxes, government transfers and inflation. Millennials were somewhat better off than Gen X — those born between 1965 and 1980 — when they were the same age. Zoomers, however, are much better off than millennials were at the same age. The average 25-year-old Gen Zer has an annual household income of more than $US40,000 ($62,300), more than 50 per cent above the average baby boomer at the same age.

Gen Z’s economic power was on display at a recent concert by Rodrigo in New York. The mostly female teenagers and 20-somethings in attendance had paid hundreds of dollars for a ticket. Queues for merchandise stalls, selling $78 T-shirts, stretched around the arena. Rodrigo will have no trouble shifting merchandise in other parts of the world, as her tour moves across the Atlantic. That is in part because Gen Zers who have entered the workplace are earning good money throughout the rich world. In 2007, the average net income of French people aged 16 to 24 was 87 per cent of the overall average. Now it is equal to 92 per cent. In a few places, including Croatia and Slovenia, Gen Zers are now bringing in as much as the average.

Last year, Gen Zers boasted about “quiet quitting”, where they put in just enough effort not to be fired. Others talk of “bare minimum Monday”.
Last year, Gen Zers boasted about “quiet quitting”, where they put in just enough effort not to be fired. Others talk of “bare minimum Monday”. Credit: Jacob Lund - stock.adobe.com

Some Gen Zers protest, claiming that higher incomes are a mirage since they do not account for the exploding cost of university and housing. After all, global house prices are close to all-time highs, and graduates have more debt than before. In reality, though, Gen Zers are coping because they earn so much.

In 2022, Americans under 25 spent 43 per cent of their post-tax income on housing and education, including interest on debt from university — slightly below the average for under-25s from 1989 to 2019. Their home-ownership rates are higher than millennials at the same age. They also save more post-tax income than youngsters did in the 1980s and 1990s. They are, in other words, better off.

What does this wealth mean? It can seem as if millennials grew up thinking a job was a privilege, and acted accordingly. They are deferential to bosses and eager to please. Zoomers, by contrast, have grown up believing that a job is basically a right, meaning they have a different attitude to work.

Last year, Gen Zers boasted about “quiet quitting”, where they put in just enough effort not to be fired. Others talk of “bare minimum Monday”. The “girl boss” archetype, who seeks to wrestle corporate control away from domineering men, appeals to millennial women. Gen Z ones are more likely to discuss the idea of being “snail girls”, who take things slowly and prioritise self-care.

The data supports the memes. In 2022, Americans aged between 15 and 24 spent 25 per cent less time on “working and work-related activities” than in 2007. A new paper published by the IMF analyses the number of hours that people say they would like to work. Not long ago, young people wanted to work a lot more than older people. Now they want to work less. According to an analysis by Jean Twenge, of San Diego State University, the share of American 12th-graders (aged 17 or 18) who see work as a “central part of life” has dropped sharply.

Another consequence is that Gen Zers are less likely to be entrepreneurs. We estimate that just 1.1 per cent of 20-somethings in the European Union run a business that employs someone else — and in recent years the share has drifted down. In the late 2000s, more than 1 per cent of the world’s billionaires, as measured by Forbes, a magazine, were millennials. Back then pundits obsessed over ultra-young tech founders, such as Mark Zuckerberg (Facebook), Patrick Collison (Stripe) and Evan Spiegel (Snapchat). Today, by contrast, less than 0.5 per cent on the Forbes list are Zoomers. Who can name a famous Gen Z start-up founder?

Gen Zers are also producing fewer innovations. According to Russell Funk, of the University of Minnesota, young people are less likely to file patents than they were in the recent past. Or consider the Billboard Hot 100, measuring the US’ most popular songs. In 2008, 42 per cent of hits were sung by millennials; 15 years later only 29 per cent were sung by Gen Zers. Taylor Swift, the world’s most popular singer-songwriter, titled her most famous album “1989”, after the year of her birth. The world is still waiting for someone to produce “2004”.

How long will Generation Z’s economic advantage last? A recession would hit young people harder than others, as recessions always do. Artificial intelligence could destabilise the global economy, even if youngsters may in time be better placed to benefit from the disruption. For now, though, Generation Z has a lot to be happy about.

Between numbers at Madison Square Garden, Olivia Rodrigo sits at the piano and counsels her fans to be thankful for all that they have. “Growing up is f...ing awesome,” she says. “You have all the time to do all the things you want to do.”

The time and the money.

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