Coming of age in the wake of the Great Recession, the Millennial generation has had to accept an uncertain economic landscape as their new normal. One critical adjustment they’ve made is to enthusiastically embrace the upsides of the share economy. While their parents helped Craigslist and eBay become household names, today’s youth rely on crowdsourcing and funding sites like Kickstarter and Indiegogo. Their collaborative ethos promotes a peer-to-peer approach that can cut out the broker and benefit both provider and consumer in the process.
By taking advantage of their collective connectivity, this generation shares information openly and at scale to (among other things) make best use of the excess capacity of goods and services. Examples of this approach are everywhere. Why buy a car—and pay money for a parking space— if you live in a pedestrian city where the vehicle will sit idle most days anyway? Instead, you can join Zipcar when you need wheels or use the Uber or Lyft app on your phone to get a ride across town. With so many shared resources, it makes sense to cooperate with others, especially if it means having access to assets that one wouldn’t be able to afford independently.
But as these economic arrangements gain popularity, there may be downsides for the rising cohort of young adults. Journalist Monica Potts offers a critical assessment of the “sharing economy” in the latest issue of the Washington Monthly that features a set of in-depth articles that focus on the relationship of Millennials and money (additional contributions are made by Phil Longman, Matt Connolly, and Jordan Fraade). Potts shows how Millennials have been creating virtues of necessity as a means of coping with an economy that is not delivering high-quality jobs.
Instead of following in the footsteps of their parents who married, bought homes, and had kids, Millennials are renting everything from homes to bikes, phones, and software, signifying a cultural shift that is radically altering their relationship to ownership. Instead of opting for the suburbs, Millennials are remaking the urban core of cities across the country, demanding improved transportation, more walkability, and better integration of technology into public services in order to benefit the collective rather than the individual. Some of these arrangements make sense over the long term, especially when the underlying assets are depreciating, but it also means that Millennials are missing out on recouping the gains from owning appreciating assets.
If we look at the balance sheet of young Millennials, and even Gen-Xers, we see declining incomes and lower levels of wealth, not merely vis a vis the rich, but compared to previous generations of Americans. In his piece, Phil Longman presents this as an emerging and consequential expression of inequality, arguing that perceptions of growing disparities might be best understood in generational terms. Rather than focusing on how exceedingly well the 1% is doing, it’s more instructive to recognize the decline of every generation of young adults born after the Boomers. In so much as the rise of the share economy is delaying a generational wealth-accumulating process, it is contributing to the pervasive downward mobility experienced by the Millennial generation. If people feel as though it is harder to get ahead than it used to be, it’s because it’s true.
One way that young people have traditionally been able to build up the assets side of their balance sheets is through entrepreneurship. However, Matt Connolly describes how Millennials are starting fewer businesses in recent years even as a seemingly endless wave of aspiring young Mark Zuckerbergs report in surveys and in the media that they want to do so. Without steady jobs, many of these young entrepreneurs take on temporary work, in effect creating a “Gig Economy,” characterized by a small, and less powerful, form of entrepreneurship that ends up supporting one job at a time and fails to spark the benefits we traditionally associate with small business creation.
Another impact of the Great Recession has been the delayed entry of young families into the economy as homeowners. Without savings to cover a down payment or the ability to qualify for a mortgage, Millennials are lagging behind previous cohorts in their rate of homeownership. Jordan Fraade sheds light on an innovative response, shared equity homeownership, which is gaining momentum in communities across the country. In shared-equity housing, the buyer gets a one-time subsidy that allows them to purchase a home that they would not be able to afford otherwise and in exchange, they are required to share the accumulated equity upon resale. This approach still offers the potential for wealth building but also provides access and stability for a generation desperately in need of both.
Shared-equity homeownership is just one example of the innovative policy solutions that we will need more of if we are to help the current crop of young families make the move up the economic ladder. Reversing their growing generational inequality is the new Millennial challenge and it will require a broad set of policies that can deal effectively with the numerous ways that inequality has expanded and grown more entrenched. Certainly, one set of policies should focus on limiting debt and bringing down the costs of accessing education and health care so liabilities don’t overwhelm the family balance sheet. But another set of policies is needed to assist young adults in building up their asset base over their life course and connecting them to productive ownership opportunities. It is our collective responsibility to make sure the emerging “share economy” doesn’t leave Millennials completely devoid of wealth.
Reid Cramer is director of the Asset Building Program at New America. He was a convener of the Millennials Rising symposium, which helped inform the articles described in this piece. This piece was originally published in New America’s digital magazine,The Weekly Wonk. Sign up to get it delivered to your inbox each Thursday here, and follow @New America on Twitter.