Why is Gen Z so Poor?

Introduction

• Many young adults from Generation Z are struggling financially, with some having to work multiple jobs just to make ends meet, despite having a degree, such as a business marketing degree, and working full-time, with some even struggling to afford food (10s).
• The cost of living is too high, with rent increases being a significant issue, and many Gen Z individuals cannot afford to live on their own, even when making over three times the federal minimum wage (1m2s).
• Statistics show that 100 million Americans cannot buy a home and get a fixed rate, and rents are being raised by $200 every year, with six in 10 Gen Z individuals feeling unable to save for the future (1m13s).
• Only 15% of Gen Z expect to be able to afford a home in the next 5 years, and 80% of those who rent worry that rental costs will keep rising beyond their capacity to afford them (1m22s).
• The COVID-19 pandemic has also had a significant impact on Gen Z, with 47% reporting that they or a household member lost a job or took a pay cut due to the pandemic, making them the most affected generation (1m32s).
• Around 40% of Gen Z are struggling with mental health, with financial stress being a major factor, and many are questioning whether this generation is truly lazy or if there are other factors at play (1m45s).
• Gen Z has had to live through multiple economic crises, geopolitical tensions, a global pandemic, and the fear of AI threatening to replace them, which has contributed to their financial distress (2m5s).
• Millennials and Boomers also play a part in the financial struggles of Gen Z, and this episode will explore the real reasons why Gen Z is facing financial difficulties in three broad categories: housing, the economy, and education (2m25s).

Who is Gen Z?

• Gen Z makes up a significant proportion of the population, with 1/5 of the population in America and Britain, and a similar proportion to current Baby Boomers, with the developing world having an even higher percentage (3m13s).
• Gen Z is more environmentally conscious, drinks and smokes less, and is in less relationships, but cares more about social issues, although they socialize less than previous generations (3m26s).
• Celebrities from this generation include Billy Eilish, Zendaya, Greta Thunberg, Mbappe, MrBeast, and Naomi Osaka, but everyday people in their cohort are coming of age into tough times (3m45s).

The Economy and Debt

• The world is facing significant debt issues, with a shrinking workforce and slowing population growth, leading to reduced GDP growth and making it challenging to service the existing debt (4m4s).
• Since 2008, the solution to this debt issue has been printing more money, which has led to the debasement of currency, causing assets to rise in value but wages to stagnate, ultimately making future generations poorer (4m17s).
• A 35-year-old in the United States is facing significant challenges in achieving milestones such as getting married, having kids, and buying a house, which was relatively affordable in the past but now costs around 10 times the average income (4m49s).

Housing Crisis

• Housing is a major concern for Gen Z, with 34% considering home ownership an impossible feat in their lifetime, and the typical age for a first home buyer reaching a record high of 36 in 2022 (5m22s).
• Many young adults are staying at home longer to save on rent, with an 87% increase in the US and a 177% increase in Australia over the past two decades (5m50s).
• The disparity between home prices and income is significant, with home prices rising twice as fast as income in the US, making it take around 6 years of income to buy the average house, compared to 2-3 years for Boomers (6m23s).
• In Australia, the average house price in Sydney is $1.6 million, requiring 14 years of income to buy a house, making it nearly impossible for individuals to save for a home (6m43s).
• Stories of expensive homes and apartments, such as a three-bedroom home selling for $9 million and a one-bedroom apartment listed for $900,000, highlight the sacrifices people are making to own a home (7m7s).
• The UK is also experiencing a housing crisis, with the average house costing nine times as much as average earnings, a level not seen in almost 150 years (8m4s).

Gen Z Homeownership

• Despite a global shortage in affordable housing and rising property prices, Generation Z seems to be navigating the housing market adequately, with 30% of 25-year-olds owning homes in 2022, 3% more than their Gen X counterparts at the same age (8m31s).
• Experts attribute this to Gen Z taking advantage of record-low mortgage rates in 2020 and 2021, having more remote work opportunities, and having access to technology, information, and platforms that help in their home purchases (8m45s).
• According to Ben Miller, CEO of Fundrise, Gen Z has more knowledge and information than previous generations, which helps them in their economic decisions (9m7s).
• In contrast, Millennials are not doing as well with housing, with the 2008 crisis hitting that cohort hard when it came to buying a house (9m27s).
• The problem of home ownership is making it harder for both younger Millennials and Gen Z to think about marriage and having kids, leading to alternatives like the tiny home trend (9m35s).
• The tiny home trend involves buying pre-fabricated tiny homes on Amazon for under $40,000, as the median price of American homes tops $400,000 (9m47s).

The Job Market and Unemployment

• The job market is booming, but the unemployment rate for 15- to 24-year-olds is high in some countries, such as Spain (28%), Sri Lanka (27%), Greece (25%), Italy (23%), and Sweden (23%) (10m10s).
• In China, over one-third of degree holders may be unemployed due to economic uncertainty and a large population in higher education (10m33s).
• Youth unemployment across richer countries averages around 13%, but this figure may not tell the full story, as it does not account for those who have stopped looking for work or only have part-time employment (10m48s).
• The way unemployment is counted has changed over time, with the US government stopping the count of those who stopped looking for work or only have part-time employment in 1994 (11m13s).
• According to Peter Schiff, when factoring in the changed way of counting unemployment, the current unemployment rate is actually higher than it was in the 1950s and 1960s (11m31s).

Gen Z and Work

• Opinions on Gen Z's financial situation are divided, with some experts like Lawrence Kotlikoff, an economics professor at Boston University, believing it's a tougher climate, while others like personal finance expert Ken Coleman think technology gives them an advantage, potentially leading to an entrepreneurial boom (12m29s).
• Technology can be a double-edged sword, as AI advancements could provide a challenge to working humans in the next decade (13m11s).
• Gen Z has figured out that changing jobs more often allows them to earn more, with a 30% increase in earnings, according to Business Insider (13m32s).
• Wages for Gen Z are rising faster than other age groups, with hourly pay rates for 16- to 24-year-olds increasing by 7% year-over-year in the US, and 15% in Britain for those aged 18-21 (13m40s).
• In some countries, including Croatia and Slovenia, Gen Z is already earning as much as the average worker (14m13s).
• The explanation for the faster wage growth could be that Gen Z had the lowest base wage, making it easier for companies to afford to pay them more (14m20s).
• Despite faster wage growth, Gen Z's pay may still not be enough to live comfortably due to inflation (14m43s).
• Inflation is a major factor in Gen Z's financial struggles, with the cost of everyday essentials increasing rapidly, making it difficult for them to achieve financial security (14m58s).
• The current period of rapid inflation, not seen since the 1970s, is particularly challenging for young adults who are just starting their careers (15m13s).

Inflation

• The pandemic and subsequent government actions, such as printing excess money, have contributed to the high inflation rates (15m30s).
• Gen Z is experiencing sticker shock due to the rapid price increases, with some reports suggesting they are psychologically scarred by the effects of inflation (15m58s).
• The mid-1970s to 1981 saw high inflation rates, reaching a peak of 20%, resulting in stagnant wages and the need for two-income households, with more women entering the workforce as a result (16m16s).
• Inflation rates may subside, but prices usually stay elevated, and even with higher wages, inflation makes things difficult for young people starting their careers (17m1s).
• The prices of houses and cars have increased significantly over the years, with a brand new car costing around $5,000 and houses costing $10,000 to $20,000 in the past (17m20s).
• Economist John Williams argues that the US government may be manipulating inflation numbers, making real inflation worse than what's published, by changing the methods used to calculate inflation since the 1980s (17m46s).
• The official statistics don't factor in house price growth directly and may substitute steak for more affordable meat when determining grocery expenses, which can lead to inaccurate inflation rates (18m10s).
• Living standards are being slashed by more than realized, making it harder for everyone, especially those just starting their careers (18m31s).

Gen Z's work ethic

• Employee confidence and morale are generally low across all generations, but Gen Z is the most disengaged at work, with only 44% reporting job satisfaction (19m5s).
• Gen Z is known for "quiet quitting," where they put in just enough work to not get fired, and similar behaviors are seen in other countries, such as China's "Tang ping" or "lying flat" (19m18s).
• A 2022 survey found that Americans aged 15-24 spent 25% less time on work-related activities than those in 2007, and the share of American 12th graders who see work as a central part of life has dropped sharply (19m36s).
• Gen Z wants a workplace with mentorship, genuine connections, flexibility, and a work-life balance (19m55s).
• The world has changed, and the traditional office job with a commute no longer appeals to Gen Z, who are perceived by older generations as lacking work ethic (20m4s).
• A survey found that 60% of US bosses have fired Gen Z workers, citing reasons such as wanting to leave early, start late, and expecting high pay (20m29s).
• In Australia, bosses face similar issues, but some argue that Gen Z workers are not lazy, just different, having grown up in a world where they may never be able to afford a house (20m42s).
• Gen Z's work ethic is often linked to finding a passion, and if they don't love their job, they are more inclined to look for something else (21m6s).
• Young people's mental health needs to be taken care of, and older people in the workforce need to communicate more effectively with younger people (21m35s).
• Many companies prioritize their bottom line over employee well-being, and Gen Z is aware of this, which may contribute to their attitude towards work (21m51s).
• Surveys of managers and employers suggest that Gen Z has a combination of perceived entitlement, short attention spans, and a tendency to critique beliefs held by other generations (22m12s).
• A common trope is that Gen Z is too soft, with 25% of Gen Z saying they need a therapist to deal with the stress of filing taxes (22m29s).
• Despite these perceptions, Gen Z actually works harder than most people think, with almost four in 10 having a side hustle in addition to their regular job (22m44s).
• Gen Z is willing to work, but on their own terms, and this may be a key factor in their attitude towards traditional employment (22m54s).

Education and Debt

• In South Korea, the youth are highly educated, but over half face asset poverty, and skyrocketing house costs are pushing many into financial difficulties (23m2s).
• Gen Z is facing financial difficulties, with some opting out of traditional higher education due to high tuition costs and student debt, instead considering careers in trades and community colleges (23m45s).
• In the US, education is extremely expensive, with tuition costs rising faster than medical services, childcare, and housing, resulting in significant student debt (23m47s).
• % of recent graduates would choose to spend a week in jail if it meant they could raise their debt, highlighting the severity of the issue (23m59s).
• Some Gen Z individuals are turning to community colleges, which are often cheaper and easier to get into, allowing students to live at home while studying (24m35s).
• In Western countries, there is a shift towards more employable degrees, such as science, engineering, and medical degrees, while humanities are falling out of favor (24m50s).
• Gen Z has the fastest rising debt levels of any generation, with a 15.4% increase in debt between 2022 and 2023, compared to a 1.3% decrease for Boomers and an 8% increase for Millennials (25m19s).
• Gen Z is also making $7,000 less than their same age group a decade ago, adjusted for inflation (25m25s).

Conclusion

• Despite financial challenges, Gen Z's wages are rising faster than any other age group, and home ownership rates are higher than Millennials at the same age (25m47s).
• Gen Z's attitudes towards work are changing, with a possible shift towards learning a trade instead of attending college in the future (26m8s).
• Historically, young people become disenfranchised during economic downturns, and governments must pay attention to their needs to avoid being voted out of office (26m25s).
• Gen Z is the most politically active age group, making their potential outcomes carry significant weight (26m36s).
• The Lost Generation, born between 1883 and 1900, had it the worst, having to go to World War I and experiencing unprecedented violence (27m1s).
• The Lost Generation, which came before Gen Z, faced numerous challenges, including being left to fend for themselves with no support, losing money in the Great Depression, and having to send their children off to World War II, resulting in a difficult life until they were in their 50s (27m16s).
• Despite the difficulties faced by Gen Z, the world is not in shambles yet, and there are still opportunities for improvement with better policies and innovation, which could potentially turn the economy and employment situations around (27m50s).
• Gen Z has the advantage of time on their side, allowing them to make life-changing investments with the little money they have, and their willingness to work side hustles and access to advanced technological tools could make them the most entrepreneurial generation yet (28m1s).
• Society should support Gen Z in reaching their full potential, as they are the future, and providing them with the necessary tools and resources could help them overcome their current financial struggles (28m20s).

Outro

• The host, Toogo, invites viewers to share their opinions on the topic and provides recommendations for other episodes, including "The Loneliness Epidemic" and "The 2008 Crisis," for those interested in learning more about societal issues and the economy (28m46s).