Generation X's Debt Headache
"Government no longer has our back," explains Tamara Draut, author of the recently published book Strapped, in an email. "Young adults today, working to get into the middle class -- they're being hit by a one-two punch: The economy no longer generates widespread opportunity, and our public policies haven't picked up any of the slack."
Her words ring uncomfortably true. As a "young adult" (age 29, thank you very much) from the generation Draut is covering, I've watched more than a few college-grad friends struggle to pay off their towering school loans and credit card debt -- usually on "creative sector" annual salaries ranging from $25K to $40K (while attempting to thrive in notoriously overpriced cities such as New York, Boston and San Francisco).
According to Strapped, Gen X-ers have it much worse than our Baby Boomer parents, because while typical earnings for college grads have stayed the same for three decades, the costs of housing, education and health care have grown exponentially -- much faster than inflation.
The grim financial situation many young folks are now facing is part of a broad governmental failure to regulate the rising costs of higher education, to boost the minimum wage to a livable wage, and to create a sufficient number of full-time jobs -- with benefits -- to ensure that America's massive twenty- and thirty-something work force is healthy and paid well enough to provide for their families.
The result of this sweeping federal failure isn't pretty. Attending college, for many middle-class as well as low-income families, is a "damned if you do, damned if you don't" proposition, and in 2003, less than a third of young adults aged 25 to 29 had a bachelor's degree. College is just too expensive for all but the luckiest few to afford -- but not having a degree means difficulty in landing a job. According to Draut, in 1972, the typical male high school graduate, aged 25 to 34, earned $42,000 in inflation-adjusted dollars; three decades later, male high school graduates of the same age were earning just over $29,000.
Because of the scarcity -- and competition to find -- full-time salaried jobs, growing numbers of young people are turning to part-time or temp gigs. During the '90s, the number of jobs handled by temp agencies doubled. And more and more young people are being forced to move back home with their parents; nowadays, four out of 10 people move home at least once after college.
I discussed all of these issues, and more, with Strapped author Tamara Draut in an email interview.
Laura Barcella: What inspired you to write this book?
Tamara Draut: I wanted to counter the conventional wisdom that young people today are struggling financially because they lack a strong work ethic or because they're profligate spenders. There is so much frustration out there among both parents and young people who can't understand why they're having such a difficult time getting ahead. I wrote Strapped with the hope of raising awareness that the challenges facing this generation are not personal, but the result of political decisions made over the last three decades.
LB: What sort of social or economic impact do you hope the book will have on American culture, and young people in particular?
TD: Already the book is having impact. I get countless emails from young people thanking me for telling this story. I've even gotten emails from parents telling me that they now better understand the lives of their twenty-something children. On a larger scale, I hope the book inspires more young people to fight for reforms by showing that the breakdown in opportunity and economic security didn't "just happen," and it can be changed.
LB: Can you give us a brief overview of why exactly "getting ahead" has gotten so much harder for young people today?
TD: Today's generation of twenty- and thirty-somethings are experiencing the fallout of a three-decade-long shift in our culture and politics. A generation ago, three factors helped smooth the transition to adulthood. The first was the fact that there were jobs that provided good wages, even for high school graduates. A college degree wasn't necessary to earn a decent living. But even if you wanted to go, it wasn't that expensive, and grants were widely available.
The second was an economy that lifted all boats, with productivity gains shared by workers and CEOs alike. The result was a massive growth of the middle class, which provided security and stability for families.
Third, a range of public policies helped facilitate economic mobility and opportunity: a strong minimum wage, low college tuition and generous financial aid, major incentives for homeownership and a solid safety net for those falling on hard times. Simply put, the government had your back. This world no longer exists. The story of what happened is well-known.
As the nation's shift to a service-based economy accelerated, the new economy dramatically changed the way we lived and worked. Relationships between employers and employees became more tenuous, as corporations faced global competitors and quarterly bottom-line pressures from Wall Street. Increasingly, fringe benefits like health care and pension plans were only provided to well-paid workers. Wages rose quickly for educated workers and declined for those with only high school degrees, resulting in new demands for college credentials.
As most families saw their incomes stagnate or decline, they needed two full-time incomes just to stay afloat, creating new demands on working parents. Getting into the middle class now required a four-year college degree, and even that was no guarantee of the American dream.
While adults of all ages have endured the economic and social changes brought by post-industrialization, today's young adults are the first to experience its full weight as they try to start their adult lives. But the challenges facing young adults also reflect the failure of public policy to address the changing realities of building a life in the 21st century. Government no longer has our back. As young adults today are working to get into the middle class, they're being hit by a one-two punch: The economy no longer generates widespread opportunity, and our public policies haven't picked up any of the slack.
LB: Why are so few college-qualified students enrolling, when now -- more than ever -- one seems to need a college degree to land a decent job? Is it because the price of university has risen so dramatically, or are other factors also at play?
TD: Young people have gotten the message loud and clear that they need a college degree to get into the middle class. Today, three-quarters of high school grads continue their education with some type of college experience. The problem is that college has become a luxury-priced necessity. Over the last two decades, the cost of tuition has more than doubled, and federal financial aid has fossilized. As a result, young people from low-income households often can't scrape together enough loans, grants or cash to foot the bill.
LB: Tell me a bit about college loans and their insidious impact on the lives and financial security of younger folks.
TD: Today, the average student loan debt for a college grad is close to $20,000. That's a $200 monthly bite out your paycheck for ten years. For those who continue on to grad school, the combined debt is about $46,000 -- a $500 monthly payment for ten years.
The problem is that the typical earnings for college grads have been flat for three decades, while the cost of housing, health care and education have all risen much faster than inflation. So essentially young people must figure out how to do more with less money.
Another layer to this problem is that about 1 out of 5 students who borrow money end up dropping out of college. So they've got the debt, but no degree. The enormous debt load means that today's generation has less money to save, whether for retirement or for a down payment on a home.
LB: I'm part of the general demographic of people you profiled in "Strapped." Can you explain how and why our parents' generation had it easier when it came to graduating from college, getting good jobs with benefits and raising a family?
TD: A generation ago, a young person entered the labor market on an escalator. Young workers could count on a swift and stead progression in their earnings. Today, young workers enter the labor market on one of those automated airport walkways. Productivity may be rising, but young workers' paychecks are staying flat.
Back in 1972, the typical 25- to 34-year-old male high school graduate earned just over $42,000 in inflation-adjusted dollars. Three decades later, male high school graduates are earning just over $29,000. But the earnings for college grads have remained fairly steady over the last three decades.
Young women's earnings have also declined, but not as steeply. Young female workers with college degrees have experienced growth in their incomes compared to three decades ago as career opportunities have grown, though women in this age group earn less than their male counterparts at every level of education.
The earnings picture is grim. But add to that the reality that while paychecks have been stuck in first gear, the price of housing has soared in the last ten years. This is especially true for young professionals because the hottest job markets are still clustered around our nation's largest and most expensive cities. Between 1995 and 2002, median rents in nearly all the largest metropolitan areas rose by more than 50 percent.
LB: What's shifted politically to keep people of this generation down?
TD: Over the last three decades, the triumph of conservative ideology has resulted in a major shift away from shared responsibility toward personal responsibility. States slashed their support of higher education, leading to steep tuition hikes.
At the federal level, financial aid shifted from being a grant-based system to a loan-based system. Guaranteed pensions got replaced with individual retirement plans. After Ronald Reagan's firing of striking airline workers, businesses ramped up their anti-union efforts, and states passed legislation making it more difficult for workers to unionize. The minimum wage lost its purchasing power. Ã¢â‚¬Â¦
Over the last three decades, we've witnessed a steady retrenchment from investing in the common good. We've failed to shore up the public structures that provide individuals with the opportunities to get ahead. As I write in the book, in this era of hyper-individualism, our national spirit has shifted from "We're all in this together" to "Hey, look out, I'm about to step on you."
LB: How have the Bush administration's policies affected the lives of Generation X (and Y) for better or -- more likely -- for worse?
TD: The policies of the Bush administration and Congress have made the future look even grimmer for young people. The soaring national deficit and debt will be our burden to pay. Three rounds of tax cuts have further constrained our nation's ability to get serious about shoring up our investments in education and health care. Most recently, Congress made major cuts to financial aid for college, including raising the cost of federal student loans. The Bush administration has taken the creed of selfish individualism to new heights -- and the public good has suffered as a result.