If you’ve been following Derek Thompson’s and Jordan Weissmann’s recent work in The Atlantic, you know that members of Gen Y (aka Millennials) are not buying new cars or homes at the same rate as those of us in older generations, we Gen X and Baby Boomers. This has significant impact on our economy — an economy that has historically seen new car and home sales as critical to its expansion as well as our cultural identity. This also has significant implications for my personal economy, as someone who earns a living helping manufacturers sell these cars which Gen Y seems to want so much less.
So, I have a lot of questions but the ones that intrigue me most are whether this trend is a lasting cultural shift reflecting Gen Y’s ideology or is it a temporary phenomenon resulting from the financial strain caused by the Great Recession? That is, will new cars and home ownership cease to play a prominent role in Gen Y’s version of the American Dream as they increasingly move to urban centers where there is less need for car ownership? Or, is Gen Y’s version of the American Dream in line with previous generations but they just can’t afford it yet? In either case, I wonder how long will it last.
The answer to these questions may come when Gen Y procreate. My hunch is when the children of Millennials begin to reach school age, we will see an increase in both home and car sales as these young families migrate out of urban areas, opting for the better public school systems and lower home prices in suburban areas. This theory assumes that suburban public schools continue to outperform their urban counterparts, which may be an invalid assumption. For instance, if Gen Y stay in cities there will likely be a bigger tax base to better fund urban public schools, which may mean there will be less reason for a Gen Y exodus. I have also assumed that Gen Y will marry and produce offspring at the same levels as Gen X and Baby Boomers. We’ll have to wait and see.
For now, affordability is certainly a big challenge. Unemployment for 20-24 year olds is at about 14% (considerably higher than the national average) and for those that are working, Gen Y median wages have declined by 6% during the recession. In fact, the average earnings of college graduates have declined 6 years in a row for a total of 15% since 2000, but college tuition and borrowing has gone up. As one Gen Y member puts it: you can’t afford to buy a new Ford when you are paying off tuition debt equal to the cost of a new Porsche.
Or maybe cars no longer mean what they used to mean. When I was growing up, cars meant freedom. They were symbolic of new found independence. They meant we were mobile. We could go anywhere. They gave us access to more people, place, and jobs. And cars could make you feel cool. They were part of our identity. Our screen icons drove iconic cars — Sean Connery’s Aston Martin, Steve McQueen’s Mustang, and Burt Reynold’s Trans Am. In my day, riding the bus was definitively not cool. But, today, maybe public transportation is.
If this spending dip is more than a temporary phenomenon that resolves with an economic recovery, what will the role of auto advertisers become? Can advertisers reverse a cultural trend? Should we? Do we have the power to make Millennials want cars again? Or, do we find and focus on new markets while fighting for share of a shrinking market?