By Astrid Popovici
We’ve all seen the cartoons. Millennials are “the snowflake generation.” They can’t afford housing, college, and healthcare because they spent all their money on avocado toast and goat yoga. And they’re so hypocritical! Using their iPhones to tweet against capitalism, oat milk Starbucks lattes in hand. They’re the luckiest generation to ever live, and they have the audacity to be socialists!
But in a very real sense, young people have it worse economically than their parents. In 1990, when the average Baby Boomer was 35, Boomers owned 21% of the national wealth. At the same age, Gen-Xers owned 9%. The median Millennial won’t be 35 until 2023, but today, their generation owns just 3.2% of the nation’s wealth.
People today have to work more hours than ever just to afford the essentials. Oren Cass’s Cost of Thriving Index measures how many weeks in a year the median male worker would have to work to afford four things for his four-person family: rent on a 3-bedroom house, a health insurance premium, the operation of a vehicle, and one semester of public college. In 1985, this Cost of Thriving Index was 29.9 weeks in a year. In 2018, the COTI was 53 weeks—more than a year’s worth of work each year. This is a simplified model, and most families have more than one breadwinner now. But its conclusions are clear: every generation since the Baby Boomers has had increasing trouble getting by.
Millennials have been denied a core component of the American Dream: the opportunity to live a better life than their parents.
This indisputable fact—not Millennial narcissism, or left-wing indoctrination—is the basis for the popularity of Bernie Sanders. Even those who didn’t support Sanders should recognize the underlying problems he diagnosed. However, his proposed solution—mass redistribution—isn’t viable. Redistribution would help alleviate some poverty in the short term, but there’s only so much income to redistribute. The entire collective profits of the S&P 500 are just 1 trillion dollars a year, which is a quarter of the annual Federal budget, or about $3000 for each American citizen. Additionally, seizing and redistributing income or wealth causes changes in behavior that can lead to many other consequences such as a reduction in working, saving, and innovation. If we truly want to improve the economic prospects of young Americans, we must address the deeper causes of wealth inequality and wage stagnation.
Think about wages as the price of labor. Supply and demand tells us that if you increase the supply of something, or if you decrease the demand, the price will go down. So the more workers you have competing for jobs, and the fewer jobs you have to fill, the less money you will have to pay each worker. Over the past few decades, the American worker has been hit with a double-punch in this respect.
First, the outsourcing of work to foreign countries has reduced the demand for American labor. American manufacturing employment has fallen from a peak of 19 million people in the ‘80s to less than 13 million today, largely due to offshoring.
Second, mass immigration into the United States—over 60 million people in the last 55 years—has increased the supply of American labor. This combination of increased supply and reduced demand is one factor that has caused wages to stagnate for the past few decades.
Automation has also reduced demand for American workers, but unlike outsourcing and mass immigration, it increases the wealth of existing Americans by making production more efficient. The relative importance of outsourcing, mass immigration and automation on wages is hotly debated by economists. But regardless of the exact balance between factors, any movement serious about improving the lives of workers must address mass immigration and outsourcing, not just automation.
In 2015, Bernie Sanders recognized the conflict between mass immigration and the wellbeing of workers, calling open borders a “Koch brothers proposal.” He has since changed his mind.
Until Trump, there was little opposition to mass immigration in either party: Democrats benefited from it because immigrants tend to vote for them, and Republicans benefited because immigrants work for their party’s donors. Cheap labor is good for big business.
The loser in offshoring and mass immigration was the rest of us.
The first step to solving a problem is acknowledging it. That’s what Bernie Sanders got right, even if the solution is more complex than mere redistribution.