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A Message From Generation Z: Thanks For Nothing

Submitted by Lance Roberts via STA Wealth Management,

This past weekend, I was reminded by my 9-year old son of the following passage in the Bible:

"Out of the mouth of babies and infants, you have established strength because of your foes, to still the enemy and the avenger." - Psalm 8:2

That verse has been shortened over time to become a colloquialism used when children have said something humorous in front of adults - "Out of the mouths of babes."

It was on our drive to Bible study that my son asked for my phone to play a new song he liked. (Note: This is also the reason traditional "terrestrial" radio stations are dying a slow painful death. If it ain't "on demand" - it's dead.) After a moment of scrolling on a music download app, the following words begin to stream through the cabin:

"We are the ones, the ones you left behind.
Don't tell us how, tell us how to live our lives.
Ten million strong we're breaking all the rules.
Thank you for nothing, 'cause there's nothing left to lose."

I was immediately struck by the lyrics and paused the song to ask my son if he understood the meaning of the lyrics. He replied simply - "no...but I like the song." 

The song opened up the ability for my son and I to have an important dialog about the future of "Generation Z" (those born after 1995) and the challenges that they will have to face. More importantly, the reasons why "Generation Z'ers," those "10 million strong," feel like they have been "left behind" by the generations before them.

What is interesting is that this was not a new song at all. In fact, the song debuted very quietly in 2013 by a band called MKTO (Misfit Kids and Total Outcasts) which was founded by two real life friends Tony Oller (21) and Malcolm Kelly (20). According to an interview with with Celebuzz the duo stated:

"We wanted to have a song that described our views of our generation, and to describe how we feel about being in the circumstances we are in, thanks to previous generations making mistakes."

However, it is not surprising that two twenty-somethings may be feeling the way they do. Let's take a look at some of the issues that they are growing up with.

Job Growth

As I have discussed often, the structural shift in employment, has had a negative impact on both total employment and particularly that of Generation Z. Currently, the number of individual working full time, between the ages of 16 and 24, has only seen a modest recovery since the end of the financial crisis.

However, the story is substantially worse as the majority of those jobs were taken by immigrant workers. As recently discussed by the Center For Immigration Studies:

"It's frustratingly common: The mainstream media discusses a social problem obviously impacted by immigration — overcrowding, low wages, increasing poverty, etc. — but assiduously avoids any mention of immigration."

The importance of youth employment is extremely critical to that generation. As the CIS explains:

"The decline in youth employment is a serious problem that deserves a serious examination. After all, a number of studies have found that the lack of early labor market experience can have a significant negative impact on employment and wages later in life."

Student Debt

The next problem is the mountain of personal debt weighing on both the Millennial and Z generations. As shown in the chart below, over the last 6-years student debt has skyrocketed.

The problem, as discussed previously, is not all student loans went to higher educations. Student loans are sources of cheap and easy capital to support spending requirements. The WSJ confirmed the same:

"The Education Department's inspector general warned last month that the rise of online education has led more students to borrow excessively for personal expenses.


The report also found the schools disbursed an average of $5,285 in loans each to more than 42,000 students who didn't log any credits at the time."

The problem, of course, is that only about 1/3 of those that enroll in college actually graduate. This leaves a large number of individuals heavily debt burdened without the college degree needed to obtain a higher wage level to support the debt. Its a vicious cycle that now weighs on a large group of the younger generation and negatively impacts future consumption trends in the economy.

Government Debt

Of course, it isn't just consumers that have over borrowed to the point that it now negatively impacts economic growth. Since 2009, the government itself has went on an unprecedented spending binge that has doubled the amount of Federal Debt outstanding.

The problem, as shown, is that increases in the debt/GDP ratio has a long-term negative consequence to economic growth. Rising debt levels detract revenue obtained through taxation into the service of debt rather than reinvestment back into the economy via infrastructure development and other revenue positive projects. Such investments create jobs and increase production that supports stronger levels of consumption which comprises more than 2/3rds of economic growth.

Unfortunately, with debt currently capped at the debt-ceiling limit, the prospects of stronger GDP growth in the next decade is likely to remain just as elusive as it has been over the last.

Wage Growth

Of course, the problem for both Millenials and Generation Z is that lower rates of economic growth are directly correlated to lower rates of wage growth. As shown below the correlation between the two is extremely high.

Given the structural shift in employment, the impact of immigration and the continued burden of excessive debt on the individual, the trends of both economic and wage growth are unlikely to change anytime soon.

Economic Growth

The problem for Generation Z is not a transient one. As shown in the final chart below, the generations following the "baby boomers" have very little to be excited about. With the lowest average economic growth cycle currently in progress, there is little ability to "grow" out of the current debt problem.

While Central Banks globally intervened to offset the impact of the financial crisis, they also impeded the "reset" process from occurring to clear the excesses built up in the financial and economic system. Furthermore, the inflation of asset prices simply created a burgeoning "wealth gap" which has largely bypassed the 90% of Americans that have little or no invested assets.

The up and coming generations have plenty to blame on the "baby boomer" generation and the scores of bad fiscal and monetary policy decisions that has robbed them of their future. The job of each generation is to leave the world in a better place than they found it. It is clear, we failed.

 "Thank you for feeding us years of lies.
Thank you for the wars you left us to fight.
Thank you for the world you ruined overnight.
But we'll be fine, yeah we'll be fine."

However, for now, let the music play.