The squeeze on millennials is a bit of cruel luck, exacerbated by shoddy government policy — but something not fixable by a wave of the magical policy wand.
“As much as we’d like to believe that government can control the economy, its power is limited,” Noah Smith wrote for Bloomberg. “Productivity gains, which drive much growth, are often due to improvements in technology. The government can spend money on research, tweak patent policies, craft more efficient financial markets and invest in early-stage companies, but it isn’t clear how much these things will really boost growth.”
Economic growth, and isolating the causes of it from noise, is trickier than most people assume. There’s a connection between consumption and investment, however. Usually, when more resources go toward investment, it expands consumption in the future. Since the 1960s, however, investment has fallen in favor of current consumption.
“Our low investment has meant more consumption for baby boomers, less for millennials,” Smith noted.
To that extent, government policy has favored baby boomers. Given that older Americans vote more than younger Americans, it’s not surprising. Government action isn’t as effective and influential as many people assume, however, so it should be remembered that it can also be a “natural” effect.
That’s cold comfort to millennials looking to stay in cities. Millennials wanting to own a home have fled to the suburbs, and urban policies that keep costs high anticipate “peak millennial” levels in cities.
Now, new data from Trulia point to the dire situation.
“The number of starter homes on the market in the 100 largest U.S. metros has dropped by about 44 percent since 2012,” Emily Badger wrote for The Washington Post.
After the real-estate market crashed, more houses became rental units, rising housing prices currently make it harder for other homeowners to transition into new housing, and stagnant wages limit the ability of young people to afford a starter house.
The economy is improving, but slowly. Millennials lack the luck of their grandparents and have to ride out their youth during some economic doldrums. Nor, it appears, do they have a quick way out of their situation.