Michelle Meyer and Lisa C. Berlin, economists at Merrill Lynch and authors of the report, argued that the idea of a ‘lost generation’ (of those born between 1981 and 1996) is “overstated”. They attributed this group’s economic problems to cyclical factors, rather than any shortcomings on their part.
The report cited Lisa Kahn, a labour economist from Yale School of Management, whose research found that those who graduate during a recession earn lower wages for a decade or more than those who matriculate during an expansion. According to Ms Meyer and Ms Berlin, this would help to explain underemployment amongst the young.
The report also challenged the view of sceptics who “argue that this age group is more likely to accept unemployment” and choose leisure over building wealth.
Pointing out that the decline in labour participation is among 20-24 year olds, Ms Meyer and Ms Berlin argued that this is due to greater college enrolment, rather than youth apathy. This greater investment in human capital “should ultimately be a positive for income generation and economic growth”, according to the report.
However, the report did warn of a potential student debt burden in the USA, where aggregate student debt is approaching $1.1tn, according to the New York Fed’s credit panel. It indicated a greater number of students borrowing, and an increase in per capita debt as potential causes of the surge.
Ultimately, the report expresses confidence that the future is not so bleak for American youth. Ms Meyer said: “I imagine it’s a similar phenomenon in the UK, in that the benefits would outweigh the costs of higher education. People tend to overblow the idea that it’s a fundamentally different generation from any generation before”.
Adviser view
Kevin Morgan, Managing Director at Consillium Financial Planning, said: “In the UK there might not be a lost generation, but a waste of labour in terms of those who do enter higher education, but whose degrees do not match demands in the industry, such as those who do a science degree but then go into the City.”
