The idea that the young are feckless spendthrifts who can’t afford homes because of their designer lifestyles has been laid to rest.
Treasury boffin Mark Vink was the killer.
Vink delved into historic spending figures, and found that the much-maligned Millennials in fact have higher savings rates than baby boomers did when they were the same age.
‘‘From the baby boomers onward, the savings rate of each generation exceed those of the generation preceding it,’’ Vink found.
It’s not that Millennials can’t afford homes because of their savings habits. They can’t afford homes despite their better savings habits.
So how have older people come to see the young as wild spendthrifts? There are a number of plausible explanations.
The first is that people tend to think they are responsible for their own successes. This is Be aware of your biases Challenge your assumptions Guide, don’t blame, the young
known as ‘‘self-serving bias’’, and is the human tendency to attribute our successes to our personal characteristics.
We own a lovely $1million house today not because houses were cheap when we were in our late 20s, or early 30s, but because of our hard work and thrift.
That self-serving bias is then bolstered with ‘‘confirmation bias’’, which is the human tendency to recognise evidence that supports our beliefs, and ignore evidence that contradicts them. If you are responsible for your own success, by definition others (the Millennials) must be the authors of their own downfall.
Something else may be happening here. Millennials do look a bit different to my generation.
They are better dressed, and have their ears, or eyes, perpetually glued to smart phones. Often they have a latte clutched in their fist.
They must be spending more to achieve such lifestyles!
They probably are, though only a little more, Vink’s work indicates. In real terms, the price of clothes has been falling for a decade. So has communication. Smart phones are cheap as chips.
The young have swapped alcohol of coffee. Binge drinking among the young has been falling.
I’ll never drop my annoyance at seeing the young and houseless drinking a $3.50-$5 latte a day, but Vink’s work indicates coffeedrinking is not a sign of the youth of today being more feckless than the youth of the past.
And Millennials also earn more than baby boomers did at their age, and are saving more of it, probably because they know they have to.
The prices of Millennial lifestyle necessities may have fallen, but the deposit needed to secure a house hasn’t.
Ten years ago a $38,000 deposit would have got you into the median Auckland house, with a home loan of $310,000. Today, it would be a deposit of $160,000, and loan of $640,000.
Two more things make hard for older generations to interpret the behaviour of the young. First, people tend to cluster with likeminded people who endorse, rather than challenge, their views.
Second, we haven’t had the data to open our eyes. Vink has provided it.
Millennials are actually better savers than baby boomers were at their age.