Millennials Are Different

Part of the Millennial's Future series.

I've been fascinated by demographics for decades, since understanding how populations grow and shrink can help make sense of all manner of trends. If you have a large bump in population in the mid 1950s, for instance, you'll know that grade school construction will be at its peak in the early 1960s, that there will be a large college population by the 1970s and housing prices will start to rise dramatically in the 1980s as this peak population gets older (and in fact, this was precisely what happened with the Boom generation)

Before I begin, I'd like to thank my company, Avalon Consulting LLC, for giving me the opportunity to do this analysis as part of it's commitment to Big Data and Data Analytics Services.

A Little Pill, A Big Effect

In 1960, the birth control pill was first introduced (to much controversy, I might add). It took about a decade for it to gain a large enough traction among the previous generation for its effects to be seen, but by 1970 the number of births in the US had declined to levels not seen since 1948.

There was something of an uptick (stock traders would call this a head and shoulders pattern, but it actually occurs quite frequently in any kind of time series), and then the population dropped to levels comparable to World War II levels by 1974. By 1982, population rates had completed a "cycle" that started in 1947, growing again to a peak in 1990, followed by a small valley that peaked again in 2008. Since then total number of births have been in decline.

What's not obvious from this graph is that what you're seeing is total number of babies per year, and that as the population grows, this should trend up (there were two hundred million more people in the US in 2014 than there were in 1933). This means that non-immigration population growth in the US has actually been declining (the first derivative). This becomes even starker when you look at the births per capita.

In 1960, per capita births peaked at around 121 births per 1000 women of childbearing age, then plummeted to a low of around 66 births in 1974. Then, for more than forty years, it has remained relatively constant, though it declined below 66 after the 2007 recession (with indications that it may drop down to below 60 by then end of the decade).

Now, you can clearly see three "generations" here, though the numbers don't exactly fit the 18 year Strauss-Howe generational model . The first generation started in the late 1930s, and peaked about 1957 (significantly, the year that the pill was introduced). Call these the Boomers - they lived during a period of strong economic and population growth. From 1958 to about 1975, you had a generation that lived through both a declining economic and population growth period, given the moniker Generation X, or GenX. Then from 1975 to 2010 (a staggering 35 years), you have a third generation that has lived with stagnant economies and no per-capita population growth.

In overall number of people, this last "Millennial" generation is bigger than the other two combined, but it's also very misleading. I'd argue that the introduction of the pill may have been one major factor that "turned off" the rapid population growth that was happening in the US. It took about 18-20 years for the population to hit an equilibrium point that represents what US population looks like with birth control in place, but that's been the typical regime since the mid-to-late 1970s.

I'm going to contend here that there are in fact two "generations" within the millennials, if you identify a generation as being the rise to "adulthood" (18-20 years typically). The first started around 1975, and ended around 1991. The second then began in 1992 and ended around 2008 (After 2008 the severe recession had an adverse affect on birth rate that seems to be setting the stage for another, milder decline, otherwise this would have ended around 2011 or so).

If you arbitrarily assume mid-points in these drops and falls, then you'd add about 8-9 years to these numbers, giving you generations that fit much more closely into the Strauss and Howe generational model, but I think this misses the point: culturally, rising or falling birth rates have a broader impact than the peaks or troughs. This explains why late generation Boomers are far more like GenXers than they are like their own generation. When birth rates are declining, funding for education is on the wane 6-8 years later at the grade school and this propagates all the way to college, businesses, already stuffed to the gills with people from the ascendant period won't hire, demand for everything drops, and the economy tends to go into decline.This fits the early GenX experience closely, but it also fits the experience of many late stage Boomers.

Two Generations of "Millennials"

Someone who was born in 1975 will be firmly in their careers at this point - they'll be 40 this year. They came of age during the dot com era, and many also were hit particularly hard by the tech recession in 2001 (which didn't have anywhere near as much impact on the growth-leg boomers, most of whom were not in the tech field). They also were fairly significantly impacted by 9/11 and the security state growth that occurred for the next 6-8 years.

There is no significant demographic factor that separates Millennials Gen I from Millennials Gen II. Culturally, Gen II Millennials grew up with the realities of the Internet, with Google and with the mobile revolution, and as such they may be the first generation not defined by a demographic benchmark. 9/11 was only of peripheral awareness, but the Great Recession has left its mark on the childhood of this generation. Gen II is only just now entering the workforce, and I think a lot of the writing about Millennials is largely guesses based upon the previous generation, from the lens of people who for the most part did grow up during clearly demarcated phases.

Now, there are three major demographic trends occurring right now that will impact the next fifty years. The first is subtle - there's a long term decline happening in the birth rate that will only become more dominant as same-sex unions become more normalized *. The number of couples that have chosen to remain childless has risen steadily in the last twenty years, as has the decline in the number of child-bearing marriages. Additionally, people immigrating, which has traditionally reflected the per-capita birthrate of the emigrating country, has also been declining as economic pressures in Latin America in particular have improved.

* A brief aside here, added to explain my analysis. I'm trying not to make any moral judgments about same-sex marriage here. Male same-sex marriages will have no impact upon birth rates - while there may be an increase in the number of adoptions, those baby will already have been born ... they don't change the numbers. Female same-sex marriages are where things become more complex. In this case, there are two competing factors. Increasing social (and legal) recognition of same-sex marriage will likely cause a net increase in women in such relationships choosing to have children with such legal standing. On the other hand, an increase in the number of such marriages will also see a decrease relative to the overall population in unplanned pregnancies. I believe the second factor will likely outweigh the first, for a net decrease in the birth rate, but the net effect will be small.

This means that for the next fifty years, the per capita rate of babies born in the US will continue to decline, albeit slowly, perhaps to the mid 50s per 1000. Some factors may mitigate this - women older than 35 are at an all time high rate, even as rates for women younger than this continue to drop, but what this indicates is that women are having first children later and are often foregoing having more than one child. If the rate remains stable, then this means that while there will be slight increase in the total number of babies born each year (more population), more growth will come from immigration than from natural births in 2024.

Note that these numbers assume that current trends continue. However, as mentioned earlier, immigration growth is also slowing. Based upon current trends, the US population peaks by about 2070, but if immigration declines, or if the per capita birth rate continues on a downward trajectory as the last few years suggest, this could happen twenty or even thirty years earlier. This is the second big trend, and it is happening world wide.

Again, the pill may be a factor. While the US middle class has declined, in most emerging nations, the middle class has been growing, and the use of contraceptives tends to increase with income and social status levels. This is true in Southeast Asia, Central and South America, and much of Western Africa. In Africa as well, AIDS has wreaked a terrible toll on the population especially in central sub-Saharan Africa, which ironically has had the effect of reducing immigrant flow into the Middle East and Europe, just at the time that many of the (especially Northern) countries are faced with population replacement rates well below that necessary to keep their population stable, let alone growing.

The final demographic factor in effect is that if you place the start of the Boomer population at 1939 rather than 1946, then a person born then will be 77 this year. The median life expectancy for men of this age is 77, for women is 80. This means that for the next 18 years, the number of people dying of old age will rise relative to the overall population until 2033. It also means that over that period, you will see net disinvestment - people who saved for their retirement are usually drawing from pensions, IRAs and social security, not investing into the market. Health care costs will continue to rise for this group as well, effects that are already impacting that industry. Companies that have been supposedly sitting on cash have done so largely as a hedge against retirement plans, and if that money isn't there (and in many cases it isn't) then it will come out in the form of class-action lawsuits.

For GenXers, there may end up being something of a big payout - people once in senior management and research positions tend to stay there, and with the descendent leg of the GenXers, this meant often being blocked from advancement. For those near the peak (born in the late 1950s) that will continue to be the case, but for those farther from that peak, it means that many of these same people are now retiring, and there will be less and less competition for these positions. Of course, we're also likely entering what could be thought of as a large scale slow recession with peaks and valleys (we're ascending a peak right now), so many of the bigger companies will end up being restructured out of existence with the next major recession (my gut says 2018, but it's always hard to call a recession). GenXers in general have had a pretty raw deal with life.

To first Gen Millennials (MG1) lies the process of dismantling the existing corporate infrastructure, a process that is already underway. A significant percentage of the MG1 workforce is contingent, and will likely stay that way, moving to a corporate model more similar to the production studio approach (where you have an array of subcontracting "houses" and a mix of permanent and contingent staff in each of these forming into coalitions to get larger scale projects done. It's a relatively low energy way of conducting business, suitable for a low energy financial environment.

Second gen Millennials (MG2) have learned thrift through some very hard lessons, likely will be very disillusioned about the nature of work as it has existed in the twentieth century, and are already laying the foundations for 21st century business models - highly contingent, distributed, agile, cooperative, risky, entrepreneurial and relatively ephemeral. Financial security will come through managing multiple financial streams. They will be loyal to their current projects because they don't want to undermine the future success of those projects, but they will not in general stay with a single employer long term, especially if that creates too big a dependency on any one revenue stream.

The Millennial Future

My suspicion is that MG1 and MG2 actually will have very different gross characteristics. This actually brings up a key criticism of generational theory - the idea of imprinting. There are a few key concepts of generational theory and imprinting that hang together:

• the events that people of the same age experience have an impact upon their personality in a consistent manner,
• that so long as a similar environment exists, the impacts will also be similar, and
• the impacts are strongest during the formative years of childhood to early adulthood.

People born during the growth years during and after World War II to nearly 1960, for instance, were conditioned to seeing rising economic prosperity, the rise of the highway systems, the establishment of the automobile as an icon, the very earliest televisions, and so forth. Boomers by and large tend to be optimistic and extroverted as a consequence. Now, this is not to say that any Boomer will be an extrovert and be optimistic about the future, but in the aggregate, there's a marked tendency in that direction, in the degree of divergence from that mean is relatively small. GenXers, on the other hand, grew up during a period of economic and political turmoil, and in general tend to be introverted, introspective and more pessimistic.

It is quite possible to read too much into this, and to assume that simply because a given individual is part of a generation, that they have that generation's characteristics, which is essentially a form of stereotyping. The base template may be there, but genetics and local environment also factor in; generational impacts are real but are essentially just predispositions.

Another criticism is more valid - asserting what constitutes a generation. I think the mid-point measures that Strauss and Howe initially made, while they made some sense if you assume a cyclic nature, fail in that it is more likely demographic driven economic trends that are the dominant factor - the growth or decline in birthrate, the corresponding growth or decline in economic activity, and so forth.

So what does this mean for the future? First, assuming that population growth directly drives economic activity (and there is a high correlation that hints that it does), the economy in the US will likely be stagnant for at least another 20 years, with a subtle downward slope. In essence, it'll be a steady state economy - a regime which we've not really seen in history before. This means that forward capitalization schemes (credit) will generally fail, as credit is reliant upon economic growth. Investments will also have low long term yields, and the stock market will have little net growth (there will be local highs and lows, but long term investments may not be worth it).

For the Millennials (MG1 and MG2), this is actually the world that they are preparing for. Most of the wealth accrueal in the twentieth century benefited the Boomers, primarily because that wealth was generated by the petro-industrial complex (which included the financial markets, the housing markets, the security complex, transportation, and large scale manufacturing). If you look at the breakdown of the areas where the top 0.1% (that portion of the population which owns roughly 47% of the assets of the country at this stage), their fortunes skew overwhelmingly to these sectors. This is generally the end state of centralized monopolistic economies in high growth regimes. Significantly, most of those same people were born between 1939 and 1957.

As corporations decentralize, as this generation dies off, that should change. In distributed economies it becomes harder to accumulate vast wealth, and the means of commerce tends to shift into a redistribution mode. Non-petroleum energy sources tend to be distributed, and usually feed into a common energy conduit platform (in this case stored and transmitted electrical power) - more charge stations, fewer gas pumps. Regional authorities will begin to reassert their ownership (and regulatory oversight) over municipal utilities. Demand rises for higher taxation of capital gains and inheritance taxes. Much of this will be driven by MG1, who are now entering into their political primacy, and who are increasingly adept at shaping the new winners and losers in a different economic regime.

That's not to say there won't be entrepreneurial opportunities - MG1 as a generation is easily as entrepreneurial as their grandparents - but it does more likely mean that having money will be less seen as a status symbol and more as a means to accomplish specific ends - to make things happen. This makes perfect sense in a steady state economy.

Folks (Even Millennials) Is Folks

So, yes, Millennials are different, but they are different because their world is different. Their values are shaped by a common shared set of experiences, but those experiences do not by themselves define any one individual, and it is a mistake to believe otherwise. They have tools for communication, analysis and production that were science fiction bordering on fantasy when their grandparents were their age, and they know how to use them. They are the future.

Kurt Cagle is an information architect, data scientist, author and industry analyst who works for Avalon Consulting, LLC., specializing in document and data semantics, ontology design and data virtualization. He is available for consultation. His clients have included Fortune 500 companies and US and European Federal Agencies. He lives in Issaquah, Washington, where he's working on his latest novel,Storm Crow.