By now we’re all familiar with the plight of the millennial generation, those born after 1980. They owe the bulk of America’s $1 trillion in student debt. They have little or no savings. A third still live at home with their parents. Those with jobs are often underemployed and underpaid. Not only have they delayed the typical trappings of adulthood—marriage, home, kids—they may be stuck in perpetual adolescence.
Millennials do have one big thing going for them: numbers. At 4.3 million, 23-year-olds are now the single largest age group in the U.S. According to U.S. Census data, there are more people in their twenties (44.5 million) than in their thirties (41 million), forties (41.7 million), or fifties (43.8 million). This is good news for twenty-somethings, who will benefit from their overall size through the economic growth they’ll create. It’s even better news for the economy, which will need every penny of taxes they pay and consumer demand they generate to offset the impact of 70 million baby boomers entering retirement. “The tragedy is that these young people will have to carry the enormous burden of the retiring Baby Boom for the bulk of their working lives,” says Milton Ezrati, senior economic strategist at the investment management firm Lord Abbett. Without them, though, the future would be dire. “They will mitigate what would otherwise be a much greater strain on the economy.”
If not for this bulge of young people, the U.S. would look a lot like Japan and Europe, which both lack a relatively large number of young adults to offset graying populations. While all three had Baby Booms after World War II, only the U.S. saw its birth rate increase in the 1980s and ’90s after two decades of decline. “This youth bulge is what makes the U.S. special right now,” says Torsten Slok, chief international economist at Deutsche Bank (DB). “Though they may not be as well-off on an individual basis, their sheer size will help overcome that. The simple act of adding more workers will by itself create more wealth.”
The last time the U.S. had this many young people primed to enter the labor force was in the early 1980s. In 1983, 4.3 million 23-year-olds were about to start their careers. Their timing was perfect. The U.S. was emerging from a deep recession, and businesses needed the cheap labor of all those young workers. Over the next 20 years, as these boomers progressed through their careers, buying cars and homes and investing in the stock market, they fueled the longest peacetime expansion in modern U.S. history. From 1983 to 2000, the U.S. economy grew at an average pace of 3.7 percent a year, largely as a result of boomer-driven consumption.
While boomers rode the momentum they created, they also spent their lives competing with one another for scarce resources. In school, this meant crowded classrooms. At work, this eventually translated to lower wages, says William Emmons, an economist at the Federal Reserve Bank of St. Louis. The real economic gains created by the boomers appear to have accrued to the older, smaller Silent Generation, born during and just after the Great Depression. These were the people who managed all those young workers. As a result, the Silent Generation benefited from higher wage gains.
Today’s 23-year-olds are starting their work lives in a weaker economy than the one the boomers entered. Yet they are better off than older millennials who graduated from college in the worst of the recession. While today’s economy isn’t great, it’s certainly better than it was a few years ago. “By and large they dodged the bullet,” says Emmons. “I’m actually very optimistic about the prospects of today’s 23-year-olds.”
There’s already evidence that those in their early twenties are faring better than those a little older. After three years of declines, the median household income of a 22-year-old born in 1991 jumped to $30,000 last year. That’s 5 percent more than what those a year older than them were making when they were 22. The unemployment rate for 20- to 24-year-olds is still 11 percent, but that’s down from 13 percent two years ago. They’re not crushed by debt. Says Emmons: “The data suggests that the younger millennials have been the most aggressive at avoiding and paying down debt.”
Astrid Schanz-Garbassi, 23, graduated from Middlebury College in 2012. She works at Turntable Health, a health-care startup in Las Vegas. Money doesn’t worry her. She says she’s “financially conservative: I don’t eat out, I’m not buying new things often. Money’s not my first concern when I think of what I’m going to do next.” She’s more interested in finding a career she likes. “There are billions of different jobs out there. You feel kind of obligated to find out what they are.”
Philips is an associate editor for Bloomberg Businessweek in New York. Follow him on Twitter@matthewaphilips.
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