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How to Make it as a Millennial

The New 30-Somethings (came to my attention courtesy of a good friend).

This article is great. It ties together a lot of things I’m personally interested in. Stagnating wages, the residue of the great recession, intergenerational wealth, insane real estate prices, student loans, the cost of lower-education, and parental dependence.

The informal synopsis is that millennials are fucked because they are encountering all of these things at once. The paradigmatic millennial took out student loans to attend college, graduated in the midst of the great recession, has seen no real growth in wages, lives parsimoniously in NY, LA, SF, etc… can’t afford rent, is raising a kid, can’t afford preschool either, but scrapes by on the assistance of their boomer parents. ‘Rental financial assistance allows them to purchase real estate and maintain a high-ish standard of living when traditional financial life milestones like paying off student loans or putting a down payment on a house would otherwise be unachievable.

Here are a few of my favorite quotes:

As one economic analysis concluded recently: “For Americans under the age of 40, the 21st century has resembled one long recession.”

[…]

On average, each millennial parent receives $11,011 per year in combined financial support and unpaid labor, the 2017 TD Ameritrade Millennial Parents Survey found, for an annual total of $253 billion in America.

[back of the napkin math reveals this to be ~2.2% of GDP]

“Education is incredibly expensive and keeps going up, but grandparents feel very strongly about their grandchildren having a good education,” said Dana Haddad, who runs New York Admissions, an education consultancy that works with children starting at 10 months.

10 months!! The rat race is starting earlier and earlier. The article doesn’t push this point, but I believe it’s the case we can attribute much of the competition and insanity surrounding American higher education to the financial insecurity faced by recent college grads. The plight of the millennials makes this extra salient.

While it’s true that families with means have always helped their children (discreetly or not), what’s different today is that as the economy has more extreme gyrations and wages flatten, family wealth plays an outsize role in helping people get ahead, said Chuck Collins, a scion of the Oscar Mayer food corporation and the author of “Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good.”

Sudden, unexpected gain in respect for a sausage heir.

So last year Ms. Alvarez’s parents surprised her with a $50,000 cash gift to help with a down payment on a $435,000 condo three blocks from the beach in San Diego. “I grew up middle-class, and my parents immigrated from Cuba,” she said. “They saw that I’ve worked hard but also that I had the bad luck to graduate into the 2008 recession

Millennials aren’t lazy. They’re just unlucky to come-of-age during a recession and but are fortunate to have parents that earned when there wasn’t one.

[these transfers of wealth] create a distorted idea of what it takes to attain success and what financial milestones are actually achievable if you are starting from zero or less.

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If this article isn’t terrifying, you either have a boomer parent or are majoring in CS/engineering. We’re becoming more financially dependent on our parents than we’ve ever been. Beyond the economic woes the article directly addresses, I see this as threatening the supposed autonomy in young adulthood that is necessary to establish a complete person.

Being bankrolled by your parents is nice, but it comes at a cost to your agency. How can you really develop your own thoughts/opinions if you need to make nice with your parents so they’ll pay your way through school? How can you truly explore your interests if there is financial pressure to pick a high-paying degree? In a more extreme case mentioned in the article, how can you ensure the best education for your child if your parents are footing the bill for their tuition?

A perpetual antagonistic relationship with your parents is bad, but if you’ve never really pissed them off I maintain you’re doing something wrong. Economic freedom is necessary for our development as autonomous, responsible agents. Young people taking risks in their 20s also fuels economic growth, raising the general standard of living and creating enormous wealth — problems of distribution aside.

This article’s prognosis is grim. It’s easy, and even rational, to read this as a student and decide to double down on academic competition and credentialsim to ensure your financial security. Yet, it doesn’t have to be like this. I am idealistic, but also optimistic. A solution should be reachable, but currently it is a mystery to me.

Fair division problems

NPR Planet Money Episode on fair division problems.

These problems have always interested me. Part of the reason I’m taking some economics classes to supplement my Philosophy is that I’m interested in how the systems we use to divide resources “fairly” work in the real world. When there are limited resources, who are the people that get them and do they deserve it?

I would have liked the episode to get a little into how the mathematicians that study fair division classify a particular solution as “fair,” especially since they hint that they intent to leave a rigorous explanation of the term to the Philosophers.

The main issue in the episode is how to divide the limited dock space in Santa Barbara between the wealthy and those who need it to earn a living, but I’m curious why they don’t just expand the dock. This is a bit of an econ 1 answer, but if the price of a space is $100,000 like the episode reports, shouldn’t this be a signal to the city that they can build more and people would be willing to pay? I understand municipalities aren’t in the dock construction business, and there may be environmental concerns (preserving the natural beauty of the coast, dock is already as large as it can get, etc…), but in theory we can use market forces to get the price lower rather than relying on what might seem like contrived schemes.

The episode is also worth checking out for the “rental harmony” problem. A guest speaker, Constantinos Daskalakis, gives a pretty concise summary of an ingenious potential solution.

MALONE: Costis says imagine that you've got an apartment with two bedrooms. One of those bedrooms is big, but it has no closet.

HERSHIPS: The other is small, but it does have that magical closet space.

DASKALAKIS: That's right. And how do you split the rent? Maybe you know, I value a small room that has a closet, but you value more a big room that - because you like space.

HERSHIPS: I'm taking the closet.

MALONE: Yeah, I don't need the closet. It's fine. I wear the same jeans every day for two weeks in a row. I don't need the closet.

DASKALAKIS: OK. Thanks for sharing (laughter).

MALONE: Yeah, you know.

DASKALAKIS: So like, yeah. So the question is, you know - who gets what? What's the allocation? But also, how is the rent split?

MALONE: So what is the protocol here? Costis says, well, let's say the rent is 2,000 bucks. First thing, everybody needs to figure out what percentage of the rent they think each room is worth.

DASKALAKIS: Maybe for you, two rooms are equal. But then for Kenny, big space is so much more valuable that he says, look; you know, I don't care about the closet at all. I don't even have clothes. OK? So what I care about is the space. So...

MALONE: I have some clothes. I just was saying that I wear the same pants. I have clothes. OK. Go ahead, though.

(LAUGHTER)

DASKALAKIS: So the protocol that we use with my roommate was - and it's a classical one. Each of the two roommates, in a sealed envelope, writes what they consider to be the right split - what do they consider to be the right values of the two rooms.

HERSHIPS: You guys actually did this?

DASKALAKIS: We did that, yeah.

HERSHIPS: Is he also a fair division guy, your roommate?

DASKALAKIS: So he's also a mathematician.

HERSHIPS: Just checking.

DASKALAKIS: Now, you know, we get together, and we open those envelopes.

MALONE: And when they opened those envelopes, they found out that Costis' roommate thought the person with the big room should pay $1,400 and the person with the smaller room with the closet should pay 600 bucks. But Costis, he valued both those rooms equally. He was willing to pay $1,000 for either room.

HERSHIPS: And in case you haven't been following along with a calculator, each roommate's total bid for both rooms has to add up to $2,000.

DASKALAKIS: So he valued the big room more than I valued the big room.

MALONE: Yeah.

DASKALAKIS: On the other hand, I value the small room more than he values the small room. So each of us gets the room where they're the highest bidder. However, how much do we pay? We pay the average of the two prices.

MALONE: Yeah.

DASKALAKIS: So for the big room, he said 1,400. I said a thousand. So he gets it, but he pays 1,200. So he's happy. Right?

HERSHIPS: And Costis pays 800 for the small room, and he's happy because he was willing to pay a thousand.

DASKALAKIS: So everybody's happy, no?