Academic journal article Monthly Labor Review

Not Fun for Young and Old Alike: How the Youngest and Oldest Consumers Have Fared in Recession and Recovery

Academic journal article Monthly Labor Review

Not Fun for Young and Old Alike: How the Youngest and Oldest Consumers Have Fared in Recession and Recovery

Article excerpt

Recessions are disruptive by nature. While affecting all consumers, the oldest and youngest consumers are particularly vulnerable. For example, older consumers may have limited assets to start, and little opportunity to recover, from market volatility. Younger consumers also tend to have limited assets and increased difficulty finding a job during economic downturns. This study examines how the youngest (under 25) and oldest (75 and older) consumers fared during the onset of, and recovery from, the recession of 2007-09. Using data produced by various U.S. Bureau of Labor Statistics programs, such as on unemployment, prices, and consumer expenditures, these groups are compared with each other, to see who fared worse, and with those in the middle (ages 25 to 74), to see whether those older or younger experienced more or less severe consequences than the bulk of the U.S. population.

The bottom of any business cycle is difficult for all consumers, but the oldest and youngest can be particularly hard hit. Older adults, especially retirees, often rely on accumulated assets, such as savings or stocks, the values of which are usually negatively affected. [1] They also have trouble entering or reentering the workforce to supplement diminished assets, even if they do not suffer poor health or face mobility or other constraints that limit or preclude their ability to work. For young adults, a recession can have much longer lasting consequences. For example, young adults have more difficulty than usual entering the workforce or maintaining a job held at the onset of a recession. Any delay in employment can reduce asset accumulation over their lifetimes. And young adults today may be even harder hit than in previous generations because they carry more student loan debt, on average, than previous generations of young adults. [2] At the same time, results of the Consumer Expenditure Surveys (CE) [3] show that the youngest consumer units [4] (those with reference person [5] under 25) and the oldest consumer units (those with reference person 75 or older) have, on average, smaller family sizes than those with reference person ages 25 to 74. [6] Accordingly, there tend to be fewer other adults within the consumer unit on whom to rely for mutual support.

This article analyzes expenditure patterns for three age groups: consumer units with reference persons under 25 years old, 25 to 74 years old, and 75 and older. CE data are examined to ascertain how these groups fared from 2004 through 2015 (hereinafter referred to as "the study period"). This period is particularly interesting because it included both a housing bubble (i.e., a period of rapidly increasing housing prices) [7] and the economic slump popularly known as the "Great Recession." During the housing bubble, there was continuous economic growth [8] and increasing wealth, as measured by housing prices. [9] According to the National Bureau of Economic Research, the recession lasted from December 2007 through June 2009. [10] While the previous recession started and ended in 2001, the study period begins in 2004 because this is the first year for which incomes were imputed in the CE, so the data presented in all figures are consistent for the periods covered. [11] Also, the 2004 start point allows one to examine, among the three groups, interesting trends observed during the peaking of the housing bubble. The study period ends in 2015 because this was the most recent year for which CE data were available at the time this article was first drafted. In this article, expenditure patterns for the three groups are compared in order to determine whether the effects of the recession differ by age groups or whether these groups have experienced similar changes to their well-being.

For this article, groups are categorized by age rather than by generation (e.g., "Millennial" or "GI" generation) in order to maintain consistency over time in the comparison. The expenditures studied are selected from tabular CE data available online to provide information about consumer well-being. …

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