Are Millennials Blowing Their Money on Luxuries?
Millennials, despite the fact that many are strapped for cash, are still prioritizing luxury goods, at least according to a report released in February by American Express Business Insights. According to the report, in 2011, Millennial consumers increased their spending on premium luxury fashion by 33%, outpacing every other demographic. This means that although Millennials aren’t the demographic responsible for most luxury purchases — that particular honor is reserved for Boomers — they are buying more and more luxury goods every year.
This doesn’t mean, however, that all Millennials are upping their spending on luxury items. Given their financial situation, many simply can’t afford to. A new study from the Economic Policy Institute reveals 2000 and 2011, the wages of young college graduates dropped 5.4%. And most of this wage loss cut into women’s paychecks: EPI reports that over the 11year period, wages fell 1.6% for men and 8.5% for women. Today, average hourly wages for young female graduates are 13.9% less than the average hourly wages for young male graduates.
Add to stagnant (or falling) wages the mountain of student debt that many young graduates are carrying, and it’s hard to imagine that large numbers of Millennials are being profligate with their earnings. Instead, it’s more likely that the American Express study is capturing the behavior of a small subsection of Millennials who are, indeed, upping their luxury purchases. Many of these Millennials likely have support from their parents (anyone who has seen the new HBO show “Girls” is aware of this Millennial stereotype), and others may be racking up credit card debt. After all, this study was conducted only among Millennials who have American Express cards. And still others could be, as the American Express study authors acknowledge, “affluent young professionals willing to splurge on discretionary items without thinking about the long-term consequences.”
There’s no question that Millennials need better financial education. Take this new study from Iowa State University, which found that 40% of ISU students underestimated their student loan burden, while one in eight didn’t even realize they had debt, but blaming Millennials for luxury spending for which, in all likelihood, only a small minority is responsible seems a bit extreme.
Photo Credit: Andres Ruedar