Do you suspect millennials are better off than they think?
PUBLISHED: 14:05 04 March 2018
Are love and affection as valuable as an extra few quid in your pay packet?
We’re sometimes considerably better off than we think. I don’t necessarily mean financially either, but in other, indeterminate, respects: from the love of your family to the blessing of good health. But how do you apportion value to a string of what might be called ‘intangible assets’ – a list that would include education and experience?
Clearly, you cannot; and although better-qualified and more experienced people tend to command higher salaries, you could make a good case for suggesting that the love and affection provided by a stable family home is at least as valuable as an extra few quid in your pay packet.
In response, cynics may invoke the lines to Money, once belted out to great effect by John Lennon:
Your lovin’ gives me a thrill,
But your lovin’ don’t pay my bills,
Now give me money...
Technically accurate, perhaps; yet without also having a collection of personal ‘intangible assets’, the lines ring pretty hollow.
Which brings me on to Millennials, the apparently immature, easily offended, entitled generation who seem to be the butt of significantly more criticism than they deserve. They’re young people finding their way in the world; I don’t expect a 20-year-old to know much about life, but I do expect him or her to be capable of arguing that what they do know is valuable, even when it isn’t.
The immediate Sharkey family’s offspring, including that of my wife and myself, is very well stocked with Millennials; in fact, with one exception (she’s 17) they’re all aged between 18-32, so we get to hear plenty of moans regarding student debt, the unfairness of internships, the difficulty of exams, ‘zero-hours’ contracts and the prevalence of ‘stress’, none of which, I’m advised, existed before.
They all did, of course, with the possible exception of internships, although frankly, if you’re prepared to work for nothing in the hope of doing something more productive than making tea, you probably need to cast your net a little wider across the employment sea.
The predictable moans of a younger generation taking their first tentative steps into the big wide world have been repeated ad nauseam for centuries. Nor is the list of gripes any longer. Impatience is perhaps the most common characteristic that links Generation Y with that of similarly-aged folks throughout history. Everyone maintains they should be earning more money than they do when they’re 20-something; everyone hates doing
those lousy jobs specifically allocated to junior members of staff, everyone hates paying rent and every 20-something believes they’re better educated than their boss.
Almost all adults experienced something similar during their early working years, which is why those of us sporting plenty of grey hair must take the Millennial moans with a pinch of salt and get off their backs. Why? Because we were the same!
However, while impatience is a trait common to those keen to move on in life, the earlier they recognise that they possess a hugely valuable intangible asset, the better. Furthermore, while it’s an asset older folks would love to have, it’s something they cannot buy.
‘Human capital’ is a phrase popularised by Gary Becker, an economist working at the University of Chicago.
It refers to the stock of experience, knowledge, personal attributes, social and a host of other skills we gradually accumulate which enable us to ‘sell’ our labour to an employer in order that we may produce economic value, ie payment, in return. Millennials have plenty of time to build the value of their human capital which, from a savings and investment perspective, is very good news indeed.
According to a recent report published by Accenture, the current Millennial generation is the largest in history; within two years, they’ll account for half the world’s workforce. You don’t have to be Einstein to realise that a cohort of this size will exert significant influence upon financial markets and across the investment landscape for decades to come.
Moreover, in addition to the ‘economic value’ they create themselves, Millennials can expect to inherit further wealth from their (comparatively) well-heeled baby boomer parents and grandparents, irrespective of the fact that the value of those inheritances may be reduced as a result of increased baby boomer longevity.
Though the report found that Millennials “have a deeper commitment to sharing wealth”, it’s fair to say that every generation of 20-somethings that has ever lived would display a similar commitment. More interestingly, Accenture discovered that Millennials readily acknowledge they must learn about investment, even though they display traits which make them “more risk averse than…baby boomers.”
All of this is quite predictable, but the most valuable aspect of human capital is time. Millennials are at least as well educated as their parents; they enjoy the benefits of a technology boom that began in the 1960s and can expect to inherit some money, perhaps a house and who knows what else. What they cannot expect to see is a state retirement pension. They’re as well forgetting about that now and start making their own provision. This is where time is so valuable; they have time to make slightly riskier investments because if they fail or make mistakes, their cumulative human capital will enable them to get back on track again.
In short, Millennials are much better off than they sometimes believe; perhaps it just needed someone to remind them.
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Peter Sharkey read economics at the University of Bristol. He worked as an accountant on three continents and has been a company director and investor for more than 30 years, building and selling three different companies.