Are Millennials Killing the Entrepreneur? NewsWire

NEWSWIRE: 4/29/19

• Contributor Samuel R. Staley says Millennials are at least partly to blame for America’s weakening entrepreneurial spirit. Staley points out that cash-strapped, risk-averse Millennials would rather get a steady paycheck than start a company, which may be holding back innovation and business dynamism. (Yahoo Finance)
• NH: Historically, startup companies account for practically all net job growth and for a vastly disproportionate share of new products and technologies. Entrepreneurship may not a sufficient condition for a competitive and dynamic economy. But it is certainly a necessary one.
• Staley is right that entrepreneurship in America is in trouble. The U.S. firm startup and exit rates are both declining. The net firm creation rate, after plunging into the red during the Great Recession, has not since rebounded. (See charts below.) As a share of all firms, firms less than one year old are half the share (8%) that they were at the beginning of available data in 1977 (16%). (See also “Declining Business Dynamism: A Visual Guide.”)
• He's also right that Millennials are helping to drive this trend. Once again, most media pundits get Millennials totally wrong. They say that Millennials represent mainly negative social trends--but concede (at least) that they are very entrepreneurial. The opposite is closer to the truth: Millennials represent mainly positive social trends--but, in fact, they are not entrepreneurial.
• See the annual indexes calculated by the Kauffman Foundation. (Charts below.) These indexes show that, since the mid-1990s, rates of entrepreneurship have been trending up for all age brackets over age 35, but trending down for younger adults. Back in 1996, a baby-bust generation of Gen-X young adults comprised 34% of all entrepreneurs. Today, an echo-boom generation of Millennial young adults comprise only 26%. Data on geographic mobility--moving between counties or states--corroborates this decline. Mobility is highly correlated with startup activity. Over the last twenty years, mobility is down among all age brackets, but it is down the most among young adults.
• So why are Millennials not starting as many businesses? Largely for reasons we might regard as positive. They are averse to taking extreme risks. They don't want to go deeper into debt or burden their parents any more than they already have. They are trying to plan ahead carefully for the future. They don't want to make a mistake. Older Americans know the truth. You don't need to get a degree in entrepreneurship (offered today, incredibly, by so many universities) in order to start a new business. What you need to do is just be a bit crazy. The same goes for having a baby. Oh yeah. Come to think of it, Millennials are doing less of that as well.

• The graying of wealth has prompted a debate over whether senior discounts for Boomers are still warranted. The days of seniors being less well-off than their kids and grandkids are over—but defenders say the deals should remain as a reflection of their age and brand loyalty, if not their need. (The Boston Globe)
• NH: The rise and fall of the term "senior citizen" is a very generational story. (See Ngram chart below.) Though invented in the 1930s, no one used the term much until the mid-1960s and 1970s, when usage suddenly became universal. This was when the G.I. Generation (born 1901-24) was starting to reach age 65 and retire. They had been "junior citizens" during the New Deal and World War II--building dams and splashing ashore at Normandy--and now, upon retiring, they were to be honored as "senior citizens." And not just honored, but showered in federal benefits. That's also when the whole federal budget began to tilt heavily toward seniors--the creation of Medicare and Medicaid (1965), the Older Americans Act (1965), a 72% increase in Social Security benefit levels (1967-72), 100% cash benefit COLAs (1972), and SSI benefits (1974). Retailers and public agencies began showering this generation with "senior citizen" discounts--at movies, restaurants, groceries, parks, travel--in the same spirit: A grateful and now more affluent nation thanks you for your service.
• Since the mid-1990s, use of the term has been declining. That's when all the new retirees, everyone under age 70, belonged to the Silent Generation. This generation generally did what it was told, but came of age just after World War II and did not earn the same reputation for collective sacrifice. And they know it. Countless AARP surveys show that the term "senior citizen" started to fall in popularity among seniors born after the mid-1920s. ("Greatest generation" also fits them badly; maybe "nicest generation" is a better fit.) Given the rapid improvement in their income and net worth relative to younger generations (see: “The Graying of Wealth”), they also understand they are less likely to deserve these freebies on the basis of need. And many of them (today mostly in their late 70s and 80s) feel guilty about the financial hardships hitting young people--a sentiment you rarely noticed in the G.I. peers of LBJ or Reagan.
• OK, with first-wave Boomers now reaching their mid-70s, we're now hitting the next turning point. Whereas the Silent have continued to accept "senior citizen" discounts by riding (a bit uneasily) in the greatness wake of the previous generation, Boomers are making these discounts newly controversial. Boomers didn't come of age with D-Day. They came of age with Woodstock--which you might say was less about building community than tearing it apart--and younger generations sure as hell don't feel obligated to pay them back for that.
• Many Boomers are refusing to accept the discount--partly perhaps out of vanity (Boomers don't like the word "senior"; see "Senior Groups Struggle to Win Over Boomers"), but also out of discomfort at the whole idea. Meanwhile, though promoters claim the list of senior discounts is still growing, many high-profile companies are eliminating or reducing it--like Kroger, Hyatt, and Amtrak. Then again, in today's environment of personalized pricing and ubiquitous loss-leader discounting (like Groupon), it's hard to say whether "senior discounts" really represent a loss to firms at all--rather than just another way to attract affluent customers. But if you ever asked Millennials, they would tell you: Instead of a "senior" discount, why not a financial need discount?

• A new piece explores the roots of occupational segregation by gender. Despite the fact that nearly all jobs nowadays are nominally open to men and women, men still stick largely to blue-collar work and women to pink-collar work—which, the author claims, could be contributing to rising wage inequality. (The Economist)
• NH: Dramatic legal and attitudinal shifts over the past fifty years have clearly made it easier for women to compete with men in most professions. Ditto for broader access to higher education: Women have been winning more four-year BAs than men since the mid-1990s, and Millennial women are now beating out men in a growing number of master's and doctoral disciplines. Yet the bottom-line results have disappointed many feminists. Female labor-force participation, after rising steeply in the 1970s, '80s, and '90s, peaked around 2000 and has since been gradually falling. Progress on the male-female "pay gap" is also decelerating--indeed, almost coming to a stop. (See first chart below.)
• So what's holding women back? There are four basic schools of thought. The first school says it's ongoing gender discrimination: Women are still being discouraged from training or joining the highest-paid professions. (According to Claudia Goldin's "pollution" theory, many men regard the presence of women in their field as a blow to their prestige.) The second school says it's mostly about bargaining: Women do not bargain as hard as men for pay and thus get paid less for an identical job. The third school says it's mostly about life choices, specifically, child raising. Much data suggests that the biggest drop in women's earnings relative to men's occurs shortly after giving birth to kids. (According to studies in Denmark, even very generous leave policies and child-care benefits don't seem to remedy this drop.) The final school says it's mostly about professional choice: Women simply prefer to work in professions that happen to get paid less.
• It's this last school that is relevant to the Economist story. Even today, for better or worse, men and women continue to congregate in different professions. Some of the commonest occupations for women (primary school teaching, nursing, and secretarial work) are 80%+ dominated by women. And overall these professions are paid less. As the author points out, 26 of the 30 highest-paying professions in America are male-dominated; 23 of the lowest-paying are female dominated. Precisely because most of these jobs are in low-productivity growth fields, there is robust future growth in the number of such jobs. The reverse is true for men. (See our discussion of Baumol's cost disease in “The Spread of the Pink-Collar Economy” and “Male Nurses Enter the Field.”)
• Could simple gender preference have something to do with this? A growing number of studies suggests that it may. One research team points out that over a century's worth of "interest inventory" data in North America indicates that men are consistently more interested in things, and women more interested in people. (Interest in things aligns heavily with higher-paid STEM careers.) Several teams have found, in broadly international studies, that basic personality traits favoring higher pay mostly tip the scales toward men. For example, using the standard OCEAN personality factors, "agreeableness" and "neuroticism," both higher among women, disadvantage them in earnings. On the other hand, using a broader factor inventory, "narcissism," "psychopathy," and "extroversion," all higher among men, advantage them in earnings. Another study finds that "risk taking" and "negative reciprocity" are higher among men, while "altruism" is higher among women--with (perhaps) similar consequences for earnings.
• One might suppose that this personality gender gap is highest in poorer and more traditional societies--and that it disappears as societies become more affluent and gender neutral in law and attitudes. Remarkably, according to all of these studies, the opposite is true. The personality gender gap is smallest in poor and traditional countries, where most people (men and women) pursue the highest earning or most productive option available regardless of personal preference. As societies become more affluent and more choices are opened up to both genders, men and women become freer to choose whatever profession pleases them. A massive UC Berkeley study of 80,000 individuals across 76 countries concludes: "Gender differences in preferences were positively related to economic development and gender equality. This suggests that greater availability of and equal access to material and social resources for both genders favor the manifestation of gender-differentiated preferences across countries" [emphasis added].
• Personality gaps translate directly into career choices. According to one study of 44 countries, women (relative to men) are least interested in math, engineering, and natural science--and most interested in health fields--in the most affluent countries (Germany, Sweden, U.S.). The reverse is true for countries like Romania, Indonesia, and Tunisia. Similarly, to find countries with the highest female share of students studying STEM careers, don't look at Scandinavia. Look instead at Turkey, Vietnam, and Algeria. 
• Bottom line: Let's not be so certain we know where history is heading. Professional self-segregation by gender may not be going away any time soon. Indeed, it may be resurging.

• Millennials and Boomers would spend an extra $1,000 a month similarly, with both generations most likely to choose paying bills, saving, or investing it. But this doesn’t mean, as the coverage concludes, that Millennials are a carbon copy of their parents when it comes to financial behavior: While their top priorities are similar, what they want out of their investments and big purchases is very different. (Morning Consult)
• NH: This article is an object lesson in how not to compare generations. It concludes that Millennials are no different from Boomers, for example, because Millennials' personal saving rate is about the same as Boomers'. But wait, that's actually remarkable, right? That a generation whose modal age is in the mid-20s is saving as much as a generation in its 60s? What the author does not do--but ought to do--is compare today's Millennials with Boomers when they were the same age.
• The author does, at one point, admit as much and links the reader to a paper by the St. Louis Fed entitled "Are Millennials Different?" This paper actually concludes that, in some ways, indeed Millennials are. To quote from the paper's conclusion: "We showed that millennials do have lower real incomes than members of earlier generations when they were at similar ages, and millennials also appear to have accumulated fewer assets." Gee, that doesn't sound the same.
• The paper also concludes that some Millennial trends such as later marriage and child-bearing ages are "secular" not "generational" trends because, well, the same shifts also characterized young Boomers and young Xers. OK, fair enough. But my idea of a secular trend is something that lasts for more than just three generations. (The Silent Generation, coming right before Boomers, got married and had kids much younger than the prior generation.)
• Book critic Mark Athitakis argues that there hasn’t been a household-name Millennial novel because there’s no longer room for a generational spokesperson. While he attributes this shift to cultural fragmentation, it also could be that Millennials’ diverse backgrounds and embrace of identity politics resist the notion of a single “voice of a generation.” (The Washington Post)
• NH: Don't disagree. Similarly, the Lost Generation was a fabled generation of great young novelists--Fitzgerald, Hemingway, Wolfe, Faulkner, Dos Passos, and so many others. The G.I. Generation coming after them had few, with maybe the exception of John Steinbeck. And he was so painfully earnest that he may have been the exception that proved the rule.
• There is perhaps a more general pattern here. Recessive generations (Lost, Silent, Gen X) have more than their share of youthful literary talent, mostly because their irony is well suited to eras in which their generations are mostly being ignored by people of other ages.
• That irony often keeps keeps a sharp edge when wielded against other generations. Gen-X novelist Bret Easton Ellis (born in 1964), who once took on Boomer yuppies, is now in his latest novel taking on Millennials. "Generation Wuss," he call them. He doesn't much like "the threatening groupthink of 'progressive ideology,'" either. Keep those youngsters in their place, Bret!
• The share of U.S. population growth attributable to immigrants rose to 48% in 2018, up from 35% in 2011. With the population aging and fertility rates at record lows, the importance of immigrants to population growth is likely to continue rising steadily even as government officials campaign to close our borders. (The Wall Street Journal)
• NH: I covered precisely this point in a recent podcast, so I won't elaborate on it here. Let me just add, first, that net immigration is declining at the same time that fertility is declining and Boomers are retiring. It's just that immigration is declining less steeply. And second, the decline in net immigration has little to do with Trump's close-our-borders campaign. It has a lot more to do with changing demographic trends in Latin America.
• The rise of texting as a form of workplace communication has led to some embarrassing faux pas, mixups, and autocorrect mistakes. At the heart of the debate on workplace texting lies a generational divide: What younger workers see as efficient and team-building comes off to many older managers as entitled and unprofessional. (The Wall Street Journal)
• NH: Lots of adjustment still needed. (See: “Don’t Call Us, We’ll Text You.") My favorite was the worker who texted his boss, "I'll call you in a sec"--which was autocorrected to "I'll call you for sex." Oh well!
  
• WHO has issued its first-ever guidelines on screen time for children: none for infants under 1 year old, and no more than an hour a day before age 5. This move lends new energy to the burgeoning push to limit screen time for kids, though some experts are already calling the limits too draconian for modern life. (World Health Organization)
• NH: The WHO recommendations are mainly framed in terms of avoiding sedentary activity and obesity in young children. But IMO a bigger issue (which we pointed out several years ago; see: "No Touching! (Except if it's an iPad)") is the importance of tactile and kinesthetic learning in the lives of toddlers. Parents who work at digital firms--and send their kids to Waldorf and Montessori Schools--already understand this. (See: "Silicon Valley Parents’ War on Screens.")
• The traditional funeral is continuing to lose ground to alternatives like memorial celebrations and “green” burials. Both a less religious public and changing tastes among Boomers are upending the death care industry, with funeral homes trading drab parlors and stuffy ceremonies for destination locales and upbeat celebrations of life. (The Washington Post)
• NH: Morticians and parlors are struggling frantically to put the "fun" back in funeral. Once the Silent Generation passes away, one wonders who will continue to support the fine arts and museums... and who will continue to visit and care for the nation's cemeteries. (See “Is the Death Care Industry Dying?” and “Did You Know? Take it to the Vase.”)
• New research finds that 34- to 36-year-old Millennials are less healthy than Xers were at the same age. Millennials have a higher prevalence of eight out of the top ten health conditions compared to Xers, with the biggest differences occurring in hyperactivity (up 37% among Millennials), type II diabetes (up 19%), and major depression (up 18%). (Blue Cross Blue Shield)
• NH: It's disturbing to see such a large increase in health problems over just three years. The study compares the last few cohorts of Gen X at age 34-46 in 2014 with the first few cohorts of Millennials at age 34-36 in 2017. Clearly, rising obesity rates are driving much of this increase. The lowest health scores for Millennials are in the southern and Appalachian states--which matches obesity rates pretty closely. (See also "Millennials at Higher Risk for Obesity-Related Cancers.")
• We have often argued that worsening chronic health conditions among Boomers and Xers relative to earlier generations at the same age may suppress future gains in life expectancy. (See: "The Future of Longevity.") Despite all of the end-of-aging hype, these trends are leading the Social Security Trustees to slow--not accelerate--their projections of future declines in age-adjusted mortality. Now we are learning that this negative cohort-related shift may extend to Millennials as well.

DID YOU KNOW?

Could Teens Save the U.S. Shopping Mall? We’ve written before about the demise of U.S. shopping malls. (See: “Is the Shopping Mall Fated for Extinction?”) Property developers have even begun refashioning dilapidated mall lots into multipurpose spaces. (See: “Did You Know? Dying Shopping Malls Get a Second Life.”) But malls may survive after all—if today’s teens get their way. New research shows that around 95% of “Gen Zers” visited a physical shopping center at least once during a three-month stretch last year, compared to 75% of Millennials and just 58% of Gen Xers. What’s more, fully three-quarters of these Gen-Z shoppers said they prefer the brick-and-mortar experience. Mall occupants know what’s at stake, and many are going all out to attract young shoppers. Clothing retailer American Eagle is betting on customization: Shoppers can get jeans embossed, modified, and colored right at the counter. Earlier this month, Macy’s rolled out “Story,” an Instagram-worthy store-within-a-store concept featuring bright colors, impressive displays, and unique products. Mall vacancy rates, currently hovering near 10%, present ample opportunity for a forward-thinking retailer to remake the shopping mall in the image of Gen Z.