Samuel Garner went to college fresh out of high school, and, like so many others, uncertain about his career path. As an 18-year-old he had very limited financial literacy and no practical experience managing his money. He graduated four years later with a degree in music performance, owing over $200,000. He started his adult life in the red—and, much more importantly, with very little means of working his way out of that crushing debt.
Sam is far from alone. 40 million Americans now owe a total of $1.2 trillion in student loan debt. Additionally, the Luxembourg Income Study suggests that adults in the developed world born between 1980 and the mid-1990s—the so-called “Generation Y”—are less capable of achieving the living standards that their parents and grandparents had at the same age. Young adults in many countries earn 20% less than the national average wage, whereas in the 1980s and 1990s the same age group typically earned more than the average.
At stake is not simply Generation Y’s independence and capacity to achieve security in their adulthood, but the economic and social stability of the developed world.
Who (or what) is to blame for Millennials’ difficulties?
According to the Luxembourg Income Study, Generation Y’s failure to attain the markers of middle-class adulthood is not due to laziness, idleness or lack of direction, but to a lack of employment opportunity, heavy debt, and inflated housing costs, all of which conspire to depress Generation Y’s incomes.
It’s a serious problem, but hardly a new one—and, given the abundance of structural impediments to Millennials’ social mobility, rather than behavioral factors, reflecting on “the underclass” debates of the 1960s, 70s and 80s offers valuable lessons about Generation Y’s capacity for attainment.
The theory of the “cycle of poverty” and self-belief
In the mid-twentieth century, sociologists, anthropologists and policy makers became fixated upon understanding what they described as the “cycle of poverty”—why certain social groups tended to remain trapped in poverty from one generation to the next. From the beginning of this discussion, researchers debated whether behavior or structure were at the core of cyclical poverty.
American anthropologist Oscar Lewis defined the behaviorist school when he introduced the “culture of poverty” theory in the late-1950s. Lewis studied deeply impoverished Mexican and Puerto Rican communities and proposed that certain cultural habits and shared qualities prevented members of these communities from attaining higher social status.
Lewis claimed that feelings of social marginalization and powerlessness, as well as a parochial perspective lead impoverished groups to feel alienated from mainstream society and lack a class identity. As a result, Lewis argued, they do not believe that it is possible for them to achieve a higher status and so they lack ambition to try and adopt risky behaviors that make it difficult for them to excel.
The shocking similarities between “the Underclass” and Generation Y
By blaming the victims of poverty for their misfortune, Lewis provoked angry backlash. His opponents insisted that structural causes and not culturally ingrained values or behaviors deprived the desperately poor of opportunities for social mobility.
Swedish sociologist Gunnar Myrdal first introduced this concept in his 1963 book The Challenge of Affluence. In Myrdal’s definition, isolation from the labor market was the central characteristic that distinguished an “underclass”.
American sociologist William Julius Wilson coupled Myrdal’s economic examination with the structure and culture of racial segregation to investigate why black Americans had limited access to employment opportunities. He argued that, as industrial jobs became mechanized and outsourced to other countries, and the United States shifted towards a service economy, African Americans became trapped in urban ghettos more than any other demographic group due to both the lack of jobs and the lack of housing created by racist practices.
This intractable poverty experienced by African Americans was created by social and economic forces, not by a culture that rejected higher ambition. Yet, critics continued to contend that individual failings were to blame.
It’s useful to study the definition of an “underclass” in this way as Generation Y is in a comparable predicament. Elder observers—who rose to maturity at a time when there was were more opportunities for credit, low-interest mortgages and high-paying employment—insist that Millennials’ failure to achieve results comes from their own aimlessness and poor decisions, not a failure of democratic capitalism.
Wilson would presumably suggest that, in order to help young people (and society) towards a better future, we need to accept that not all young people’s failings are due to their own negligence—and that limited access to high status, high paying jobs might also be playing a part.
Does education automatically equal a better life?
Throughout the developed world, various social groups cherish the ideology that hard work, ambition, and education can overcome structural hurdles. Indeed, this belief is crucial to a free society that purports to value equality.
Educational attainment is a marker of civility and, it is hoped, provides the means for achieving a higher social status.
Yet, sociological research indicates that structural factors cannot be so easily overcome by diligently hitting the books. American sociologist Reverend Jay Macleod’s Ain’t No Making It is an ethnographic study of two groups of boys who were raised in the Clarendon Heights housing projects.
One group, the Hallway Hangers, rejected the belief that hard work will lead to personal achievement. They followed the least rigorous academic track and many dropped out of high school early. The second group, the Brothers, committed themselves to doing well in school, and believed that their efforts would lead to upward mobility.
Yet, both the Hallway Hangers and the Brothers were unable to escape poverty. Dogged by racism, lack of job opportunities, unobtainable higher education premiums, ineffective social welfare options, crime, drugs and alcohol, both groups of boys remained mired in poverty. The Brothers’ hard work and educational success did not promote them to a better life.
What Generation Y’s stagnant status means for the future
If, as Macleod suggests, schools are not a guaranteed pathway to social mobility, but instead serve to validate and perpetuate class structures, then leaving education for the workforce is a particularly daunting proposition for Millennials, who bought into the achievement ideology that rewarded their parents, and have rung up substantial college debt in the process.
The situation is only worsened by the lack of opportunities available for these highly-educated college graduates. And with debt payments and low-paying or no jobs, as well as the prohibitive cost of housing, one of the greatest markers of middle-class adulthood—homeownership—is all but out of reach.
This means that developed countries will suffer flagrant inequality as the capacity for young adults to acquire a secure competence will depend in large part on their family’s wealth, property and position.
Home ownership in a rising property market is one of the most important ways in which ordinary wage earners in developed economies become investors and, eventually, create inheritances for their children. This is a crucial point because, over time, obstacles to homeownership will worsen the divide between the haves and the have-nots. As French Economist Thomas Piketty warns in Capital in the Twenty-First Century, global capitalism has created an economy in which inherited wealth grows a lot faster than earned wealth.
As a result, the potential for aspiring young adults to escape their college debt and buy their own homes increasingly diminishes, while their more affluent peers will gain financial security from the increasing value of their parents’ estates.
If Piketty is right, the meritocratic societies that idealize equal opportunity and defend the idea that we get the lives we work for and deserve are heading for trouble. If it’s inevitable that return on capital will significantly outpace the general rate of economic growth over the long run, then only punitive taxation of the sort that largely disappeared during the 1980s can prevent the sort of rise and rise of inequality that allows rigid social demarcation to develop and aristocracies to grow and self-perpetuate. And that implies that capitalism itself is built upon a troubling paradox embedded in capitalist democracies that cannot be counteracted by hard work and higher education alone.
Piketty’s suggestion of a global wealth tax might seem drastic, but to reduce the inequality that will ultimately decide the fate of the developed world, is it worth considering?