The 30-year-old living in his mom’s basement has forever been both the unfortunate target of Hollywood humor and the poster child for irresponsibility. For all the jokes circulating over college graduates moving back home, “boomerang kids” are a symptom of a larger national issue involving increasing costs of living amplified by an inadequate job market.
Reasons Millenials are Moving Home
Millenials are on track to become the most educated generation in United States history. In 2010, 90 percent of high school-aged Millenials expected to pursue higher education, and 70 percent of college-aged Millenials were in school or planned to return for their bachelor’s degrees. Despite the high levels of education, in March 2012, 36 percent of Millenials (aged 18-31) were living at home. In addressing this number, the first question to ask is why so many college graduates are backtracking to the nest rather than continuing forward into full financial independence as previous generations have.
The goal of post-secondary education for most is access to higher-paying jobs upon graduation, and yet graduates are unable to find jobs to sustain basic living expenses, including rent. Many graduates are forced to accept low-paying jobs or internships out of college despite advanced degrees and years of specialized study.
Carl Van Horn, founding director of the Heldrich Center for Workforce Development at Rutgers University, expressed this discrepancy: “Employers are taking college grads over high-school grads, but paying them high-school grad wages.”
And if they are paid as such, they are forced to live as such. College students accept loans with the understanding that their debt represents an investment: higher education will streamline them into a higher-paying job, and the loans will pay themselves off over the years.
Seventy-one percent of the national class of 2012 left college in debt and, of those graduates, they entered the workforce facing an average debt of $29,400. Today, that number sits closer to $33,000. Moving back home thus appears less of a choice than a necessity for more than a third of graduates, despite the assumption that the ticket to financial stability and independence is a college degree.
College Major a Crucial Decision for Future Employment
The age-old parent’s phrase, “You can be whatever you want to be,” is still true. You can indeed be whatever you want to be, at a cost — today, only a small selection of degrees lead to profitable careers, with the rest leading largely to lower-level jobs. In 2013, a team of market analysts and researchers at the University of California, San Diego released their fourth annual Top Ten Hot Careers for recent and mid-career college graduates. Nowhere on the list were doctors or lawyers, and sliding in at tenth was employment as an insurance sales agent. Unsurprisingly, software engineering stole the top two positions, with app development and software tying for first place.
Interestingly enough, these jobs were not listed as “hot” because of pay scale. Each won its position based on the number of jobs available for that particular field, demonstrating a shift in importance from adequate wages to the likelihood of being hired at all.
The overall 2013 unemployment rate for recent graduates was 7.9 percent. According to the National Association of Colleges and Employers, those lucky enough to find salaried employment earned an average starting salary of $45,327, an increase of 2.4 percent from the previous year. Average debt rose from 2012 to 2013 by almost the same amount.
This isn’t necessarily surprising: the most recent national average unemployment rate stands at 6.3 percent. However, a study by the Center for College Affordability found that the jobs college graduates are landing are not the jobs they expected. Almost half of those recent graduates are in jobs that the Bureau of Labor Statistics suggests require less than a bachelor’s degree. To make matters worse, number of college graduates is projected to grow by more than 31 percent by 2020, a rate more than double the 14.3 percent increase in jobs that require bachelor’s degrees.
Further complicating the issue, employment as a software engineer requires specific training and a particular major. A major in biology won’t help you find a job as an application developer without a specialized skill set in computer science, even if you have a great concept for an app that utilizes your knowledge in the biology field. For English majors: journalism has not made the Top Ten since 2010. Indeed, researchers have found the subset of graduates with degrees in accounting, engineering or computer sciences are more successful in finding college-level work than those who pursue the humanities. The rest face mal-employment at best, and unemployment at worst.
College Grads Denied Acceptance into Housing Market
Colleges make it very easy to borrow money, but the economy isn’t making it easy to find a job out of college that can cover both loan debt as well as basic living expenses. Necessary incidentals such as food and car payments cannot be avoided, and, as boomerang kids are demonstrating, the first thing to go is often independent housing.
The Bay Area attracts college graduates from across the country, from software engineers seeking the Silicon Valley to artists inspired by the region’s diversity. The median price of homes listed in San Francisco currently stands at $900,000. While this is impressively disconcerting in its own right, most college graduates today aren’t buying homes, so it is more relevant to speak of the economics of apartment rentals. In January 2014, the median cost to rent a one-bedroom apartment was $2,813 per month. Putting the median aside, to afford even a fair-market-rate apartment of the same size, the National Low Income Housing Coalition determined one would need to make $29.83 an hour.
Oakland, often considered the affordable alternative to San Francisco, saw a 15 percent increase in rental prices from Q1 to Q4 in 2013. As of Q4 2013, an apartment there had a median price tag of $1,600 per month. It continued to rise 6 percent through Q1 2014 and shows no sign of slowing.
To rent in Oakland, the average 2013 college graduate would have to devote 42.4 percent of his or her yearly salary to housing payments. To live in San Francisco, that number skyrockets to 74.5 percent. Budgeting specialists suggests individuals set only 33 percent of their yearly salary aside for housing. And according to housing website Lovely, landlords in most cities require a tenant’s monthly income be 3 to 4 times the rent price.
The numbers are the same in Chicago, Boston, New York and Washington, D.C., and it doesn’t help that most college-level jobs are found in these urban areas. Given the exorbitant cost to rent in those areas, it comes as no surprise that independent housing is written off as unaffordable. As housing in metropolitan areas becomes less attainable, the average graduate is thus less likely to move. The issue this presented is one of intellectual immobility — graduates are financially unable to move away from home and are thus confined to the jobs available in and around their hometowns. For those fortunate enough to have family in large cities, this is not a concern. For those who moved out of small towns to attend college, the job outlook is harrowing.
Indication and Threat of Long-Term Economic Stagnancy
While parents may be thrilled to have their children back home for a short visit, there is a long-term threat that boomerang kids are exposing. By removing the space in their budgets for housing, college graduates face delayed economic maturity. Their disinclination to make larger purchases is backed by concerns of retaining solvency, a legitimate apprehension given the 5-figure debt saddling the average college graduate. Public reluctance to spend has wider ripple effects, and as college graduates devote more of their income to repaying debt rather than making purchases, the manufacturers and businesses that rely on public spending suffer the consequences.
Meanwhile, the housing market continues to be oriented toward sellers. A home in many urban areas is out of the reach of college graduates and older generations alike. The growing numbers of boomerang kids expose national economic inefficiencies, which have made it increasingly difficult for the average American to meet basic living expenses.
The solution is nowhere near as readily available as the statistics that identify all aspects of the problem. Student loan debt is part of broader economic weakness, from slow job growth to a widening gap between the very wealthy and the rest of the U.S. public. As graduates enter the workforce, their low salaries and high debt make it difficult for them to support themselves, and it’s unlikely they can count on political institutions to actively pursue solutions to these issues. Only 45 percent of Millenials voted in the 2012 elections, and yet elected officials play a significant role in the future of the rising generation. Government investment and planning could represent a key to economic improvements; while voting alone cannot solve the multitude of challenges facing graduates, it is at the very least a step in the right direction.
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