The Education of the Millennials

Published in 1907, The Education of Henry Adams is a meditation of the immense shifts in the political, economic, social, and technological landscapes of 19th century America during the Second Industrial Revolution. While granted a first-class education, Henry Adams–the great-grandson of John Adams and grandson of John Quincy Adams–would lament throughout the book that his formal education in the classics and history never prepared him for the scientific and technological revolution of the late 19th century. Quoting the book (narrated in third-person):

At any other moment in human history, this education, including its political and literary bias, would have been not only good, but quite the best. Society had always welcomed and flattered men so endowed. Henry Adams had every reason to be well pleased with it, and not ill-pleased with himself … Only on looking back, fifty years later, at his own figure in 1854, and pondering on the needs of the twentieth century, he wondered whether, on the whole the boy of 1854 stood nearer to the thought of 1904, or to that of the year 1 … The calculation was clouded by the undetermined values of twentieth-century thought, but the story will show his reasons for thinking that, in essentials like religion, ethics, philosophy; in history, literature, art; in the concepts of all science, excepts perhaps mathematics, the American boy of 1854 stood nearer the year 1 than to the year 1900. The education he had received bore little relation to the education he needed. Speaking as an American of 1900, he had as yet no education. He knew not even where or how to begin. (emphasis mine).

A cursory review of U.S. history suggests that the Millennials (a demographic group typically defined as those born between 1980 and 2000) have already experienced profound political, social, and technological changes in their short lifetimes unmatched by previous generations, with the possible exception of those who: 1) fought the American Revolutionary War, 2) the American Civil War, 3) experienced the Gilded Age, or 4) experienced the Great Depression and fought in World War II. Many historical seismic shifts in the American cultural fabric were bloody; some not (e.g. the influx of more than 25 million European immigrants from 1850 to 1930).

Further review of these societal shifts suggests one common, and very important, attribute: With the exception of the various waves of immigration, none of these were uniquely American. However, all of these have ultimately made America stronger on the global stage, beginning with American independence in 1776.

Fast forward to today, and the Millennials (also known as the Gen-Ys) are struggling. We believe we could distill this into three major causes:

  1. The U.S. labor market is no longer protected: Relative to Europe and Asia, the U.S. has always had a chronic shortage of labor, resulting in relatively high wages and the subsequent creation of a middle class. Post Civil War and Slavery as an institution, the Gilded Age was a glaring exception, as waves of immigrants served to depress wages for manual labor. The creation of a U.S. middle class after WWII was enabled by a significant curb in immigration beginning in the late 1910s, as well as the democratization of higher education and a general shortage of labor after WWII. The fall of the Berlin Wall in 1989, and the subsequent commercialization of broadband internet and cellular networks, has resulted in an unprecedented shift in the old Labor vs. Capital debate. We believe the acceleration of automation in the U.S. economy will shift this debate further as more manual labor (including those who engage in complex, but repetitive tasks, e.g. fast-food workers or coffee baristas)  is replaced by machines over the next 5-10 years;
  2. The rapid pace of change in the U.S. labor market: Most of us fear change; however, we also secretly crave it, but only if implemented gradually. The rapidity of the shift in the labor market caught many Americans by surprise. In 1901, the Wall Street Journal summarized the immense consolidation of U.S. industry with the comment: “God made the world in 4004 B.C. and it was reorganized in 1901 by J.P. Morgan.” Carnegie Steel–which formed the basis of the $1.4 billion IPO of U.S. Steel in 1901–was founded only just 25 years before, while Standard Oil was founded as recent as 1870. With the exception of Google and Microsoft, many of today’s largest companies were founded more than 50 years ago. However, business practices have shifted immensely over the last 25 years. The mass adoption of outsourcing and automation by U.S. companies–along with an influx of college-educated Gen-Ys into the labor market–has depressed wage growth significantly. Defined benefits pension plans are no longer offered (or valued), and unemployment among young, college-educated workers are near record highs. Such experience by the Millennials is encapsulated by a recent NY Times article chronicling “the rise of the serial intern.”  The world has been reorganized and rearranged in a way such that today’s U.S. labor market bears no resemblance to that of 1989, when the Gen-Ys were still being educated on the wisdom of obtaining a college degree at all costs.
  3. The lack of a 21st century education and the rise of a highly educated global workforce: Year after year, the OECD PISA (Programme for International Student Assessment) shows that American kids are continuing to fall behind their global counterparts in terms of K-12 education. There are many reasons for this (lack of accountability by schools and teachers, lack of respect for the teaching progression, different cultural emphases for formal education, etc.); but more important, even kids who graduate with a four-year college degree have had little preparation to compete in today’s highly educated global workforce. I believe the main problem is this: The modern university system does not sufficiently prepare college graduates to compete in the 21st century global economy as it was engineered with the 20th century industrial economy in mind. Even the emergence of college entrepreneurship programs is a relatively recent phenomenon. e.g. The Arthur Rock Center for Entrepreneurship at Harvard Business School only opened in 2003, and the Polsky Center for Entrepreneurship and Innovation at University of Chicago opened in 1998. Furthermore, only a selected number of universities offer undergraduate courses or experiences in entrepreneurship (neither Harvard nor University of Chicago does). Moreover, most Americans remain U.S.-centric in nature; most U.S. college graduates have never resided or worked overseas. The challenge of working and collaborating with those from foreign cultures will be one of the main challenges for Gen-Y workers over the next 5-10 years.

The ongoing struggles by Millennials are exemplified by the following charts, courtesy of Goldman Sachs.

 Chart 1: A Sign of the Times… Today’s Millennials Are Less Employed

(16-24 Year Olds Labor Force Participation Rate)


Chart 2: And Millennials’ Average Income Have Been Declining Relative to that of the U.S. Labor Force

(15-34 Year Olds’ Average Income as a % of U.S. Labor Force Average Income)


The struggles of the Millennials are real, and will have real implications for U.S. society and the global economy. In our last commentary (“Engaging with China as a Global Economic Superpower“), we addressed the need for U.S. leaders to engage with China as the latter rises to become the world’s biggest economy over the next 6-8 years. This is a job for the Millennials, as most baby boomers and Gen-Xers are too far entrenched in their attitudes and work habits to adapt to a globalizing workforce. Most important, U.S. consumer spending will be driven by Millennial spending growth over the next five years (3.4% annualized), easily crowding out the impact of the Gen-Xs (only 0.6% growth). In fact, total consumer spending by Millennials should surpass that of the Baby Boomers by 2020, making Millennials the largest spending cohort in U.S. history. Just as the Baby Boomers dictated every major societal and economic trend since the end of WWII (from the adoption of disposable diapers to the Civil Rights movement), the Gen-Ys will be driving similar trends for decades to come. The Education of the Millennials continues…

Chart 3: Projected U.S. Annualized Spending Power Growth by Generational Cohort



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