Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies.
The effect of all this “domestic outsourcing”—and, let’s be honest, its actual purpose—is that workers get a lot less out of their jobs than they used to. One of Batt’s papers found that employees lose up to 40 percent of their salary when they’re “re-classified” as contractors. In 2013, the city of Memphis reportedly cut wages from $15 an hour to $10 after it fired its school bus drivers and forced them to reapply through a staffing agency. Some Walmart “lumpers,” the warehouse workers who carry boxes from trucks to shelves, have to show up every morning but only get paid if there’s enough work for them that day.
“This is what’s really driving wage inequality,” says David Weil, the former head of the Wage and Hour Division of the Department of Labor and the author of The Fissured Workplace. “By shifting tasks to contractors, companies pay a price for a service rather than wages for work. That means they don’t have to think about training, career advancement or benefit provision.”
This transformation is affecting the entire economy, but millennials are on its front lines. Where previous generations were able to amass years of solid experience and income in the old economy, many of us will spend our entire working lives intermittently employed in the new one. We’ll get less training and fewer opportunities to negotiate benefits through unions (which used to cover 1 in 3 workers and are now down to around 1 in 10). Plus, as Uber and its “gig economy” ilk perfect their algorithms, we’ll be increasingly at the mercy of companies that only want to pay us for the time we’re generating revenue and not a second more.
But the blame doesn’t only fall on companies. Trade groups have responded to the dwindling number of secure jobs by digging a moat around the few that are left. Over the last 30 years, they’ve successfully lobbied state governments to require occupational licenses for dozens of jobs that never used to need them. It makes sense: The harder it is to become a plumber, the fewer plumbers there will be and the more each of them can charge. Nearly a third of American workers now need some kind of state license to do their jobs, compared to less than 5 percent in 1950. In most other developed countries, you don’t need official permission to cut hair or pour drinks. Here, those jobs can require up to $20,000 in schooling and 2,100 hours of instruction and unpaid practice.
In sum, nearly every path to a stable income now demands tens of thousands of dollars before you get your first paycheck or have any idea whether you’ve chosen the right career path. “I was literally paying to work,” says Elena, a 29-year-old dietician in Texas. (I’ve changed the names of some of the people in this story because they don’t want to get fired.) As part of her master’s degree, she was required to do a yearlong “internship” in a hospital. It was supposed to be training, but she says she worked the same hours and did the same tasks as paid staffers. “I took out an extra $20,000 in student loans to pay tuition for the year I was working for free,” she says.
All of these trends—the cost of education, the rise of contracting, the barriers to skilled occupations—add up to an economy that has deliberately shifted the risk of economic recession and industry disruption away from companies and onto individuals.
Becoming poor is not an event. It is a process.
Like a plane crash, poverty is rarely caused by one thing going wrong. Usually, it is a series of misfortunes—a job loss, then a car accident, then an eviction—that interact and compound.
I heard the most acute description of how this happens from Anirudh Krishna, a Duke University professor who has, over the last 15 years, interviewed more than 1,000 people who fell into poverty and escaped it. He started in India and Kenya, but eventually, his grad students talked him into doing the same thing in North Carolina. The mechanism, he discovered, was the same.
We often think of poverty in America as a pool, a fixed portion of the population that remains destitute for years. In fact, Krishna says, poverty is more like a lake, with streams flowing steadily in and out all the time. “The number of people in danger of becoming poor is far larger than the number of people who are actually poor,” he says.
We’re all living in a state of permanent volatility. Between 1970 and 2002, the probability that a working-age American would unexpectedly lose at least half her family income more than doubled. And the danger is particularly severe for young people. In the 1970s, when the boomers were our age, young workers had a 24 percent chance of falling below the poverty line. By the 1990s, that had risen to 37 percent. And the numbers only seem to be getting worse. From 1979 to 2014, the poverty rate among young workers with only a high school diploma more than tripled, to 22 percent. “Millennials feel like they can lose everything at any time,” Hacker says. “And, increasingly, they can.”
… . “I don’t understand why it’s so hard to do something with your life,” he tells me. The answer is brutally simple. In an economy where wages are precarious and the safety net has been hacked into ribbons, one piece of bad luck can easily become a years-long struggle to get back to normal.
Over the last four decades, there has been a profound shift in the relationship between the government and its citizens. In The Age of Responsibility, Yascha Mounk, a political theorist, writes that before the 1980s, the idea of “responsibility” was understood as something each American owed to the people around them, a national project to keep the most vulnerable from falling below basic subsistence. Even Richard Nixon, not exactly known for lifting up the downtrodden, proposed a national welfare benefit and a version of a guaranteed income. But under Ronald Reagan and then Bill Clinton, the meaning of “responsibility” changed. It became individualized, a duty to earn the benefits your country offered you.
Since 1996, the percentage of poor families receiving cash assistance from the government has fallen from 68 percent to 23 percent. No state provides cash benefits that add up to the poverty line. Eligibility criteria have been surgically tightened, often with requirements that are counterproductive to actually escaping poverty. Take Temporary Assistance for Needy Families, which ostensibly supports poor families with children. Its predecessor (with a different acronym) had the goal of helping parents of kids under 7, usually through simple cash payments. These days, those benefits are explicitly geared toward getting mothers away from their children and into the workforce as soon as possible. A few states require women to enroll in training or start applying for jobs the day after they give birth.
The list goes on. Housing assistance, for many people the difference between losing a job and losing everything, has been slashed into oblivion. (To pick just one example, in 2014 Baltimore had 75,000 applicants for 1,500 rental vouchers.) Food stamps, the closest thing to universal benefits we have left, provide, on average, $1.40 per meal.
In what seems like some kind of perverse joke, nearly every form of welfare now available to young people is attached to traditional employment. Unemployment benefits and workers’ compensation are limited to employees. The only major expansions of welfare since 1980 have been to the Earned Income Tax Credit and the Child Tax Credit, both of which pay wages back to workers who have already collected them.
Back when we had decent jobs and strong unions, it (kind of) made sense to provide things like health care and retirement savings through employer benefits. But now, for freelancers and temps and short-term contractors—i.e., us—those benefits might as well be Monopoly money. Forty-one percent of working millennials aren’t even eligible for retirement plans through their companies.
And then there’s health care.
In 1980, 4 out of 5 employees got health insurance through their jobs. Now, just over half of them do. Millennials can stay on our parents’ plans until we turn 26. But the cohort right afterward, 26- to 34-year-olds, has the highest uninsured rate in the country and millennials—alarmingly—have more collective medical debt than the boomers. Even Obamacare, one of the few expansions of the safety net since man walked on the moon, still leaves us out in the open. Millennials who can afford to buy plans on the exchanges face premiums (next year mine will be $388 a month), deductibles ($850) and out-of-pocket limits ($5,000) that, for many young people, are too high to absorb without help. And of the events that precipitate the spiral into poverty, according to Krishna, an injury or illness is the most common trigger.
“All of us are one life event away from losing everything,” says Ashley Lauber, a bankruptcy lawyer in Seattle and an Old Millennial like me. For most of her clients under 35, she says, the slide toward bankruptcy starts with a car accident or a medical bill. “You can’t afford your deductible, so you go to Moneytree and take out a loan for a few hundred bucks. Then you miss your payments and the collectors start calling you at work, telling your boss you can’t pay. Then he gets sick of it and he fires you and it all gets worse.” For a lot of her millennial clients, Lauber says, the difference between escaping debt and going bankrupt comes down to the only safety net they have—their parents.
And so, instead of receiving help from their families, millennials of color are more likely to be called on to provide it. Any extra income from a new job or a raise tends to get swallowed by bills or debts that many white millennials had help with. Four years after graduation, black college graduates have, on average, nearly twice as much student debt as their white counterparts and are three times more likely to be behind on payments. This financial undertow is captured in one staggering statistic: Every extra dollar of income earned by a middle-class white family generates $5.19 in new wealth. For black families, it’s 69 cents.
Want to get even more depressed? Sit down and think about what’s going to happen to us when we get old. Despite all the stories you read about flighty millennials refusing to plan for retirement (as if our grandparents were obsessing over the details of their pension plans when they were 25), the biggest problem we face is not financial illiteracy. It is compound interest.
In the coming decades, the returns on 401(k) plans are expected to fall by half. According to an analysis by the Employee Benefit Research Institute, a drop in stock market returns of just 2 percentage points means a 25-year-old would have to contribute more than double the amount to her retirement savings that a boomer did. Oh, and she’ll have to do it on lower wages. This scenario gets even more dire when you consider what’s going to happen to Social Security by the time we make it to 65. There, too, it seems inevitable that we’re going to get screwed by demography: In 1950, there were 17 American workers to support each retiree. When millennials retire, there will be just two.There’s one way that many Americans have traditionally managed to build wealth for themselves, to achieve some kind of dignity and comfort in old age. I’m talking, of course, about homeownership. At least we’ve got a shot at that, right?
…
Despite the acres of news pages dedicated to the narrative that millennials refuse to grow up, there are twice as many young people like Tyrone—living on their own and earning less than $30,000 per year—as there are millennials living with their parents. The crisis of our generation cannot be separated from the crisis of affordable housing.
More people are renting homes than at any time since the late 1960s. But in the 40 years leading up to the recession, rents increased at more than twice the rate of incomes. Between 2001 and 2014, the number of “severely burdened” renters—households spending over half their incomes on rent—grew by more than 50 percent. Rather unsurprisingly, as housing prices have exploded, the number of 30- to 34-year-olds who own homes has plummeted.
Falling homeownership rates, on their own, aren’t necessarily a catastrophe. But our country has contrived an entire “Game of Life” sequence that hinges on being able to buy a home. You rent for a while to save up for a down payment, then you buy a starter home with your partner, then you move into a larger place and raise a family. Once you pay off the mortgage, your house is either an asset to sell or a cheap place to live in retirement. Fin.
This worked well when rents were low enough to save and homes were cheap enough to buy. In one of the most infuriating conversations I had for this article, my father breezily informed me that he bought his first house at 29. It was 1973, he had just moved to Seattle and his job as a university professor paid him (adjusted for inflation) around $76,000 a year. The house cost $124,000 — again, in today’s dollars. I am six years older now than my dad was then. I earn less than he did and the median home price in Seattle is around $730,000. My father’s first house cost him 20 months of his salary. My first house will cost more than 10 years of mine.
… all the urgency to build comes from people who need somewhere to live. But all the political power is held by people who already own homes.
For homeowners, there is no such thing as a housing crisis.
But the soaring rents in big cities are now canceling out the higher wages. Back in 1970, according to a Harvard study, an unskilled worker who moved from a low-income state to a high-income state kept 79 percent of his increased wages after he paid for housing. A worker who made the same move in 2010 kept just 36 percent. For the first time in U.S. history, says Daniel Shoag, one of the study’s co-authors, it no longer makes sense for an unskilled worker in Utah to head for New York in the hope of building a better life.
This leaves young people, especially those without a college degree, with an impossible choice. They can move to a city where there are good jobs but insane rents. Or they can move somewhere with low rents but few jobs that pay above the minimum wage.
This dilemma is feeding the inequality-generating woodchipper the U.S. economy has become. Rather than offering Americans a way to build wealth, cities are becoming concentrations of people who already have it. In the country’s 10 largest metros, residents earning more than $150,000 per year now outnumber those earning less than $30,000 per year.
Millennials who are able to relocate to these oases of opportunity get to enjoy their many advantages: better schools, more generous social services, more rungs on the career ladder to grab on to. Millennials who can’t afford to relocate to a big expensive city are … stuck. In 2016, the Census Bureau reported that young people were less likely to have lived at a different address a year earlier than at any time since 1963.
And so the real reason millennials can’t seem to achieve the adulthood our parents envisioned for us is that we’re trying to succeed within a system that no longer makes any sense. Homeownership and migration have been pitched to us as gateways to prosperity because, back when the boomers grew up, they were. But now, the rules have changed and we’re left playing a game that is impossible to win.
Some of the trendiest Big Policy Fixes these days are efforts to rebuild government services from the ground up. The ur-example is the Universal Basic Income, a no-questions-asked monthly cash payment to every single American. The idea is to establish a level of basic subsistence below which no one in a civilized country should be allowed to fall. The venture capital firm Y Combinator is planning a pilot program that would give $1,000 each month to 1,000 low- and middle-income participants. And while, yes, it’s inspiring that a pro-poor policy idea has won the support of D.C. wonks and Ayn Rand tech bros alike, it’s worth noting that existing programs like food stamps, TANF, public housing and government-subsidized day care are not inherently ineffective. They have been intentionally made so. It would be nice if the people excited by the shiny new programs would expend a little effort defending and expanding the ones we already have.
But they’re right about one thing: We’re going to need government structures that respond to the way we work now. “Portable benefits,” an idea that’s been bouncing around for years, attempts to break down the zero-sum distinction between full-time employees who get government-backed worker protections and independent contractors who get nothing. The way to solve this, when you think about it, is ridiculously simple: Attach benefits to work instead of jobs. The existing proposals vary, but the good ones are based on the same principle: For every hour you work, your boss chips in to a fund that pays out when you get sick, pregnant, old or fired. The fund follows you from job to job, and companies have to contribute to it whether you work there a day, a month or a year.
Another no-brainer experiment is to expand jobs programs. As decent opportunities have dwindled and wage inequality has soared, the government’s message to the poorest citizens has remained exactly the same: You’re not trying hard enough. But at the same time, the government has not actually attempted to give people jobs on a large scale since the 1970s.
Because most of us grew up in a world without them, jobs programs can sound overly ambitious or suspiciously Leninist. In fact, they’re neither. In 2010, as part of the stimulus, Mississippi launched a program that simply reimbursed employers for the wages they paid to eligible new hires—100 percent at first, then tapering down to 25 percent. The initiative primarily reached low-income mothers and the long-term unemployed. Nearly half of the recipients were under 30.
The results were impressive. For the average participant, the subsidized wages lasted only 13 weeks. Yet the year after the program ended, long-term unemployed workers were still earning nearly nine times more than they had the previous year. Either they kept the jobs they got through the subsidies or the experience helped them find something new. Plus, the program was a bargain. Subsidizing more than 3,000 jobs cost $22 million, which existing businesses doled out to workers who weren’t required to get special training. It wasn’t an isolated success, either. A Georgetown Center on Poverty and Inequality review of 15 jobs programs from the past four decades concluded that they were “a proven, promising, and underutilized tool for lifting up disadvantaged workers.” The review found that subsidizing employment raised wages and reduced long-term unemployment. Children of the participants even did better at school.
But before I get carried away listing urgent and obvious solutions for the plight of millennials, let’s pause for a bit of reality: Who are we kidding? Donald Trump, Paul Ryan and Mitch McConnell are not interested in our innovative proposals to lift up the systemically disadvantaged. Their entire political agenda, from the Scrooge McDuck tax reform bill to the ongoing assassination attempt on Obamacare, is explicitly designed to turbocharge the forces that are causing this misery. Federally speaking, things are only going to get worse.
Which is why, for now, we need to take the fight to where we can win it.
Over the last decade, states and cities have made remarkable progress adapting to the new economy. Minimum-wage hikes have been passed by voters in nine states, even dark red rectangles like Nebraska and South Dakota. Following a long campaign by the Working Families Party and other activist organizations, eight states and the District of Columbia have instituted guaranteed sick leave. Bills to combat exploitative scheduling practices have been introduced in more than a dozen state legislatures. San Francisco now gives retail and fast-food workers the right to learn their schedules two weeks in advance and get compensated for sudden shift changes. Local initiatives are popular, effective and our best hope of preventing the country’s slide into “Mad Max”-style individualism.
The court system, the only branch of our government currently functioning, offers other encouraging avenues. Class-action lawsuits and state and federal investigations have resulted in a wave of judgments against companies that “misclassify” their workers as contractors. FedEx, which requires some of its drivers to buy their own trucks and then work as independent contractors, recently reached a $227 million settlement with more than 12,000 plaintiffs in 19 states. In 2014, a startup called Hello Alfred—Uber for chores, basically—announced that it would rely exclusively on direct hires instead of “1099s.” Part of the reason, its CEO told Fast Company, was that the legal and financial risk of relying on contractors had gotten too high. A tsunami of similar lawsuits over working conditions and wage theft would be enough to force the same calculation onto every CEO in America.
Some cities are finally acknowledging this reality. Portland and Denver have sped up approvals and streamlined permitting. In 2016, Seattle’s mayor announced that the city would cut ties with its mostly old, mostly white, very NIMBY district councils and establish a “community involvement commission.” The name is terrible, obviously, but the mandate is groundbreaking: Include renters, the poor, ethnic minorities—and everyone else unable to attend a consultation at 2 p.m. on a Wednesday—in construction decisions. For decades, politicians have been terrified of making the slightest twitch that might upset homeowners. But with renters now outnumbering owners in nine of America’s 11 largest cities, we have the potential to be a powerful political constituency.
The same logic could be applied to our entire generation. In 2018, there will be more millennials than boomers in the voting-age population. The problem, as you’ve already heard a million times, is that we don’t vote enough. Only 49 percent of Americans ages 18 to 35 turned out to vote in the last presidential election, compared to about 70 percent of boomers and Greatests. (It’s lower in midterm elections and positively dire in primaries.)
But like everything about millennials, once you dig into the numbers you find a more complicated story. Youth turnout is low, sure, but not universally. In 2012, it ranged from 68 percent in Mississippi (!) to 24 percent in West Virginia. And across the country, younger Americans who are registered to vote show up at the polls nearly as often as older Americans.
The fact is, it’s simply harder for us to vote. Consider that nearly half of millennials are minorities and that voter suppression efforts are laser-focused on blacks and Latinos. Or that the states with the simplest registration procedures have youth turnout rates significantly higher than the national average. (In Oregon it’s automatic, in Idaho you can do it the same day you vote and in North Dakota you don’t have to register at all.) Adopting voting rights as a cause—forcing politicians to listen to us like they do to the boomers—is the only way we’re ever going to get a shot at creating our own New Deal.
Or, as Shaun Scott, the author of Millennials and the Moments That Made Us, told me, “We can either do politics or we can have politics done to us.”
And that’s exactly it. The boomer-benefiting system we’ve inherited was not inevitable and it is not irreversible. There is still a choice here. For the generations ahead of us, it is whether to pass down some of the opportunities they enjoyed in their youth or to continue hoarding them. Since 1989, the median wealth of families headed by someone over 62 has increased 40 percent. The median wealth of families headed by someone under 40 has decreased by 28 percent. Boomers, it’s up to you: Do you want your children to have decent jobs and places to live and a non-Dickensian old age? Or do you want lower taxes and more parking?
Then there’s our responsibility. We’re used to feeling helpless because for most of our lives we’ve been subject to huge forces beyond our control. But pretty soon, we’ll actually be in charge. And the question, as we age into power, is whether our children will one day write the same article about us. We can let our economic infrastructure keep disintegrating and wait to see if the rising seas get us before our social contract dies. Or we can build an equitable future that reflects our values and our demographics and all the chances we wish we’d had. Maybe that sounds naïve, and maybe it is. But I think we’re entitled to it.
