Sarah Kaderavek
Mrs. Straub
AP Economics
17 March 2016
Economic Generational Differences
With growing generational diversity in today’s workforce, employees who hold similar positions and salaries to one another may not exhibit similar consumer behaviors as expected. This being so when examining a workplace, one will find Traditionalists, Baby Boomers, Generation X-ers, Millennials and eventually the up in coming Gen. 2020 (see Figure 1). Each generations have unique characteristics that impact how they act. These characteristics, as well as the state of the economy, translate to their likeliness to spend or save their additional income. In other words, although taxes and the economy dictate consumer’s marginal propensity to consume (MPC) and marginal propensity to save (MPS), generational differences also have a large influence in this same matter.
Figure 1. Breakdown of the workplace by generation
Traditionalists are the oldest generation found in the workplace. This generation was born between 1900 and 1945 and highly influenced by The Great Depression and World War II (West). The downturn of the economy during The Great Depression started with the collapse of the stock market and the failure of banks in the United States. The failure of banks lead to many bank runs which only worsened the issues faced by the economy. If you’re interested in learning more about this watch this video. These occurrences caused much of this generation to grow up poorer, therefore instilling the importance of saving in this generation. Additionally, because they grew up with less, this generation is comfortable living with less. Because of these values, their MPS is much higher than other generations while their MPC is often much lower.
Baby Boomers are the second oldest generation found in the workplace. This generation was born between 1946 and 1964 (West). Seeing as this generation is post Great Depression and post war, they had a very different life than the Traditionalists before them. According to Gelinda Grimes article, the Baby Boom generation was the first generation for a majority of its population to seek higher level education. Additionally, this is the generation of optimism due to the economic upturn after the war and the social changes that followed. These experiences not only create a sense of hard-work among Baby Boomers but also a sense of materialism (West). Due to this, Baby Boomers are more likely to have a higher MPC than the generation before them, while still remaining fiscally responsible. Generations X-ers are the generation that came after the Baby Boom, being born between 1965 and 1980 (West). Seeing as they were raised by Baby Boomers, this generation was taught to value their own opinion and work hard. This is also the smallest generation in size, so many other traits are shared with the generation before them. But according to Devon Scheef, this generation has “traits of independence, resilience, and adaptability.” Either way, their MPC and MPS can be predicted to be quite similar to Baby Boomers.
Millennials are the most current generation of adults seen in the workforce. This generation was born between 1981 and 2000 (West). When compared to Generation X, this generation “works to live” rather than “lives to work.” This generation has helped develop the greater demand for technology as well. Thus, they are generally less stingy with money, so long as their career allows them to be. However, because their parents from Generation X pursued higher education, and they did as well, parents from this generation are interested in investing in their children’s futures. Due to these factors, it can be argued that their MPC and MPS are almost equal but may fluctuate due to certain expenses.
In conclusion, there is far more that goes into determining how an individual will spend there money than just the current state of the economy or tax and interest rates. Overall, as the generations have developed people are willing to spend more money as seen by the mindset of the Millennial versus the mindset of a Generation X-er. While marginal propensity to consume and marginal propensity to save fluctuate, there is a greater psychological understanding of each consumer which can be examined.
Works Cited
Grimes, Gelinda. “How the Baby Boom Generation Works.” HowStuffWorks. Infospace LLC.,
2016. Web. 12 March 2016.
Kadlec, Dan. “Millenials Won’t Cut Spending But Expect to Save More.” Time Inc. Time Inc.,
2016. Web. 12 March 2016.
West Midland Family Center. Generational Differences Chart. PDF file.
Scheef, Devon. “Generation X and The Millennials: What You Need to Know.” Law Practice
Management. American Bar Association, 2005. Web. 12 March 2016.
There's no way to know for certain how these generational shifts will affect the economy as a whole. Certainly, many companies, large and small, will be forced to rethink their business models to fit with the ever-changing populations. I only fear that the shift between the "live to work" of prior generations and the "work to live" of current ones will result in a catastrophic breakdown. Many are going into fields solely for the pay, and money simply isn't a good enough motivator to get people to take pride in their jobs. A lack of pride may very well chain into a lack of business ethics, which could very well be a critical issue.
ReplyDeleteI found this very interesting because you related a topic we talked a lot about in business to economics. In business, we talk a lot about how people of different ages and different generations bring a lot of different skills to the table. The older workers tend to be more experienced so they know how to work well through problems. While the younger generations are more experienced with technology and tend to be more comfortable trying new things. In theory, putting these two groups together sounds like a perfect combination, however, like we read in the article about the building company, sometimes it causes the business to be less productive. Because the different generations think so differently and have a hard time relating to each other; spending more time arguing and less time working. As the older generations start to retire and the even younger generations begin to get more jobs, we will, again, be in a position that many people of the same age range are working together, causing them to be more productive - increasing output for the company.
ReplyDeleteYou really laid out the generational differences well. That was very clear and concise. You also explained why their MPCs and MPSs were different based on relevant historical events to each generation. However, I believe that you could’ve added more detail in specific examples of the frugality of each generation. For instance, saying that millennials like to spend more on Starbucks coffee than the other generations. Perhaps Generation X actually spends more on Starbucks. It would’ve been interesting to see some of those statistics. But the ones you provided were very informative. The essay was overall laid out rather well, but more elaboration on specific common purchases would’ve maybe aided you’re point.
ReplyDelete- Martin Mueller
I agree that generational shifts have a large affect on the marginal propensity to save and consume. For instance, GenY the most current generation is obsessed with having the newest gadgets and gizmo's. I personally try to keep up to date with the newest technology. The younger generation is obsessed with impressing others with their belongings, therefore we spend more. On the other hand there are traditionalists who would rather save their money for a rainy day. Materialistic products mean close to nothing to the older generation. Overall, I think this is a great topic and you did a amazing job analyzing the data.
ReplyDeleteNow in 2016, it will just be a couple years until "Gen 2020" really starts entering the workforce. After viewing a couple other comments posted, I agree with the statements that say each generation has its own beliefs or marginal propensity to save/consume. This is very important if one was to predict the future economy of United States, and to analysis how the majority of the working class will spend their money. For an example, my generation (Gen Y) isn't afraid of spending money (in many cases). Once Gen Y takes over the work force, it's likely to see effects in the economy due to the spending. Otherwise, good job on the blog post!
ReplyDeleteAs the younger generations seek out more opportunities in the work force, the quantity and quality of technology would increase as well. This increase in technology could turn the older generations out of the work force and into retirement. This would lead to a decrease in the circulation of money because more people would be saving for after retirement. The increase of technology would also increase productivity because the workers would be comfortable in their environment and understand how to operate correctly. Other then technology, bosses and managers must also learn how to manage all of the different generations to ensure a productive firm as well. This could mean more education and training for those looking at management positions.
ReplyDelete