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Customer LoginsGeorgetown University Study: today's millenials face multiple challenges
US new vehicle registration data indicate that millenials' (age 21-34) portion of total new vehicle registrations continues to decline (see chart below). In the first seven months of this year, 11.2% of all new vehicle purchases were made by millenials, down from 14.5% five years ago. There are two schools of thought on why this trend is occurring:
Millenials are not as interested in cars as their predecessors because, among other things, today's millenials are immersed in the digital age or today's millenials are "maturing" later than their predecessors at least in part because of the recession and the millenials' resulting difficulties in gaining employment.
- A study released Monday by the Georgetown University Center on Education and the Workforce provides data supporting the second theory. This study, derived from the analysis of census data from 1980 to 2012, mentions several compelling facts. Today's wage earner reaches an annual income of $42,000 by the age of 30, up from the age of 26 back in 1980. The labor force participation rate by "young people" today stands at its lowest level in 40 years. Today, 72% of 21-25 year olds are working, down from 84% in 2000. Among young men, this labor force participation rate has plummeted from 80% to 65%.
Why are millenials of today less likely to be employed when compared to their predecessors? Again, there are several theories. One possible reason is that in today's US economy, there are fewer high-wage factory jobs than in decades past. Another explanation is that a higher proportion of today's jobs require advanced skills the millenials do not possess. A third reason is that today's young men and women are saddled with more debt than their predecessors. Lastly, today's millenials may have had a more difficult time getting a job because of the recent recession and slow recovery.
There seems to be a convincing amount of data suggesting that today's young buyers are facing a series of challenges, whether from the modest performance of the economy or structural changes in the economy, which make it more difficult in today's environment to obtain employment. If this is the case, it is difficult to argue that these young potential customers are avoiding the new car showroom just because they have lost interest in automobiles.
Source: Wall Street Journal, October 1, 2013, page A8
Tom Libby is manager, loyalty practice and industry analysis, IHS Automotive
Posted 2 October 2013