One of the big talking points in the great American millennials versus baby boomers debate is whether the younger generation has knee-capped itself by its lavish spending habits that have prevented them from owning homes. If millennials stopped buying $14 avocado toast and $1,000 iPhones, would they be able to save enough for a down payment on a modest home?
Freddie Smith, 36, of Orlando, Florida, recently went viral on TikTok for a video in which he challenged the boomer argument with statistics from the Bureau of Labor, Federal Reserve, and the U.S. Census Bureau. Smith believes that the older generations misunderstand millennial finances because their concept of luxury is based on 1980s economics. Smith says that for baby boomers, essentials such as rent and child care were much more affordable, but items considered luxuries (TVs, CD players, computers) were much more expensive.
How is the economy different for millennials than it was for baby boomers?
"The main shift is that core essentials—housing, education, healthcare, and even food—have become more expensive," Smith said. "Housing and rent, for instance, now outpace wage growth, making homeownership feel unattainable for many. The cost of childcare has also skyrocketed, and food prices have increased.”
"As a result, I think older generations have a different perspective on luxury versus necessity,” Smith continued. “They grew up in a time when hard work typically led to financial stability, whereas today, even with hard work, many people struggle with the high costs of housing, rent and medical expenses. Basic survival used to be far more affordable, allowing people more financial room to build a stable life."
Smith’s numbers don’t lie. For a person in the '80s to own three TVs, a CD player, a cellphone, a microwave, and a computer, it would cost them 3.5 years of rent or a 20% downpayment on the average home. So, it was irresponsible for someone in that period to purchase all of what was known then as luxuries. However, these days, for a Millennial to have the average apartment and the equivalent amount of "luxuries" would only cost a little over one month's rent.
A 1980s computer and television. via Canva
"But if you skip that daily $6 Starbucks drink, you’ll have enough for the downpayment in 29.22 years," Yokahana joked in the comments. "I hate that housing and transportation have become luxuries," Molly added. "Imagine spending 3x your rent on a microwave," Donutdisaster wrote.
Why are luxury goods more affordable now than they were in the '80s?
The price of manufactured goods has steadily fallen over the last few decades due to technological improvements and trade policies that have allowed the U.S. to import goods from places where labor costs are cheaper. "International, global competition lowers prices directly from lower-cost imported goods, and indirectly by forcing U.S. manufacturers to behave more competitively, with lower prices, higher quality, better service, et cetera," Sociologist Joseph Cohen of Queens University said, according to Providence Journal.
Why are housing prices so high?
Housing prices in the US have soared due to the low inventory caused by the Great Recession, mortgage rates, and zoning laws that make building more challenging. Rents have increased considerably since the pandemic due to low inventory, inflation, barriers to home ownership, and the fact that more people want to live alone than with a roommate or romantic partner.
Smith’s breakdown of the economic changes over the past two generations makes a strong case for the idea that millennial financial troubles have more to do with systemic problems than spending habits. The boomers got a bad deal regarding luxury items, and the millennials with necessities. Wouldn’t living in a world where both were affordable in the same era be great?