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By Kevin McCarthy
Post-Millennials could have massive spending power in the years ahead.
The Millennial generation is already making more money than its Gen X predecessors and Boomer parents when comparing like-for-like ages. After adjusting for inflation, the median income from the oldest cohorts of this generation is $49,000 – up 7% versus Gen Xers and 26% versus Boomers. Rising dual-income households skew the math slightly, but the message is still the same: Adjusting for inflation, Millennial households are earning 10% more than Gen-X households and 21% more than Boomer households. However, this is just for the 72 million Millennial cohort (born 1981 – 1996) – those who followed are showing even more potential.1
From a size perspective, Gen Z is nothing to scoff at, with over 68 million individuals born between 1997 and 2012. The oldest members of this cohort (about 25 years of age) are just entering the cusp of household formation. We refer to the combination of Gen Y and Z as the first digitally native population (or “DN cohort”) – all born with devices in hand and hardwired for digital life connections. According to the U.S. Census, the combined pre-tax annual income potential from these two back-to-back generations is $7.1 trillion vs. $5.5 trillion for the prior two generations – a 30% increase.
The point is we believe that purchasing power from these generations will be massive in both scale and duration, and unlike anything, we have seen before. But we note some key differences to be aware of – some generational and some tied to other factors:
- Dual-working households often mean convenience is a higher priority.
- Higher standard of living drives more discretionary spending.
- Services bias over goods – even as the service economy is still cyclically depressed.
- Quality of experience (goods or services) is paramount given limited time (customer retention).
As the DN Cohort profile matures over the next decade, these key differences are likely to accelerate and serve as important reminders for companies that aspire to capture this outsized generational growth opportunity.
1Source: U.S. Census.
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