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Comparing Economic Status of Pre-Recession Millennials

to Post-Recession ‘September 11ths’

(Preliminary Analysis)

The New Generation Gap:

Geoffrey Paulin, Ph.D.

Senior Economist

Division of Consumer Expenditure Surveys

American Council on Consumer Interests

April 23, 2017

Albuquerque, NM
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The work in progress described herein 

requires Consumer Expenditure Survey (CE)

microdata to complete...
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...However, tabular data provide a basis for 

preliminary analysis.
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The plans and structure of the analysis are as 

follows:

CAUTION: Paying careful attention during this demonstration

may result in training in use of CE data!
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Background

 Basic question: Are young adults “better off” today than were 

their counterparts 10 years ago (before/after the recession)?

 This is an update in a continuing series exploring this question.

“Early” boomers, “late” boomers, and Generation X;

Late boomers and late Generation X/early Millennials

The youngest and oldest consumers before, during, and after the 

recent recession (forthcoming)
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Tools for Preliminary Analysis

Tabular Data: Selected Age of Reference Person,

2005 and 2015
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Demographic differences head the tables.

 The number of “young adult” consumer units falls more than 2 

percent, while the rest of the population grows by 12 percent! 

Is this due to:

Actual population decline (“baby bust”); or

Young adults returning home after (or never leaving for) college?

Only the Census Bureau knows for sure!*

 Homeownership rates are noticeably lower (5 to 6 percentage 

points) for each group in 2015 than 2005.

 Hispanics account for larger percentages (2 to 3 points) of each 

group in 2015.

*Actually, so do CE Microdata, but remember, this work describes tabular data only.
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Changes in Real Income

 Ingredients:

Nominal incomes in 2005 and 2015

Value of the Consumer Price Index (CPI) in 2005 and 2015

 Source: BLS Websites

CE data: https://www.bls.gov/cex/tables.htm (Selected age of 

reference person, XLSX format)

CPI data: https://www.bls.gov/cpi/home.htm (Multi-screen data 

search tool for all urban consumers, current series)
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First, compute the CPI adjustment factor:

 CPI 2005: 195.3

 CPI 2015: 237.017*

Adjustment factor: (237.017/195.3) = 1.214

*CPI started publishing values to three decimal places in January 

2007.
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After applying the adjustment factor, the 

following is noted:

Real ($ 2015) 

Income before taxes 2005 2015 Percent change

Under 30 $46,392 $46,130 -0.6%

30 and over $75,841 $73,417 -5.3%

Incomes have fallen for young adults;

but much more for those who are older!
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However, “permanent” incomes (proxied by 

total expenditures) are different:

Real ($ 2015) 

Average Annual 

Expenditures 2005 2015 Percent change

Under 30 $41,903 $40,761 -2.7%

30 and over $58,980 $58,463 -1.3%

The percent decline in permanent incomes for

young adults is twice the rate of those who are older.
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Aggregate Shares

1. Compute aggregate dollars for which each group accounts. 

(E.g., how many billions of dollars did young adults spend on 

Good X in 2005, and in 2015?)

2. Compute the aggregate share of interest in each time period 

(i.e., the proportion of TOTAL billions of dollars spent on 

Good X in each year for which young adults account).

3. Compute the portion of the population for which young 

adults account.

4. Compare the aggregate share to the population share to see 

if young adults consistently “over” or “under” spend their 

share.
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Computing Aggregate Shares

 Ingredients:

Average annual expenditures (or income) in 2005 and 2015

– Young adults (under 30)

– Older adults (30 and older)

Total numbers of consumer units by each age group in 2005 and 

2015

 Source: Selected Age of Reference Person table
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Example:

Consumer Units (CUs) in 2005

 Young adults: 18,282,000 (18.2 million)

 Older adults: 99,074,000 (99.1 million)

 Total population: 117,356,000 (117.4 million)

Average annual food expenditures in 2005

 Young adults: $4,564

 Older adults: $6,182

Aggregate Expenditure:

 Young adults: $83.4 billion ($4,564*18.2 million)

 Older adults: $612.5 billion ($6,182*99.1 million)

 Total population: $695.9 billion ([$83.4 plus $612.5] billion)
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Comparing Population and Aggregate Share: 

Young Adults

 Population share: 15.6 percent

18.2 million (young adult CUs) / 117.4 million (total population CUs)

 Aggregate food expenditure share: 12.0 percent

$83.4 billion (aggregate young adult expenditure)

$695.9 billion (aggregate expenditure for total population

$83.4 billion / $695.9 billion = 12.0 percent

 Finding: Young adults “underspend” their share (12.0 < 15.6)
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The results are similar for this group in 2015:

 Population share: 13.9 percent

 Aggregate food expenditure share: 10.9 percent
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Possible Explanations:

 Family Size?

No. Consider Average CU size (in 2005):

– Under 30: 2.3

– 30 and over: 2.5

 Income?

Could be.

– Under 30: $38,227 (2005)

– 30 and over: $62,492 (2005)

– Gap is similar in 2015 ($46,130 vs. $73,417)

 Other factors?

Indeterminate. Requires microdata for regression analysis.
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Next, consider Engel’s Proposition.

I SAID “ENGEL’S PROPOSITION,”

NOT “ANGLES, PREPOSITION!”

Of
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Syllogistic Reasoning:

 Engel’s Finding (1857): The larger the income, 

the smaller the share allocated to food.

 Axiom: The smaller the share allocated to 

food, the more “left over” for other spending.

 Conclusion: Smaller food shares indicate 

higher social welfare/economic status.
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Note that “Food” has two 

components:

 Food at home 

Food purchased at grocery stores and similar 

outlets

“Necessity” component

 Food away from home

Food purchased from restaurants and similar 

establishments

“Luxury” component
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Results for Food at Home:

Under 30 2005 2015

Food (H) $2,291 $2,830

Total Exps. $34,528 $40,761

Share 7.1% 7.2%

30/older 2005 2015

Food (H) $3,481 4,217

Total Exps. $48,599 $58,463

Share 6.6% 6.9%

By this measure, young adults have no change in 

status, while their elders are slightly “worse off.”
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Similarly, one can examine 

“budget shares”:

 Total Food = Food at Home + Food Away from 

home.

 How much of the total food budget is 

allocated to:

Food at home (“necessity” share)

Food away from home (“luxury” share)
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Budget Shares: Food

Under 30 2005 2015

Food (Tot.) $4,564 $5,520

Home 55.6% 57.2%

Away 44.4% 42.8%

30/older 2005 2015

Food (Tot.) $6,182 $7,278

Home 50.2% 51.3%

Away 49.8% 48.7%

The share for food at home has risen for both age 

groups, possibly indicating a decrease in general 

welfare...
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...However:

Other possibilities, such as changes in relative 

prices of food at and away from home, have 

not yet been examined.

Note that CPI has information on both, available 

online. (At site cited earlier.)

Also note that expenditures for total food are 

“nominal.” (The CPI-all adjustment factor would 

have cancelled out anyway.)
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Of major interest during this 

period is housing.

 The “housing bubble” famously burst in or 

around 2007.

 CE data show changes in both:

 Spending for owned and rented dwellings before 

and after this period

Changes in housing tenure, as noted at the 

beginning of this segment.
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Especially because of changing tenure, the 

analysis is complicated.

 Housing expenditures are averaged over ALL 

consumers.

That is, they represent expenditures as if the 

“average consumer” is (generally) 60 percent 

homeowner and 40 percent renter.

At any given time, most consumers are one or the 

other, not both.
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To properly compare across 

tenures and time:

 Examine owned dwelling expenditures 

separately from rented dwelling expenditures.

Divide owned dwelling expenditures by percent 

homeowners. This produces an estimated 

average expenditure on owned dwellings for those 

who own.

Repeat for renters (substituting “rent” for “own” 

of course).
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While not yet completed for this analysis....

...I hope you will read the paper when it appears in print.
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This concludes your introduction 

to the Selected Age of Reference 

Person CE tabular data.
Contact Information

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Geoffrey Paulin, Ph.D.

Senior Economist

Division of Consumer Expenditure Surveys

www.bls.gov/cex

202-691-5132

paulin.geoffrey@bls.gov