“War on the Young”-Professor Scott Galloway

May 02, 2024

According to Scott Galloway, “Young people have every reason to be enraged.” Galloway is a multi-millionaire businessman and professor at NYU. He believes the biggest challenge to the U.S. is not inequality, climate change or war in the Middle East, but an issue that ties all of these together:  America’s war on the young. I agree with him. We need to recognize it and work to fix it.

Wages haven’t kept pace with inflation. For centuries, every new generation has been better off than their parents. The social contract that has bound America has been: Work hard, play by the rules and you’ll be better off than your parents. This is no longer true. Today’s 25-year-olds make less than their grandparents and many of today’s young people are also carrying major student debt loads. Wages haven’t kept pace with inflation- the federal minimum wage is still only $7.25 per hour. Housing costs have outpaced wages to the point where few young people can afford their first house.

Elise and I graduated in 1969. I went to work with Arthur Andersen and worked overtime. Elise taught H.S. French. Our annual salary those first 12 months out of school was about $24,000. At age 22 in 1970, we were able to buy a $21,000 house in Arlington Heights and got on the first step of the escalator to financial independence.  

Today, per the WSJ, for those looking to embark on the American dream, it is further out of reach than ever. For a young couple making even $100,000 a year, a new house might cost 5-8 times their salaries or more. Many just keep renting as putting together a $100k deposit for a new house seems impossible to attain.  

Here are some facts for each generation at age 25, adjusted for inflation. Please note that inflation has averaged 4% increase per year since 1969. Over 55 years, that’s an increase of 750%:

Many young Americans are struggling. Is it any surprise? In the last 10-15 years, self-harm rates, teens with depression, gun deaths, obesity and overdose death have skyrocketed. According to Jonathan Haidt, author of NYT #1 Bestseller “The Anxious Generation”, the shattering of the social contract has young people feeling rage and shame. 50% of Americans older than 55 say they are extremely proud to be Americans. That number drops to 18% among those 18-34-year-olds.

Professor Galloway asserts that we don’t lack the financial resources to help the young people and put the social contract back in place. The problem is that the cohorts that have benefited most from the post WWII economic boom have “pulled the ladder up behind them.” Yes, we, the Baby Boomer Generation, have done that. Three decades ago, adults under 40 held 14% of household wealth and those 55 and older held 50%. Today, those under 40 have only 9% of household wealth while those over 55 control 70%.

Higher Education. Education is the most effective way of bringing the next generation ahead. However, with education costs rising at almost twice the rate of inflation over the last 50 years, many have been left out. These increases have been no problem for the wealthy. Yet, many of the “elite schools” have kept enrollment down and endowments soaring. Harvard’s undergraduate class size has been 1,600 for 50 years while their endowment has grown 500%- after inflation. Of course, universities pay no real estate taxes or income taxes. Professor Galloway asks the excellent question, “Is Harvard a public servant or a Chanel bag.” He suggests that higher ed should be a grand bargain- by redirecting money earmarked for bailing out the 1/3 of Americans who had already graduated from college to increasing freshman seats and reducing costs. Affordability and accessibility are desperately needed. “Hear, hear.”

Capital vs. Labor. Our system rewards those with capital more than those who supply the labor. Income from labor is taxed at “ordinary” income tax rates, which can be as much as 41% federal and 13% state (CA) rates. Capital gains are taxed at a high of 20% federal and many states don’t even tax capital gains.  To get a capital gain you need to have a successful investment. To have an investment, you have to have money left over from paying your bills to put it into stocks or some other asset. About ½ of Americans have no outside investments. In the last 50 years, median income for American workers, adjusted for inflation, is the same as it was in 1974. However, during the same half century, the S&P 500 is up over 40x, adjusted for inflation.

Real estate is also an amazing capital asset. It can appreciate tax free, using theoretical depreciation to reduce taxable income. When sold, it can be transferred without tax to another investment. And, when the owner passes away, the beneficiaries may not pay any tax on the appreciation due to a “step-up in basis.”

Government Programs. In 2023, $1.4 Trillion was paid out in social security. The increase was $135 billion over 2022. Most of us know that the social security trust fund will likely run out of money in 8 years or less. Many young people feel that social security has become a Ponzi scheme, whose cookie jar will be empty when they retire. Knowing this, why not use a “means test” for social security payments, like we do with Medicare, where those with higher incomes pay larger premiums? Why don’t we reduce the social security payments for those who don’t need the money as much as others and take the savings and use it to lift more children above the poverty line? 

Age of those in Congress. 40 years ago, the average age of the U.S. Congress was about 50 years. Today it is about 62. Since 2017, Congress has held 40 hearings on children and social media to address many of the problems outlined by Jonathan Haidt above, yet nothing has been passed. Both parties have introduced legislation to age-gate social media and nothing got passed. Is it any surprise that social security and social media issues are not dealt with when we look at the age of Congress?

Happiness. America is the 10th happiest country in the world for people over 60. It’s the 62nd happiest for those under 30. Professor Galloway recaps it this way, “Young people are economically disadvantaged, threatened by climate change and voiceless thanks to our dysfunctional politics.” Yes, we’ve broken our social contract with the young. Many of them are “opting out.” In 1993, 60% of 30 to 34 year-olds had at least one child. Today that number is 27%. Home ownership for this cohort has declined similarly.

Do We Love Our Children? I hope we all can answer yes to that. We need to do what we can to help stop this war on the young. Young people power the economy. Their taxes pay for the services we older people consume. Professor Galloway sums it up this way, “Without robust youth employment, Social Security will go bankrupt, debt service will consume the federal budget and the commonwealth will collapse.” I agree with him and hope you do too. Let’s all keep our eyes open for avenues for us to help turn around one of the most important problems in American.

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