Wednesday, April 26, 2006

The Bank is Open. But Why?

The Bank in question is the New York Times' aptly named Bank of Mom and Dad. Combining anecdotal evidence with pop books and scholarly findings, the Times reports young adults- say 18 to 34 year olds- increasingly are receiving, if not relying upon, support from their parents.

But how novel is this development? What constitutes parental support? There are a lot of tangled ideas included in this piece which are not effectively identified. For instance, time. Pulling from results generated at the University of Michigan's respected Institute of Social Research we are told half of 18-34 year olds receive time donations from their parents (and significant chunks- nine full time equivalent weeks of work). To the extent that this is watching the grandkids or driving a kid back and forth from college, consider me underwhelmed. Setting aside the increased health of older Americans (Mom and Dad are now more likely to be well enough to babysit) and the long arc increase in college attendance (which increases the number of kids needing a ride home at semester's end), this is not new. But let's not totally dismiss these data points. Similarly, let's consider paying for college. Michigan's ISR finds that parents around the 70th percentile of income can expect to spend over $40,000 on their children between the ages of 18 and 34 (precisely what this means is unclear- are the 'in-kind' donations of continuing to use your bedroom rent free included in this figure in any way?). This figure, however, includes college education expenses, taking away some of the bite of this number (particularly since it's for a top 30% family and the family monetary contribution shows a distribution similarly skewed to that of income itself).

The role of sustaining cash does seem novel and new. Particularly its scale. In fact, I suspect what is new and novel about most forms of parental assistance is their extensiveness not their mere existence. Parents have been paying down payments, handing down cars, and watching the grandkids for as long as those things have existed. To what extent are those gifts now necessary? To what degree is this a reflection on broader economic conditions? Or are these trends more a reflection on the generation, affectionately, 'on the dole'?

I'd place myself firmly in the middle. Books such as Generation Debt and Strapped finger the overall economic situation and the unresponsiveness of the generation in power. They are not wrong. At the same time, as some famous economist once noted- you must bear some responsibility for your preferences- the fact that 20 somethings want is not instant validation. Take Anya Kamenetz, the author of Generation Debt. 25 or so years old, a recent graduate of Yale University. Sure, the bills might be piling up, the cost of being adult high, and the salary not much north of entry level. But her profile is hardly bleak. Among the best educated the world has ever seen and in possession of a publishing contract before her car insurance becomes reasonably priced. Which is not meant to pick on Anya. But it is meant to hold her personal and social expectations up for examination. Particularly for children of upper middle class families. They (we) are used to having their (our) wants met (so conditioned that we may be guilty of confusing wants for needs). Along comes adulthood with a harsh adjustment. The wants don't instantly change, the ability to satisfy them slams into a hard budget constraint. Instead of adjusting- or more accurately bearing the entire adjustment on still shaky shoulders- make application at the Bank of Mom and Dad. If the Bank of Mom and Dad isn't open enough, there's always the all too easy credit card offer and its income sucking debt service charges.

That said, there is something brewing here. Take a look at the categories swallowing the meager incomes of new adults: health care, education, housing, and to an extent child care. It is no accident that young adults are among the most uninsured segments of the population. They tend to be the healthiest and the least able to afford coverage. Remember, the single mid-career professional and the single 24 year old entry level staffer pay the same insurance premium under the company plan, making health insurance (though not necessarily health care) proportionately more expensive for the young. Higher education- in the form of increasing tuition costs, thus more debt, and increasing years of schooling- is taking a double bite out of incomes. Costs for housing and child care- similar to medical care and education- are increasing faster than the general level of price increases. Or, in simpler terms- these services are eating a bigger chunk of paychecks than they used to. At the same time, these are abstractly inelastic purchases (you need a place to live, education is the surest way to an adequate income, eventually health problems must be addressed, etc). Smush it all together and you've got an income crunch which hits the young hard and for the first time.

After all these words, you're probably wondering what it all means. Sorry to leave you unresolved, but I don't know. There is a problem here. Turning to Mom and Dad for cash and support cushions the blow of growing up (my couch and first car, not to mention tuition, etc during college, eased my transition from dependent child to self-supporting adult). But it doesn't solve the problem, it merely shifts it onto those with better resources. However, Mom and Dad are facing the same general crunches as well as retirement planning. It's not enough to expect personal responsibility to carry the day. At the same time, personal responsibility is more than, to borrow the Vice President's phrase, a sign of "mere personal virtue." It's the building block on which structural change is anchored.


At 10:15 AM, Blogger Anya said...

My book isn't about me. I do not extensively use my biography as an example and neither should you.

It is predominantly about the 2/3 of young people who do not earn a four-year college degree, who are unquestionably worse off than their parents--in income, housing, health care, you name it. That's the majority.


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