Two things worrying Gen Z now

Key Concepts

• Gen Z Spending Habits: Significant reduction in overall spending.
• Economic Challenges: Cost of living, economic uncertainty, inflation impacting Gen Z.
• Job Market Fears: Fear of not finding a job after losing one, longer job search durations.
• Emergency Savings: Gen Z actively building emergency funds.
• Parental Support: Decreasing financial support from parents due to parental financial stress.
• Healthcare and Rent Costs: Sticker shock from rising healthcare premiums and rents.
• Generational Dislocation: Division within Gen Z between those progressing and those struggling.
• AI Impact on Workforce: Concerns about AI hindering job acquisition, promotions, and career progression.
• Value of On-the-Job Experience: Gen Z's belief in the necessity of practical experience for skill development.
• Universal Basic Income (UBI): High support for UBI among Gen Z.
• Retirement Concerns: Gen Z's low confidence in affording retirement.
• Work Ethic and Loyalty: Gen Z's perception of loyalty and work ethic, contrasting with employer assumptions.
• Transformative Workforce Era: Gen Z's role in a changing job market.

Gen Z Spending and Economic Pressures

Gen Z has reduced their overall spending by 13% between January and April of the current year, as reported by PWC. This significant cutback is attributed to a confluence of factors including the rising cost of living, pervasive economic uncertainty, and persistent inflation. These economic headwinds are creating a challenging financial landscape for younger consumers.

Job Market Fears and Financial Preparedness

A key finding from Jason Dorsey's research indicates that Gen Z's anxieties extend beyond simply fearing job loss. They are even more concerned about the prospect of not being able to find another job once unemployed. This fear is driving a cautious approach to their current employment, with individuals striving to maintain their positions. Furthermore, a significant, and often overlooked, behavior is the active effort by Gen Z to build emergency savings. They are aiming to accumulate several hundred to a couple of thousand dollars to buffer against potential layoffs, anticipating a longer job search period than in previous economic cycles.

Parental Support and its Limitations

The research also highlights the continued, albeit diminishing, financial support Gen Z receives from their parents. This support manifests in various forms, from direct financial aid like gas cards and allowing extended cohabitation to helping with credit card payments. However, these same parents are increasingly experiencing their own financial stress, which limits their capacity to provide the same level of assistance to their adult Gen Z children as they might have in the past.

Broader Cost of Living Increases

Beyond inflation, Gen Z is experiencing "sticker shock" from other essential expenses. Rising healthcare premiums and soaring rental costs in many areas are contributing to their overall financial strain and are key drivers behind their reduced spending.

Generational Dislocation and Disparities

A notable internal dynamic within Gen Z is a sense of "dislocation." The generation is bifurcating into two groups: one segment that has managed to secure employment and is progressing, and another peer group, of the same age and often from similar backgrounds, that is struggling to advance. This disparity is creating internal challenges and a sense of unease within the generation. Dorsey likens the current situation for young adults entering the workforce to the difficulties faced during the Great Financial Crisis.

Defining Gen Z and Age Demographics

For the purpose of this research, Gen Z in the US encompasses individuals up to the age of 29, essentially covering all individuals in their twenties and extending down to their mid-teens. The research examines a broad spectrum of their engagement with the economy and workforce, including workforce participation rates, the declining trend in obtaining driver's licenses, and reduced participation in summer or seasonal jobs. This age range is significant because it captures individuals who are beginning to gain financial autonomy and have the capacity to spend.

The Role of AI in Gen Z's Workforce Concerns

Artificial Intelligence (AI) is a significant factor in Gen Z's workforce anxieties. While Gen Z generally embraces and trusts AI, using it daily in their personal lives, they are increasingly perceiving it as a barrier in the professional realm. They report hearing and seeing that AI is hindering their ability to secure jobs, receive promotions, and take on more responsibilities. This is particularly concerning for those in their first year or two of their careers, especially college graduates, who may question the value of their degrees if AI prevents them from entering the workforce. This contrasts with vocational trades, where job availability is perceived as more robust. The primary concern regarding AI is not necessarily job displacement, but rather its role in making it difficult for Gen Z to gain an initial foothold in their careers and subsequently advance and develop essential skills.

Gen Z's Need for On-the-Job Experience

A majority of Gen Z believes that practical, on-the-job experience is crucial for acquiring the skills necessary for professional success. They recognize this need and are actively seeking opportunities to gain this experience.

Support for Universal Basic Income (UBI) and Retirement Pessimism

Universal Basic Income (UBI): Over 60% of Gen Z supports Universal Basic Income. This support has grown significantly, particularly since the COVID-19 pandemic and the implementation of government stimulus checks, which demonstrated the feasibility of such programs. Gen Z is the most vocal generation advocating for the federal government to provide a basic living wage to all adults in the US.

Retirement Outlook: Conversely, Gen Z expresses a strong belief that social security programs like Medicare will not be available to them in the future. They anticipate needing to financially support their parents, who they believe will outlive their savings. Furthermore, Gen Z is pessimistic about their ability to afford a house or build wealth through traditional means. Consequently, a majority of Gen Z does not believe they will be able to afford to retire. This outlook profoundly impacts their financial decisions, including savings, investment strategies, and career choices.

Key Takeaways for Employers and Policymakers

Misconceptions about Gen Z: Gen Z is often mischaracterized. Over 70% of Gen Z members in a recent study believe that loyalty to an employer means working there for at least one year, with a significant portion believing it requires two to three years. This contradicts the perception that young adults lack work ethic or are unwilling to commit to employers.

Different Work Styles and AI Integration: While Gen Z may exhibit different work styles, they possess natural proficiency with AI, a technology that many have grown up with.

Financial Sensitivity and Long-Term Impact: Gen Z is in a financially delicate situation, and the long-term consequences of early career challenges, such as difficulty securing employment or financial strain, can significantly delay career progression and create cascading negative effects.

Call for Re-evaluation: Employers and policymakers are urged to re-examine their perceptions of Gen Z. They are eager to work, possess valuable skills, and are actively seeking employment. Recognizing their contributions and understanding their unique circumstances is crucial for their successful integration into the workforce and for the benefit of all generations during this transformative period.