A new survey of credit-card spending indicates that members of the generation known as Millennials are increasing their spending on "luxury" items — designer clothing and accessories, tech gadgets, jewelry, etc — faster than any other age cohort. Their parents, the Baby Boomers, still spend far, far more on luxury items (they make up 50% of the total luxury market, while Millennials are only 3%), but it is young people whose luxury spending is growing the most spectacularly.
According to the study:
Gen Y consumers increased spend on premium luxury fashion by 33% in 2011 over the year prior. Despite representing the smallest group of luxury consumers today, Gen Y grew spending the most in full-priced online luxury retail, by 31% in 2011 over the year prior, compared to Gen X at 23%, Boomers at 19% and Seniors at 6% for the same period. Gen Y also led spending among all groups in specific retail categories such as jewelry, with an increase of 27% for 2011 as compared to Gen X and Boomers, which increased 2% and 4%, respectively, and Seniors, which declined spend on trinkets and baubles by 3% in 2011.
The data was based on the spending habits of American Express cardholders from 2009-2011.
On the one hand, this seems confounding: Gen Y — which the credit-card company calls people born 1980-2000 — are some of the least-employed, most-indebted folks around. College seniors who graduated in 2010 carry an average of $25,250 in student debt; total student debt in the U.S. surpassed $1 trillion late last year. And U.S. youth unemployment is now at 18.1% — more than double the national rate of 8.1%. And because the unemployment rate in the U.S. only measures people actively looking for work — not those who are under-employed, or those who have been looking for work so long they've given up — the true rate is likely even higher, as evidenced by the fact that the Department of Labor finds that young people's labor force participation is at its lowest level ever. For black and Hispanic youth, the unemployment rate is even worse: 31% and 20.1%, respectively.
On the other hand — the hand that I can use to reach out and open my closet, the hand that I am using to type on my $1700 laptop — the notion that young people are apparently eager to spend what little discretionary income they have on luxury items makes perfect sense. Millennials are mostly too young to have any money-sucking dependents. After the rent, the bills, and the credit cards are paid, and after I set aside a tenth of whatever I've earned for savings and investments, whatever money I have left over I'm much more likely to spend splurging on gourmet ingredients for a nice meal or a pair of designer shoes than I am something actually...useful. Of course, my gourmet ingredients don't come from Whole Foods and my shoes are gently used from eBay, but whatever. Why shouldn't I spend my money on what I want? I'm at a stage of my life where I don't really have anyone I need to spend money on but myself, and I suspect many Millennials are the same. Shoes and sweetbreads it is.
That and we've been inundated with luxury advertising since birth, and spend twelve hours every day simmering in the broth of the Internet — a space where whatever "lines" once existed between retail, advertising, sponsored content, content-content, and other editorial have been more or less erased. Where the cues to consume are many.
There's a scene in The Corrections where the character Gary, a bank vice-president whose income funds a lavish lifestyle for his deeply materialistic wife and kids, has an imaginary conversation with his mother, Enid — a stingy woman whose own desire to consume wars constantly with her guilty sense of thrift. "I have what you taught me to want," shouts Gary, in his head, after enduring yet another critique from Enid. Gary is a Boomer, and Enid is a Greatest Generation-er, but the dynamic resonates today. Millennials want what we are taught to want. And so that's what we're buying.
Millennials: Young, Broke, and Spending on Luxury [Fiscal Times]
Photo: Aaron Amat/Shutterstock