Living through social life before and after the financial crisis... Income disadvantage
In child-rearing years, increased childcare and education costs due to COVID-19
WSJ "Millennial generation disadvantaged from the start"
While some young people in Korea are struggling with debt after 'real estate all-in' investments, it has been found that the millennial generation in the United States has also seen an increase in debt levels due to the COVID-19 pandemic and inflation.
On the 25th (local time), The Wall Street Journal (WSJ) evaluated that the American millennials in their 30s have been placed at a disadvantage from the start.
According to the media, this generation began working during the 2007?2009 period of economic recession caused by the global financial crisis, which often limited their income.
Moreover, during the prime time for having and raising children, they faced difficulties due to the outbreak of COVID-19. With schools closed, they spent thousands of dollars on unplanned private education and childcare expenses.
In addition, when they tried to purchase their first home, they faced economic pressure from high interest rates and rising housing prices. These circumstances have contributed to placing the millennial generation under a mountain of debt.
"US Millennials Hit from All Directions"
According to the Federal Reserve Bank of New York, the total debt of the millennial generation exceeded $3.8 trillion (approximately 5,008 trillion KRW) as of the fourth quarter of last year, a 27% increase from the end of 2019. The debt growth rate among millennials was found to be the steepest across all age groups.
WSJ pointed out that the increase in millennial debt could deepen the wealth gap between generations. Silvio Tavares, CEO of VantageScore Solutions, said, "Young and less affluent borrowers are financially pressured as their incomes cannot keep up with rising living costs and inflation. In that sense, a 'credit gap' is emerging," adding, "This phenomenon is not seen among older and wealthier borrowers."
Some argue that millennials feel financially insecure even when the economic situation is good. Charlotte Pirinsipato, who is in charge of young consumer analysis at the US polling firm Morning Consult, said, "From the millennials' perspective, they are hit from all directions. They feel they cannot control their financial situation," and added, "Generation Z will likely follow in the footsteps of millennials."
One in Four to Five Young Koreans Has Debt Exceeding Three Times Their Income
In Korea as well, the situation is not good, with one in four to five young people carrying debt exceeding three times their annual income.
According to the report "Asset Status and Response Measures for the Future Life of Youth" (by Kwak Yoon-kyung et al.) from the Korea Institute for Health and Social Affairs, which analyzed raw data from the Statistics Korea Household Financial Welfare Survey, the average debt of households headed by young people aged 19 to 39 was 84.55 million KRW in 2021. This is 2.48 times the 34.05 million KRW recorded in 2012. Here, debt refers to financial liabilities excluding rental deposits, and the average includes young people without any debt.
The increase in youth debt appears to be related to difficulties in securing housing and the real estate investment craze. The report pointed out, "While debt for housing accounts for the largest share, there is a phenomenon of increasing debt for real estate or financial asset investments not intended for housing," and warned, "Those who purchased financial assets and real estate through 'Yeongkkeul (borrowing to the limit)' and 'Debt investment' are highly likely to become socially vulnerable due to future asset decreases and debt increases."
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