Against the backdrop of this financial paradox, young people who cannot afford housing are increasingly resorting to risky financial decisions. This fully illustrates the situation.
For the youth, the initiation rite essentially involves receiving the label of an irresponsible generation. However, it is Generation Z that has faced the toughest conditions: they are accused of both unwillingness to work and high spending on impractical things like cryptocurrencies and NFTs.
Important distinctions between today’s youth and previous generations lie in two aspects. First, members of Generation Z are more likely to embrace these characteristics, creating the concept of "quiet quitting." Second, new research shows that such behavior is a response to deteriorating economic conditions, particularly the inaccessibility of home ownership.
A recent study by economists from the University of Chicago and Northwestern University, published last week, demonstrates the following results. Young people who have no real chance of acquiring housing significantly more often increase their spending on leisure, reduce work hours, and invest in high-risk financial assets, including cryptocurrency. The research by Son Hyun Lee and Yongjin Yoo shows that those who are close to the possibility of becoming homeowners are generally less inclined to take financial risks and are more diligent in their work.
A similar situation is observed in the United Kingdom. Young renters who have less realistic chances of saving for a down payment are more inclined to take financial risks compared to their peers who are already on the path to purchasing property.
The most important conclusion is that the study by Lee and Yoo, using various time frames and current housing price data, shows a causal relationship between housing inaccessibility and the financial behavior of youth. The recent increase in the propensity for risky investments and higher spending on leisure is explained by changing economic conditions. As young people realize that their chances of acquiring their own homes are minimal, they begin to resort to high-risk bets, which American economist Kyla Scanlon has termed "financial nihilism": why make an effort if the outcome will still be unattainable? At the same time, more affluent young people strive to save.
The study’s findings also highlight that the low stress resilience of Generation Z in the workplace is a consequence of economic realities. Many young workers express their dissatisfaction on social media, pointing out the futility of traditional nine-to-five jobs. These beliefs and behavioral patterns are explained by changes in the economic environment. It is not that previous generations were more dedicated to work, but that work was a means to achieve life goals. When the reward, in the form of home ownership, becomes unattainable, the desire to work loses its meaning.
It is also worth noting that parental support is necessary on the path to success. For most young people buying a home for the first time, the main obstacle is not income level, but rather the down payment itself. Why stay late at work if in the end, one will have to save for a down payment that could take a lifetime?
The data obtained have significant implications. First, they emphasize the need to address the issue of housing affordability, as it creates instability in both the economy and society: many young people are forced to take financial risks that can have serious consequences.
Second, it is essential to educate young people about financial literacy, which will help them adapt to new conditions. As today’s twenty-somethings are more likely to become lifelong renters, they will need more support and guidance to learn about other ways to build wealth and understand that there is hope.
While one can criticize the growing economic nihilism among youth, they are simply playing with the cards they have been dealt.
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