Geoffrey Paulin

For many Americans, the age of 21 is a major point of demarcation in one’s life cycle. This age marks the start of full legal adulthood—that is, the age at which the young person is no longer considered a minor and can freely engage in all legal activities, such as renting or purchasing a home. By age 21, many Americans have completed their formal education, and many more will do so during their twenties.¹ In addition, numerous individuals in this age group are starting on their first jobs leading to a career, and consequently, they face many new challenges. Achieving and maintaining financial independence can be difficult and has long-term ramifications for young adults and others in society. After all, income and spending patterns established in youth will affect one’s ability not only to save for the purchase of a home, provide for a family—including future children’s education—and live well in retirement, but also to contribute toward programs such as Social Security for current retirees. Clearly, then, understanding the economic status of young single adults is important for society as a whole, especially when substantial structural changes in the economy occur, as they have during the last generation.

Indeed, the changes that have taken place may lead to outcomes that differ from what has happened in the past. On the one hand, there has been a persistent belief, based on experience, that the current generation of Americans will be better off economically than the previous generation. On the other hand, since the 1990s, much literature has suggested that that belief may not be true anymore.² This article examines expenditure and income patterns for single, never-married young adults (persons aged 21 to 29 years) who were interviewed in 2004–05 and compares the patterns with those exhibited by single young adults 20 years earlier. The aim of the comparison is to assess the economic status of the two groups of singles in each period.

This excerpt is from an article published in the December 2008 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnotes
1 In general, the Consumer Expenditure Survey (CE) collects information on expenditures made, but not on amounts or quantities purchased. For example, a person may report having spent $20 for movie tickets in the past 3 months, but data on whether that person went to the movies twice and spent $10 each time or went 10 times to a discount movie theater are not collected.

2 Note that similar comparisons can be made even when neither period of interest is the base year for the index. For example, suppose that the analyst wants to compare expenditures that took place before the base year with those in the second period. Suppose also that the price index for the pre-base-year period in question is 80.0 and the expenditures for that period are $3. To convert these expenditures to second-period values, the analyst once again multiplies the expenditures from the pre-base-year period by the ratio of the second-period index to the index for the pre-base-year period (that is, [400.0/80.0] × $3 = $15). The result shows that real expenditures in the pre-base-year period are less than the value of expenditures reported in the second period. Therefore, the purchaser must have purchased more pounds of apples in the second period than in the pre-base-year period, even though the price of apples has increased.

Changing market: expenditures by Hispanic consumers, revisited, A.—Aug. 2003.
Making it on their own: the baby-boom meets generation X.—Feb. 1998.
Imputing income in the Consumer Expenditure Survey.—Dec. 1994.

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