Lingering Myths about Generation X

Generation X attracts more speculation, controversy and debate than one would care to master. The conversation began in 1991 with Douglas Coupland's book, Generation X: Tales for an Accelerated Culture, which profiles a group of "underemployed, overeducated, intensely private and unpredictable" twenty-somethings who have "nowhere to direct their anger, no one to assuage their fears and no culture to replace their anomie." Coupland's proclaimed erosion of standards and values, and the resulting ambivalence of his archetypal characters have haunted Americans born between 1965 and 1978 for nearly 15 years.

Throngs of researchers, writers and insulted Gen Xers have made a pet project out of revising or even refuting Coupland's claims, but certain myths still linger. This article addresses five of the most prevalent perceptions of Generation X in today's world. Using the most up-to-date information available, along with historical statistics, we shed light on where Generation X stands.

Generation Xers are, and always will be, outnumbered by other generations

Researchers define a generation as a group of peers who share similar life experiences. Notwithstanding those who doubt the credibility of generation-based characterizations, generational divides still provide some of the most useful insights into large groups of our population. The Baby Boomer generation was born between 1946 and 1964, a span of 18 years. Generation X, on the other hand, is not so easily categorized. Most commonly, those born between 1965 and 1978 are considered Xers, but several influential research reports have expanded the conventional 13-year span to one more comparable to that of the Boomers — 1961 to 1981.

Much of the reason manufacturers and marketers are so dedicated to Baby Boomers is because they are considered the largest demographic group participating in the marketplace. That depends on how you look at it. Younger Boomers often complain that they have less in common with their assigned generational cohort than the market acknowledges. As a result, those born between 1961 and 1964 could potentially attach themselves to either or both of their surrounding generations.

Researchers who have adopted the 1961 to 1981 time span for Generation X have taken this generational ambiguity into consideration, and it spells a major shift in the power-in-numbers mindset of Boomer-centric marketing. The 1961–1981 group of Generation Xers actually outnumbers the Boomers.

When comparing Generation Xers and Boomers, it is important to use a snapshot of Boomers when they were young adults. This offers a comparison of like terms for more relevant and more accurate results. Table 1 is based on U.S. Census Statistical Abstract data. It compares the young adult populations of 2002 and 1990 and illustrates the population difference between 1965–1978 Xers and 1961–1981 Xers.

Although the numbers from Table 1 are not exact (the 40–44 age group in 2002 actually includes people born in 1959–60), you can see that a more generous inclusion of Generation Xers makes quite a difference.

Even without the help of might-be Xers born in the early 1960s and late 1970s, the purchasing power of Generation X's core constituency was $730 billion in 2001, according to Alison Stein Wellner of Forecast magazine.

Gen X is overeducated and underemployed (a.k.a. "slackers")

Time magazine's 1997 cover article, "Great Xpectations," weighed in on this issue, stating that much of the job-market pessimism that Boomers projected onto Generation Xers was the result of their own disillusionment. "Boomers entered the marketplace years ago with high expectations," said one of Time's sources. "And when they were disappointed, they thought the future looked bleak for Xers. So they portrayed them as a lost generation." In contrast, half of the Xers interviewed for the article believed they would outdo their parents financially.

Now, not only is Generation X making more money at a younger age than their Baby Boomer parents did, but they are also more satisfied in their careers. Despite a slight increase in unemployment from 4.9% in 1990 to 5.4% in 2004, Generation Xers are averaging $45,080 in household income; the same age group in 1990 would make only $41,025 in today's market (adjusted for inflation).

Generation Xers are equipped with several workplace assets that contribute to their unexpected success, including the following:

• Education: Xers are more educated for their age than any other generation, and they have a pragmatic approach to education: They want to see marketplace returns for the time, money and effort they spent in school. In 2002, 56% of 25—34-year-olds had attended at least some college, whereas only 45% of Boomers in 1990 had attended college. Census Bureau statistics reveal that educational level is directly related to income. For example, college graduates earned 53% more money than high school graduates in 2002.
• Technological knowledge and ability to multi-task: Many Xers grew up with computers in their homes — or at least in school — and can quickly learn almost any software program. They can concentrate on many tasks at once and process information quickly.
• Acceptance of change: This generation has witnessed historic increases in divorce, layoffs and general marketplace instability. They are not afraid of changing careers. In fact, U.S. workers change jobs nine times by the age of 32, according to Jean Chatzky of Money magazine. For Xers, job security has taken on a whole new meaning: It comes from having transferable skills that make them more marketable and lead to better jobs.
• Self-orientation/self-sufficiency: From daycare to day jobs, Generation Xers look out for themselves. They have adopted a free-agent mentality toward the job market. Xers approach careers with more self-awareness than employees in the past and consequently have higher expectations of the workplace. They want to make valuable contributions on the job, and they want those contributions to be acknowledged. After all, if Xers aren't satisfied with their jobs, they won't hesitate to find others, or even venture out on their own (four out of five business startups are by Xers). Another important feature of job satisfaction for Generation X is flexibility: They may work hard, but they don't forget to play. Unlike many Boomer workaholics, Generation X marks a return to a balanced lifestyle: They believe that happiness in life cannot be achieved without a healthy commitment to outside interests, including a rich family and social life.

Generation Xers will live with their parents longer

As it turns out, Xers' higher incomes, coupled with more flexible mortgage requirements, have enabled them to buy homes sooner than Boomers did. According to the U.S. Census Bureau, 47% of 25—34-year-olds owned a home in 2003, compared to 43% in 1990. Table 2 (page 40) summarizes homeownership rates of various segments of young adults in 1990 and 2003.

As Table 2 shows, not only are more married couples buying homes, but single males and, most markedly, single females are buying homes in much larger numbers than Boomers did at their age.

So where are these young homeowners living? Table 3 (page 42) shows a list of the top 10 U.S. cities for the Gen X population.

Home Investment

The major motivating factor for Gen X homebuyers is home equity. NQuery research shows young homeowner focus groups told us that their homes were a mechanism to build wealth rather than a place to "plant some roots." Most agreed that they would be in a different home in five or fewer years.

Across the United States, home equity grew by $2 trillion over the past three years, reaching $7.7 trillion by the end of March 2003, as shown in Exhibit 1. Home equity is the single largest component of net wealth for most families in the United States.

Home equity gains tend to have a more powerful effect on consumer spending than other gains in wealth (rising incomes, savings, stock market investments) for two reasons:

• Families view gains in home-equity wealth as more permanent, whereas gains (or losses) in the stock market are seen as more transitory. Home-equity growth is also more stable, largely because home values are far less volatile than stock prices. Since 1970, the quarterly growth rate of home values averaged 6% (at an annual rate) with a standard deviation of 4.8%, while the market for corporate equities has gained 15% on average with a standard deviation of 33.4%. Based on this information, it is clear that stock values have been far more volatile than house prices. As a consequence, aggregate home equity in the United States has grown 8.6% per quarter (annualized), with a standard deviation of 7.9% — far less volatile than stock market gains.
• Home equity wealth is also more broadly held across the United States than stock market wealth. The U.S. homeownership rate is 68%, while only 53% of American families hold stock, either directly or indirectly.

Generation Xers favor intangibles over possessions

One of the biggest misconceptions about Generation X is that they reject material wealth in favor of rich intellectual, spiritual and social lives — that they value experiences over possessions. Coupland called this idea "lessness" or "status substitution."

Having and spending money may lack novelty for Xers, but that doesn't mean it is not important. This generation has been participating in discretionary spending since they were teenagers, and now they want to maintain a similar level of affluence. Time's publication of the New American Dream study revealed that the majority of Xers believe material things, such as their homes and cars, are very important.

Xers are an important group when it comes to discretionary spending, largely because they are reaching peak ages for life stages associated with heavy spending. Generation X has produced homebuyers and home-improvement shoppers at an earlier age than ever before, and they will go to great lengths to make their homes reflect personal tastes and preferences. Kid-friendly items are also a hot market for Xers now that 55% of them have children.

According the Consumer Expenditure Survey, Generation X outspends the average consumer in several categories, including eating out, clothing, transportation, entertainment, audio/visual equipment and housing. Table 4 outlines household spending on select items for Generation X compared with that of the average consumer.

Gen X is cynical

Until now, this report has served to dispel common Generation X myths, but we'll concede this one. Generation X does often seem to use irony, sarcasm and skepticism to keep the world in perspective, as Karen Ritchie explains in Marketing to Generation X. No ideal, icon or marketing strategy is safe from Generation X, and many companies have failed to adjust their strategies accordingly.

While Xers may not be as idealistic as their parents once were, they are not entirely impervious to marketing. Just don't try to sell them hype, because they will see through it every time. Xers know when they are being marketed to, so they prefer to receive straightforward messages and objective information. Financial institutions and insurance companies have caught on and are offering rate comparisons with competitors'. Examples of no-hype, comparison-shopping portals include Vehix and Travelocity.

Another way to reach this audience is to speak to their personalities, which is why self-conscious and ironic approaches to Generation X marketing have proven successful for several companies. Time magazine's "Great Xpectations" article provides insight on this subject, citing examples like Sprite, which rose from No. 7 to No. 4 in soft-drink sales after adopting the slogan, "Image is nothing. Thirst is everything. Obey your thirst." More recently, Saturn has adopted a no-hype strategy in an October 2004 TV commercial: "I hate being sold. That's why I bought a Saturn." Xers appreciate self-conscious advertising, because it tells them: "We know you are aware of what we are trying to do, and we're not afraid to show it."

The main lesson here: Don't underestimate Generation X. They have a lot of spending power, and they use it judiciously. Now is the time to reach out to this generation in some key markets, especially home improvement.

Sources

Previous NQuery research, U.S. Census data, and a comprehensive search of reliable secondary sources were used for this report. A complete list of secondary sources appears below:

Chatzky, Jean. "Gen Xers Aren't Slackers After All." Time (Apr 8, 2002).

Hornblower, Margot. "Great Xpectations." Time (Jun 9, 1997).

Lankard, Bettina A. "Career Development in Generation X." Myths and Realities, a publication of ACVE (1995). www.cete.org/acve.

Mitchell, Mark Andrew and Robert Orwig. "Generation X: How to Manage, Market, and Motivate Them." Nonprofit World 16:1 (January/February 1998): 36–41.

Wellner, Alison Stein. "The new adults: Gen Xers will turn 38 this year..." Forecast (Jan 2003).