Some may say our nation’s youth are entitled, but when it comes to millennials and state entitlement programs there’s another worry: what will happen when benefits can’t be paid out?
I spoke with Bloomberg analyst Neil Grossman about his recent study on Generation Y and the lopsided nature of Social Security, Medicare, and Medicaid. Here is part of our conversation for Forbes.com:
What can young people expect as unfunded liabilities grow?
Grossman: Young people already find jobs hard to get, are paid lower on a relative basis to prior generations, and have lower expected earning trajectories over their working careers. This is slowing household formation. This also makes it harder to save and invest for the future, which implies that long term returns on assets will be lower—Millennials won’t have the savings to pay for them—which will actually put further stress on a retirement system that relies on high returns for funding.
What can Millennials do to turn this around long-term?
Grossman: For Millennials, the solution I think is most appropriate is to seek lower benefits and to insist that seniors bear a far larger part of the actual cost of the benefits they receive. The biggest issue is that these programs are true political hot potatoes. The biggest voice wins and seniors and Boomers have loud, powerful vocal chords. Millennials need to counter this—the sooner the better.
It’s been almost 10 years since President George W. Bush outlined a proposal for the partial privatization of Social Security. We knew this was heading our way even before that. Yet Grossman predicts that little will be done for the next 20 years or so. When do you think there will be enough political will to address the issue?