In brief Gen Z and idealism
- A tension exists for this generation in many western, more developed markets: their age should make them idealists (the optimism of youth is a real thing), but the economic context of low growth and uncertain employment pulls them towards a less positive realism about the future.
- This means they’re not all gloomy, or as pessimistic as older generations on their behalf – but few are brimming with hope. Only 7% of Baby Boomers and 10% of Generation X expect Gen Z to have a better life than Millennials, but a quarter of Generation Z themselves (25%) expect their lives to be an improvement on Millennials’.
- They do have a focus on success and want to make money (60% of Generation Z in established markets feel this pressure). But it would be wrong to think this indicates shallow materialism – they just know they face tougher times, and in that context, focusing on finances is a sensible response.
- Despite this pressure, there has been a cohort shift away from materialistic values. Schoolchildren now have less materialistic views of happiness and success than schoolchildren of the same age in 2011 – less than a third (30%) feel the things they own say a lot about how well they are doing in life, compared with 42% seven years ago.
- But this doesn’t mean teenagers are moving away from brands. Over a third (35%) still feel brand names matter to them (compared with 38% in 2011).
- The experience of and demands from work are also shifting. For example, Saturday jobs are not really a thing any more. In 1997, 42% of 16-17 year old students (older Millennials) were studying and working at the same time – but at the equivalent point in 2014, just 18% of 16-17 year olds (older Generation Z) were.
The implications and the future
Future workplaces: rounded and flat
So young people are feeling the pressure to be successful, despite (and perhaps partly because of) having a glass-half-empty attitude to judging their chances of improving on the lives of their parents. Yet ambitions are not just to make money – a decline in materialism among teenagers compared with Millennials at the same age perhaps harbours a change in what Generation Z judge as success. Already, employers are beginning to heed calls to shed the traditional ‘corporate ladder’ approach – favouring what has been coined by Deloitte as a ‘corporate lattice’.137 A structure adopted by tech startups such as Google, this lattice approach promotes flatter, less hierarchical management. Employees are encouraged to take the initiative and the workplace environment is formed around the importance of integrating employee wellbeing with success. An evolution towards more fluid career paths and holistic job satisfaction could well cater to a generation under pressure, yet showing fewer signs of materialism.
Founded in 1996, Valve Corporation is a video gaming and digital platform company with a flat management structure. Employees do not report to managers – instead the company functions through an internal free-market, where time, ideas and projects are allocated. A grassroots approach to new projects means any employee can offer up an idea, and if colleagues think it’s good, teams are formed. Performance is measured through peer-to-peer reviews and a ranking system where staff working on the same project rank each other’s technical skills, productivity, team-playing abilities and so on. Valve strives to create a family atmosphere, with colleagues looking out for the wellbeing of others, helped by a wealth of office amenities and an annual all-expenses-paid company trip. In 2011, Valve’s operating profits were an estimated $2-4bn, making it the most profitable company per employee in the US. In 2017, founder and owner Gabe Newell was estimated to have a net worth of $4.1bn, ranking above US President Donald Trump.
The human cloud – a silver lining?
Gen Z are entering adulthood with less direct experience of the traditional workplace. This is partly out of choice – they want to focus solely on their studies – but also partly because there’s just not many part-time, traditional jobs available. This is mirrored in the growth of the gig economy, which has changed the employment market with an estimated 20-30% of the working population in Europe and the US engaged in independent work.138 The growth of the ‘human cloud’, a huge global resource of freelancers available to work remotely on demand, is further evolving the independent employment sector. Online marketplaces such as Amazon’s Mechanical Turk139 and Upwork140 immediately connect the employer with freelancers who are invited to bid for tasks that cover pretty much every skill an employer could ever want – from admin to design, to digital coding, to legal advice. Due to the fluid nature of the freelancer workforce and their explosive growth, it’s hard to predict the scale of these digital marketplaces, but McKinsey estimates that by 2025 (when Generation Z will mostly be in the workforce), 540 million workers will have used these types of sites to find work.141
Perhaps this is fitting for a generation less accustomed to clocking in and out at set hours. Yet the benefits and drawbacks of the gig economy is a long-standing debate. For some, these platforms could offer the future workforce the flexibility more suited to a modern employment market, but for others it could lead to poorer job stability and earning potential for a generation already expecting to be financially poorer.
Not brandless – but brands for less
How do you appeal to a generation who know they may not have as much disposable income as their parents did at the same age, yet still value brand names? The importance of diversifying and retrofitting brands to the budgets of younger people with less disposable income will likely become ever more important. There is already a push among retailers, particularly those with online delivery models, to rethink how they can market to lower-income consumers – Amazon has reduced Prime membership costs by more than half to US consumers on certain benefits.142 The success of European brands such as Lidl, ALDI and Primark – famed for providing cheaper, branded fashion and groceries – can only encourage more inclusive brands.
The current evidence
Realistic about the future
Generation Z have a sobering view of their future, despite the optimism of youth. Two in five (41%) Gen Z feel their lives will be worse than Millennials, and only a quarter (25%) expect their overall quality of life to trump the generation before them.
But this glass-half-empty attitude is anchored in real economic context. The financial crash in 2007, combined with broader trends (wealth across established markets has been tipped increasingly in the favour of older generations), has meant younger generations are struggling comparatively.
A recent analysis of the Luxembourg Income Study by the Guardian newspaper found that incomes for those aged 25-29 in various western European countries and the US have stagnated since the seventies and eighties, compared with the incomes of older people, which have risen. For example, in Italy, income for the 25-29 age group grew by 19 percentage points less than the national average between 1986 and 2010, meaning that in real terms, younger people are no better off than they were in 1986.143 On various wealth metrics in Britain, younger adults are failing to improve on previous generations. Young families are half as likely to own their own home by age 30, compared with Baby Boomers at the same age, and earnings for adults in their mid-twenties, as well as their disposable incomes, have stagnated.144
This pattern is mirrored in the us
In 2003, 66% thought their children’s quality of life would be higher and only 31% thought it would be lower. By 2011, this optimism reversed – only 44% it was likely their children would have a better quality of life, and 55% thought it was unlikely.
In reaction, there has been a notable shift in the hopes of established markets for their young people. A complete reversal in optimism has taken place in Britain and the US over the last 15 years across all age groups. In 2003, optimists for the future of the young outnumbered pessimists by nearly four-to-one in Britain. Now there are just as many pessimists as optimists.
This picture is widespread across established economies, with countries such as France and Belgium mostly filled with pessimists (71% and 60% respectively). However, the story of Gen Z in emerging markets is very different, where there is a much greater sense of optimism. The majority in countries such as China, Peru and India believe younger generations will have a better life than their parents did. These patterns mirror the reality of economic growth and opportunity tipping towards the east and south.
Feeling the pressure to succeed
So, in this context, it’s no surprise that younger generations feel more pressure to be successful and make money. But this is not a symptom of selfishness, or even materialism (as we shall see) but a reaction to an unforgiving economic climate. The age divide is particularly stark among established markets – three in five (60%) of older Generation Z (16-22 year olds) and Millennials say they feel this pressure to make money and be successful, compared with only a third of Baby Boomers (35%). Of course, there will be strong elements of life cycle effects to this that would happen at any time in history – the young just tend to have fewer because they’ve had less time to build up wealth. But the contrast with a much shallower difference in emerging markets suggests a more structural explanation of tougher circumstances in the west.
This could also be exacerbated by the increasing number of young adults remaining in higher education. In Britain for example, three in ten (29%) Millennials already held degrees in 2014 (when aged 18-34), compared with just a quarter of Generation X (24%) at the same age in 2000. Generation Z seem to be following the same trajectory. With three-quarters (74%) of secondary school children thinking it is likely they will go into higher education, this trend seems set to continue.145
Death of the Saturday job
Saturday jobs are not really a thing any more – at least in the UK. Sixth-formers in the UK are now far less likely to have a job compared with the previous generation of schoolchildren. In 1997, 42% of 16-17 year old students (older Millennials) were studying and working at the same time. At the equivalent point in 2014, just 18% of 16-17 year olds (older Generation Z) were.
This is a long-term decline which predates the recession in 2008 and is at odds with labour market data indicating the availability of part-time jobs. Analysis by the UK Commission for Employment and Skills suggests this is more about an attitude change among Generation Z. Although some want to work but can’t due to lack of the right job opportunities or increased competition, fewer want part-time jobs. Young people are increasingly choosing to focus on their studies.
It’s not all about the money
There is evidence that, generationally, what it means to be successful and happy is moving away from materialistic interests. Of course, an idealistic attitude is easier to have when relying on the ‘Bank of Mum and Dad’, but compared with school children of the same age seven years ago, there does seem to be a shift in values.
Secondary school-age Generation Z (aged 11 to 17) are less likely to agree with a range of materialistic statements compared with Millennial schoolchildren when they were the same age. Less than a third (30%) of younger Generation Z feel the things they own say a lot about how well they are doing in life, compared with 42% in 2011. Less than half (46%) feel that buying things gives them a lot of pleasure (compared with 53% in 2011). And even fewer wish that the all-important ‘Bank of Mum and Dad’ was bigger (only 37% compared with 48% in 2011).
Yet, importantly, a devaluation of money and materialistic possessions does not mean teenagers are moving away from brands. There has been no real decline in how important teenagers view brands. Over a third (35%) still feel brand names matter to them (compared with 38% in 2011).
Final thoughts …
Economically, Gen Z are in a unique position. In the established markets at least, they’re already mostly realistic about what the economic context might mean for their future (unlike Millennials, who invested in higher education and entered adulthood expecting the pattern of generation-on-generation improvement to seamlessly continue for them, only to be bitterly disappointed).
Although they’re still too young to have a full sense of what impact this will have in adulthood, there are clear indications that they’re on a mission to get some money in the bank and be successful.
But it’s not that they’re expecting (or wanting) to earn enough to sit in champagne-filled hot tubs – they’re just acutely aware of how slippery that economic ladder is nowadays. Actually, it seems that kids now get less pleasure from materialistic things (or so they say) than Millennials did. But it would be a mistake to think that this means they’re willing to compromise on brands – brand names are just as important to them as they were for Millennials.
Businesses and policymakers need to avoid the trap of confusing cause and effect, and misunderstanding Gen Z’s underlying motivations: they’re adapting to their context, in a way that Millennials maybe didn’t have the chance to and, with the right approach, can still be engaged.