The millennials are here!
Few themes permeated the Greater Washington Board of Trade’s recent two-day “Outlook 2016” confab than the influence wielded by those born between the years 1981 and 1996.
At times it seemed like presenters were talking about some alien race, albeit one that will make up 50 percent of the global workforce by 2020. Millennials like living in cities! They like experiences over things! They like to rent, not own! They like collaborating, not hiding out in offices! They travel for fun and adventure! They like to eat out! They like to order things on their phones!
This confuses me, a late boomer. I like cities. I like experiences over things. I like to eat out. If I wasn’t almost out of my mortgage, I might like to rent. I like travel and have adventures. I like to order things on my phone.
In other words, the changes afoot are bigger than the millennials, but give the generation its due. It’s shaking things up.
Yet in macro terms, the consensus among local business leaders is that we should expect more of the same for the near term: A slow, if choppy, expansion of the Washington economy as we continue to shake off the effects of the Great Recession. The factors that bedevil us are not going away anytime soon, whether it be a gridlocked Congress, an economy too dependent on federal spending, or global turmoil.
Navigating the bumpy ride is likely to get trickier. The slowdown in China shows that when the Asian giant sneezes our stocks markets can catch a cold. No one really knows how the economy will respond once the Federal Reserve tries to de-leverage its enormous balance sheet. One investment guru told us the smart money will need to be more selective in identifying opportunities. If a sector seems strong, you probably already missed the boat.
But don’t mistake that larger sluggishness for a lack of energy behind the scenes.
There’s enormous churn going on inside companies and industries in the Washington area. The slowdown in federal spending is forcing agencies to rethink their contracts. Nearly two-thirds of companies that have held work with the government, the so-called incumbents, have lost their contracts. Contracting has gotten competitive again, for a smaller piece of the pie. Contractors providing people for delivering government services are being hit especially hard, because a competitor that offers a lower price can often hire the incumbent’s workers, for less. In contractor speak, this is called rebadging. Others might label it the commodization of labor.
Which helps explain why unemployment is falling in the Washington area but payrolls are rising very little.
Another shutdown or round of automatic budget cuts under the federal sequestration process is only likely to exacerbate issues.
Other industries face their own challenges.
Take health care, an enormous employer. The shift to how the health machine gets paid, from consumption to outcomes, driven by the Affordable Care Act, is transforming every phase, from doctors, hospitals, insurance companies and more.
The changes are pushing the distribution of medical care down the food chain, closer to the community. Suddenly health systems are fashioning partnerships so you can receive your consult at your doctor’s office, the local drug store or Wal-Mart, or even virtually, via telemedicine. These new delivery systems are being fueled by new mobile technology that allows you to book appointments on your phone and give you more control over your health care. Viewed another way, the traditional doctor-patient relationship is under assault, being modified by ever sophisticated algorithms seeking to identify gaps in our care and places to economize.
A rise in consumerism is spreading to other sectors, too.
The managers of our airports actually wonder if we really need more parking as an Uber generation comes of age. Companies are offering more and more amenities in their buildings to compete and retain talent. The very nature of the office is changing at as companies realize they must innovate to stay relevant in today’s economy. What better way to innovate than to put employees together in big open spaces so they can better brainstorm with one another, instead of remaining cut off by office walls.
Besides, millennials like to work in teams!
There’s also a sense that business leaders here are less preoccupied with what’s happening locally. Today’s Internet-connected world brings ideas from around the world to our doorstep. So tech leaders here take their cues from Silicon Valley or London. We envy the new architecture and airports of the Middle East or Asia, and wonder why our customs operations are so inefficient compared to what travelers experience elsewhere.
And here’s the thing, many of these changes are happening because institutions are actually paying attention to what millennials want. As one real estate executive told us, the millennial’s movie is different than their parents. Owning a home was an article of faith for the boomers. It connoted safety; we were told the buy early and buy a lot, even if it meant borrowing ungodly sums. Real estate was the single best way to build wealth.
The millennials sat through a very different show. They saw parents and friends lose their homes in the real estate bust. In their experience, owning a house connotes risk. The purchase process is difficult, as banks throw up all kinds of obstacles to getting a loan. All of which explains why home ownership levels today are barely above where they were in 1965.
Still, a healthy understanding of risk can be a good thing in an economic recovery. And give millennials time. Many real estate agents are betting it won’t be long before this generation starts forming families and begins looking for more permanent space.
The millennials are here, and that likely will have implications for all of us.