Gen Z - Key Characteristics no.2 - Prudent

Read on my website: www.alexatherton.com/blog/prudent-gen-z

Read time: 6 minutes

This is part of a series of blogs on Generation Z (years of birth 1997-2012). Over the course of these blogs and through the talk I have put together I explain

• how and why Generation Z is different, naming seven key characteristics

• the challenges this presents for leaders and organisations

• the actions not only to overcome those challenges but ensure future prosperity.

Gen Z is the most important generational shift yet. Their experiences and outlook are not understood well enough by those who have come before them. Generation Z has huge, as yet mostly untapped, potential to meet the challenges of today.

To see an overview of the whole series, including dates of generations, go to https://www.alexatherton.com/gen-z.

Why Prudence?

Some of the key characteristics of Gen Z stood out to me more than others. Originally I had this one down as ‘conservative’ but it did not feel clear enough. That word offers a range of different possibilities, some of which would be misleading. 

Having said that, there is some evidence that the blend of political views within Gen Z is different from the previous two generations at the same age. There’s a libertarian streak amongst many which few media outlets seem willing to discuss.

Here, I am referring to financial prudence primarily, and the starting point can be seen in the graph below. In particular, I am referring to the dip shown in 2008/9 due to the Global Financial Crash at that time. Wider detail on the GFC can be read here, and seen in the excellent (but troubling) film Big Short.

In retrospect we did not realise how good we had it in the years leading up to the crash. Although the period of time between the recovery from the GFC and the pandemic look similar to what came before, the losses from the crash need to be considered too. Note also the declining rates of growth from 2014 to 2019. The economic impact of the pandemic may have been extremely severe but it also followed a difficult period.

At the time of the GFC the oldest Gen Z were starting secondary school and the youngest not even born. The banks which went under took many businesses, jobs and homes with them. It was followed by significant cuts to public expenditure under what became known as the ‘austerity programme’ (albeit not by those who instigated it). 

These cuts included education, welfare and local government. VAT went up to what felt like an eye-watering 20% at the time. It was a regressive move in tax terms and has stayed there ever since.

Gen Z grew up in a less prosperous time than the previous generation. Furthermore, the youngest generation is always going to be affected more by public spending cuts than the average, as they depend upon it more. As one example, for Gen Z it meant less money for schools and higher debts for those who went to university.

The 2010s demonstrated that the gains made in previous generations cannot be guaranteed, or that lessons will be learned from economic disasters. It may be a cliche that a key lesson of history is that its lessons are not learnt, but the evidence supports it.

Despite the GFC business investment in the UK continued on an upward trend for years afterwards. That tailed off sharply from 2016 onwards, and nose-dived in the pandemic. Optimism is not high. Check the graph from the Financial Times below.

Economic Confidence

Zoomers have good reason to be less confident about future economic prosperity, even beyond the current cost of living crisis and recovery from the pandemic. The table below from Deloitte’s annual Gen Z and Millennials’ survey shows the proportion of both generations who ‘believe the economic and social/political situation will worsen’.

The pandemic may have led to a more pessimistic outlook on the economy, but the numbers were not strong even before Covid-19. On average Millennials are slightly more pessimistic than Gen Z but by definition they are also older. The fact that Gen Z coming out of education are similarly despondent about the future feels particularly depressing to me.

Pandemic Impact

Gen Z was also the generation most affected economically by the pandemic, as demonstrated by the table below from Vox in 2020. As with the GFC every generation was affected. As ever, the variations within generations will be greater than those between and not just on the basis of age either.

In terms of shaping the outlook of a generation the key point is this; by the time the oldest Zoomers got to their mid-twenties there had been a key economic disaster which shaped their teenage years, and then another as soon as they got to the workplace. 

Those on the lowest incomes were also hit hardest by the pandemic. This included those who used the gig economy for part or all of their income, and those who experienced the misfortune of being ‘last in, first out’. Any impact on the lowest incomes is going to affect the youngest disproportionately given earnings are lower at the start of your working life. 

Cost of Living

All of this has led to Gen Z being a generation far more likely to save should it be possible to do so, as far-fetched as that possibility appears to be right now. My analysis of this is that it does not necessarily represent saving for a more prosperous future, but mitigating against the next disaster.

Put extremely broadly, Generation X’s key task in early professional life was to save for a deposit for a house or a flat. Sharing the collective rent with others enabled this to happen to a greater or lesser extent. Many then went on to exploit this position to buy further properties with the introduction of buy to let mortgages in the mid nineties.

Others got on the housing ladder and moved their way up. Those with a mortgage in place before the GFC then discovered a key benefit if they survived it. Interest rates fell to record low levels and stayed there for well over a decade. The experience of ownership became cheaper than anticipated, whilst the likelihood of buying diminished sharply for those who followed. 

As property prices increased the ability to save diminished, and rent absorbed a higher proportion of income. Young Millennial professionals either moved back in with their families to save, or moved somewhere cheaper. Even then this proved beyond many whose ‘temporary’ circumstances became a lot more permanent. 

Gen Zs are now faced with the terrible position of a weakening economy being accompanied by a significant increase in rent, as only one feature of the cost of living crisis. They live in smaller spaces and with more people on average. On top of that the lockdowns meant working from home in a space not ideal for the task. Organisations found savings in renting smaller spaces and graduates joined workplaces with no designated space to work in beyond the room they slept in.

Faith in Institutions

All of this presents an issue for organisations, and perhaps larger corporations in particular. Generation Z does not have as much faith in them. The same is true for governments, political parties and other institutions. 

Gen Z not only sees a future in working around institutions, but also does so out of necessity rather than a sense of idealism. From their perspective, traditional ways of doing things have not worked. Given this, it doesn’t matter if the old ones are disrupted. Furthermore ‘disrupting the system’ is not necessarily part of the journey to building a new one either as that would only lead to a new set of institutions. It is not just the current institutions which are problematic, but the concept of institutions per se.

This presents serious issues for organisations seeking to recruit and retain the best of this generation, and it is a topic I will return to in future blogs in this series.

Best Value

A brief aside, even in advance of the pandemic there was good evidence that Gen Z is extremely interested in best value. The rationale for this is laid out above. 

Having said that, value does not come at any price. This is particularly when it comes to values, ethical issues matter. Food is a key interest compared to Gen X at the same age but it also comes with an expectation of being very locally sourced and not racking up food miles at any cost just to get the ingredient. Increasingly the same applies to other aspects of consumerism, particularly clothes. Depop does not just represent Gen Z’s love of vintage clothing, but also their eye for a side hustle.

Financial Values

The above-mentioned Deloitte survey identifies that Gen Z ‘chooses ‘financial stability’ against ‘enjoyment’ by two to one’,  and to a much greater extent than the Millennials. Significantly they also value salary less than any previous generation. 

The economic and global circumstances inherited by Gen Z have shifted their outlook compared to previous generations, and ensured that prudence is a key characteristic.

Financial stability may have been desired by every generation but it has become harder to attain for the youngest adults, and far more fragile if attained. It is far from the only consideration and prudence extends to how it is achieved and maintained.

Understanding and responding appropriately to this dichotomy is fundamental for organisations in meeting the key challenges posed by generation. How they can do so will be addressed later in the series.

Click here to book Alex to speak at your event about Generation Z

Remember that

• Gen Z has inherited a perilous financial situation, and they continue to watch many from the older generation enjoy the security of a mortgage which will be paid off. There is a good reason why working additional hours for free for someone fortunate enough to grow up in a more prosperous time does not appeal.

• While starting salaries in many professions, including the public sector, are in a better place than they were, what the average Gen Z can afford to do with it is another question altogether.

How can I help you?

1. One to one coaching programmes for senior leaders who are swamped by their jobs so they can thrive in life. Click here to discover where you are on your journey from Frantic to Fulfilled? Just 5 minutes of your time and you will receive a full personalised report with guidance on your next steps.

2. Team coaching programmes - working IN a team is not the same as working AS a team and yet they are often treated as if they are the same. I help teams move from the former to the latter, and generate huge shifts in productivity and outcomes.

3. Talks, workshops and seminars - including topics relevant to the two areas above plus explaining Gen Z to Gen X and dealing with the intergenerational workplace. Speaker showreel here.