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Gen Z adults suffer more credit card delinquencies

In the latest release from the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, Fed data show that credit card delinquencies are increasing. Also increasing is the percentage of borrowers who have used all their available credit. Among the more concerning findings is that more than one in 6 Gen Z borrowers are in this position.

The oldest Gen Z adults are in their mid-20’s, so the finding that a comparatively high percentage of them have no available credit is raising some alarm among economists. In addition, Fed economists have also observed that maxed out credit accounts are increasingly likely to become delinquent. Interestingly, Gen Z adults had the lowest median revolving balance – about $760.

Gen Z delinquencies are of special interest because delinquency on relatively low credit limits may indicate larger issues at play in the economy. A study conducted earlier this year by credit reporting agency TransUnion found that the median income for Gen Z workers who are 22-24 years old is about $45,500. Gen Z workers may be more sensitive to economic pressures because they earn a comparatively low salary. Imbalances between what they earn and what they spend may be exacerbated precisely because they earn less than other workers.

Gen Z workers must contend with higher housing costs, higher costs-of-living, and a lower salary when compared (in real dollars) with their Millennial counterparts at the same age.

Gen Z workers need authentic economic opportunities

I’m going to argue that it serves exactly no one to place the youngest and lowest -paid workers in a deep financial hole by striving to pay them as little as possible. Or by forcing them to work two or more jobs to make ends meet.

Our youngest workers should start out with the ability to make a living wage from their primary employment. Alone, that will help them avoid debt, which only serves to diminish the economic potential of this group.

It is critical that we develop community college programs that enable young workers to qualify for jobs in high-wage, high demand fields. Failure to do this will cause these prime-age workers to leave the area – likely never to return. Currently, Michigan is the only state that is experiencing the net negative migration of its Gen Z population.

The continued loss of young workers will negatively impact Michigan for years. Reversing this trend and drawing in prime age workers from other places is critical to Michigan’s long-term ability to support sustained economic development.

Photo Credit: PT Money/Philip Taylor , via Flickr