Minneapolis Fed finds ‘boomerang generation’ effect tied to unemployment among non-college-bound

Is the “boomerang generation” of young adults moving back with Mom and Dad for a time confined to out-of-work college grads?

Not so, according to a recently published paper titled “Boomerang Kids: Labor Market Dynamics and Moving Back Home,” by Minneapolis Fed Research Economist Greg Kaplan, who takes the first detailed look at the phenomenon among young people not attending college.

In a nationwide study of monthly employment and housing status among 2,851 young people between the ages 16 to 23 not attending college, Kaplan found that half of those who moved out moved back home for at least a month by age 23. He also found that losing a job increased the likelihood of moving back home in a given month by 64 percent for males and 71 percent for females.

In addition, a 1 percent increase in earnings boosted the likelihood that a young man would not live with his parents by almost 18 percent. While increased earnings among females was also a positive indicator for living away from parents, it was not statistically meaningful.

While the popular press has been filled with anecdotes of the boomerang phenomenon, coverage has mostly focused on young adults who left home to go to college. A recently released telephone survey conducted in October by The Pew Research Center also looked at the phenomenon, and found that “one-in-ten adults ages 18 to 34 (10 percent) say the poor economy has forced them to move back in with Mom and Dad,” and 13 percent of parents with grown children say one of their adult sons or daughters has moved back home in the past year.

Most academic studies on household formation until now have focused on the decision to leave home for the first time. While some economists have studied the young’s movement in and out of their parents’ homes, none has tied these movements directly to participation in the labor market.

This is also the first study focused on the current generation of young adults born in 1980 or later, who have been described as the “boomerang generation” in the popular media, according to Kaplan.

Although non-labor market factors such as marriage and childbirth also played an important role, “household formation in general is very much an economic phenomenon,” Kaplan concluded. He indicated that the dynamic of moving back with parents “may be an even more important component of youth behavior than is currently thought,” which points to a need for greater understanding of insurance and support mechanisms focused on young adults who do not go on to college.

Kaplan looked at non-college-bound youth as one way to better understand the impact of labor market dynamics on poorer families. To really understand how much benefit people are getting (from unemployment insurance, welfare programs and other social programs) we need to understand how much support they are getting on their own,” Kaplan said.

“If moving back home changes the relative benefit of costly programs to society, when thinking how to design policy,” he said, “we need to think about incentives for moving back in and out parents’ homes.“

He cites the fact that household income, not individual income, is used to determine welfare benefits as one example. “While we don’t see money changing hands (within poor families), there are a lot of other ways families can give support and provide a safety net.”

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