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The generation entering adulthood is rewriting social & economic norms
Just when we got used to millennials as the generation that was changing everything, here comes Gen Z. Born between 1996 and 2016, and 2.5 billion strong, it’s now the largest generation in the world globally. And with its leading edge already entering the workforce, it will surpass millennials in spending power by 2031, according to “OK Zoomer: Gen Z Primer,” a new report from BofA Global Research.
“Gen Z is going to bring broad disruptions to economies, markets and social systems,” says Haim Israel, Head of Thematic Investing for BofA Global Research and co-author of the report. “If they haven’t done so already, businesses and investors need to start adjusting their strategies to reflect Gen Z’s growing political, social and economic influence.” Based on a proprietary survey of approximately 14,500 people aged 16 or older in 10 countries, the report reveals some defining characteristics of a generation likely to usher in broad change. Gen Z tends to be:
“If they haven’t done so already, businesses and investors need to start adjusting their strategies to reflect Gen Z’s growing political, social and economic influence.”
Fully comfortable with remote living. In the United States, nearly half (45%) of teens say they are online “almost constantly.”1 Small wonder, because Gen Z is the first generation with no memory of a pre-internet world. In fact, 40% of those aged 16-17 prefer hanging out with friends online to doing so in person. Members of this generation spend more time watching e-sports than traditional sports—and just 14% expect their banks to have physical branches. Yet all that isolation comes at a cost, Israel notes: “Gen Z is the loneliest generation.” Pets increasingly fill the void in person-to-person contact.
Financially mighty, but cautious with money. Gen Z’s combined global income is expected to increase five-fold before the end of the decade, from its current $7 trillion to $33 trillion. By 2031, their income will account for more than a quarter (27%) of the world’s total. And the consumer power of Gen Z will accelerate as baby boomers and members of the Silent Generation hand down trillions of dollars of wealth, Israel notes. Still, for all that clout, the generation’s view of money has been deeply influenced by global downturns during their formative years. “Gen Z experienced the effects of the last financial crisis through their families,” Israel notes. Thus they tend to be financially conservative and reluctant to take on debt, whether through credit cards or car loans.
Gen Z Income will exceed millennial income by the early 2030s: 140% Increase in the next 5 years
Concentrated in emerging markets. Nine of 10 members of Gen Z live in emerging market nations. While populations in Europe, the United States and China are growing older, India, whose population skews younger, accounts for a full 20% of Gen Z, the report says. Amid rising literacy rates, urbanization and expanding tech infrastructure, countries such as India, Mexico, Thailand and the Philippines are likely to ride the generation’s growing economic power. Yet as residents of an online world, Gen Z seems to place less importance on national identity than do older generations. Some 40% described themselves as a “citizen of the world” rather than a citizen of their country.
89% of Gen Z are in the EM Size of bubble denotes combined population of the cohorts (million)
The “Clicktivist”: Committed to sustainability, ready to act. Gen Z will likely accelerate the global movement toward sustainable investing, by calling on the companies they work for, buy from and invest in to have strong records on environmental, social and governance (ESG) issues. “Social causes are part of their identity, and this extends to their financial decisions as well,” Israel says. Some 80% say they factor ESG into their investment decisions. “Companies and governments shouldn’t underestimate the power of Gen Z as they become activists for causes like equality and climate change,” says Israel.
Focused on products over experiences. Compared with other generations, Gen Z consumers are more likely to value material goods over experiences such as travel, the survey found. When buying, quality is more important to them than price, and they prefer to use cash or their phones to pay. “Credit cards weren’t even in the top three,” Israel says. While enjoying a wide range of goods, this generation is careful about what it consumes. More than half of those who have reached drinking age don’t drink, the survey shows—a potential challenge for the alcoholic beverage industry. “Gen Z is also the first cohort where the majority has some kind of meat restriction in their diet,” Israel adds.
Gen Z by the numbers
Source: “OK Zoomer: Gen Z Primer,” BofA Global Research, December 1,2020
“Gen Z is compelling other generations to adapt to them, not the other way around”
Gen Z’s always-wired approach to life will help drive e-commerce—already surging during the global pandemic—to new heights. “Online is the only place to be,” Israel says. E-commerce is in turn likely to drive growth in areas such as logistics, needed to distribute ever higher volumes of goods door-to-door.
Other potential beneficiaries include industries as diverse as telecommunications, e-sports, food delivery and even pet supplies, Israel notes. Members of Gen Z, along with millennials, are “increasingly willing to pamper pets with high-quality products.”
Older industries, meanwhile, are likely to struggle. If millennials are “cord-cutters,” disengaging from television and other traditional media, Gen Z represents “cord-nevers,” Israel says, indicating seismic changes ahead for the entertainment industry.
Similar challenges are in store for brick-and-mortar stores and malls. Automobile manufacturers may likewise struggle—members of Gen Z are obtaining driver’s licenses at lower rates than previous generations at the same time that remote work and e-commerce reduces the need to drive for work or shopping.
As millions of members of Gen Z enter adulthood and the workplace, their influence is only sure to grow. The rest of the world must take care not to underestimate their power, or to assume that they will fall in line with a course set by their elders. Israel says, “Gen Z is compelling other generations to adapt to them, not the other way around.”
For a closer look at how Gen Z will change the world, read the full BofA Global Research report, “OK Zoomer: Gen Z Primer” here.