The Millennials: Confident. Connected. Open to Change.

February 24, 2010

From: To:

This is part of a Pew Research Center series of reports exploring the behaviors, values and opinions of the teens and twenty-somethings that make up the Millennial Generation

Event: Video
Quiz: How Millennial Are You?

Overview

Generations, like people, have personalities, and Millennials -- the American teens and twenty-somethings who are making the passage into adulthood at the start of a new millennium -- have begun to forge theirs: confident, self-expressive, liberal, upbeat and open to change.

They are more ethnically and racially diverse than older adults. They're less religious, less likely to have served in the military, and are on track to become the most educated generation in American history.

Their entry into careers and first jobs has been badly set back by the Great Recession, but they are more upbeat than their elders about their own economic futures as well as about the overall state of the nation.(See chapter 4 in the full report)

They embrace multiple modes of self-expression. Three-quarters have created a profile on a social networking site. One-in-five have posted a video of themselves online. Nearly four-in-ten have a tattoo (and for most who do, one is not enough: about half of those with tattoos have two to five and 18% have six or more). Nearly one-in-four have a piercing in some place other than an earlobe -- about six times the share of older adults who've done this. But their look-at-me tendencies are not without limits. Most Millennials have placed privacy boundaries on their social media profiles. And 70% say their tattoos are hidden beneath clothing. (See chapters 4 and 7 in the full report)

Despite struggling (and often failing) to find jobs in the teeth of a recession, about nine-in-ten either say that they currently have enough money or that they will eventually meet their long-term financial goals. But at the moment, fully 37% of 18- to 29-year-olds are unemployed or out of the workforce, the highest share among this age group in more than three decades. Research shows that young people who graduate from college in a bad economy typically suffer long-term consequences -- with effects on their careers and earnings that linger as long as 15 years.¹ (See chapter 5 in the full report)

Whether as a by-product of protective parents, the age of terrorism or a media culture that focuses on dangers, they cast a wary eye on human nature. Two-thirds say "you can't be too careful" when dealing with people. Yet they are less skeptical than their elders of government. More so than other generations, they believe government should do more to solve problems. (See chapter 8 in the full report).

They are the least overtly religious American generation in modern times. One-in-four are unaffiliated with any religion, far more than the share of older adults when they were ages 18 to 29. Yet not belonging does not necessarily mean not believing. Millennials pray about as often as their elders did in their own youth. (See chapter 9 in the full report)

Only about six-in-ten were raised by both parents -- a smaller share than was the case with older generations. In weighing their own life priorities, Millennials (like older adults) place parenthood and marriage far above career and financial success. But they aren't rushing to the altar. Just one-in-five Millennials (21%) are married now, half the share of their parents' generation at the same stage of life. About a third (34%) are parents, according to the Pew Research survey. We estimate that, in 2006, more than a third of 18 to 29 year old women who gave birth were unmarried. This is a far higher share than was the case in earlier generations.² (See chapters 2 and 3 in the full report)

Millennials are on course to become the most educated generation in American history, a trend driven largely by the demands of a modern knowledge-based economy, but most likely accelerated in recent years by the millions of 20-somethings enrolling in graduate schools, colleges or community colleges in part because they can't find a job. Among 18 to 24 year olds a record share -- 39.6% -- was enrolled in college as of 2008, according to census data. (See chapter 5 in the full report)

They get along well with their parents. Looking back at their teenage years, Millennials report having had fewer spats with mom or dad than older adults say they had with their own parents when they were growing up. And now, hard times have kept a significant share of adult Millennials and their parents under the same roof. About one-in-eight older Millennials (ages 22 and older) say they've "boomeranged" back to a parent's home because of the recession. (See chapters 3 and 5 in the full report)

They respect their elders. A majority say that the older generation is superior to the younger generation when it comes to moral values and work ethic. Also, more than six-in-ten say that families have a responsibility to have an elderly parent come live with them if that parent wants to. By contrast, fewer than four-in-ten adults ages 60 and older agree that this is a family responsibility.

Despite coming of age at a time when the United States has been waging two wars, relatively few Millennials-just 2% of males-are military veterans. At a comparable stage of their life cycle, 6% of Gen Xer men, 13% of Baby Boomer men and 24% of Silent men were veterans. (See chapter 2 in the full report)

Politically, Millennials were among Barack Obama's strongest supporters in 2008, backing him for president by more than a two-to-one ratio (66% to 32%) while older adults were giving just 50% of their votes to the Democratic nominee. This was the largest disparity between younger and older voters recorded in four decades of modern election day exit polling. Moreover, after decades of low voter participation by the young, the turnout gap in 2008 between voters under and over the age of 30 was the smallest it had been since 18- to 20-year-olds were given the right to vote in 1972. (See chapter 8 in the full report)

But the political enthusiasms of Millennials have since cooled -for Obama and his message of change, for the Democratic Party and, quite possibly, for politics itself. About half of Millennials say the president has failed to change the way Washington works, which had been the central promise of his candidacy. Of those who say this, three-in-ten blame Obama himself, while more than half blame his political opponents and special interests.

To be sure, Millennials remain the most likely of any generation to self-identify as liberals; they are less supportive than their elders of an assertive national security policy and more supportive of a progressive domestic social agenda. They are still more likely than any other age group to identify as Democrats. Yet by early 2010, their support for Obama and the Democrats had receded, as evidenced both by survey data and by their low level of participation in recent off-year and special elections. (See chapter 8 in the full report)

Our Research Methods

This Pew Research Center report profiles the roughly 50 million Millennials who currently span the ages of 18 to 29. It's likely that when future analysts are in a position to take a fuller measure of this new generation, they will conclude that millions of additional younger teens (and perhaps even pre-teens) should be grouped together with their older brothers and sisters. But for the purposes of this report, unless we indicate otherwise, we focus on Millennials who are at least 18 years old.

We examine their demographics; their political and social values; their lifestyles and life priorities; their digital technology and social media habits; and their economic and educational aspirations. We also compare and contrast Millennials with the nation's three other living generations-Gen Xers (ages 30 to 45), Baby Boomers (ages 46 to 64) and Silents (ages 65 and older). Whenever the trend data permit, we compare the four generations as they all are now-and also as older generations were at the ages that adult Millennials are now.³

Most of the findings in this report are based on a new survey of a national cross-section of 2,020 adults (including an oversample of Millennials), conducted by landline and cellular telephone from Jan. 14 to 27, 2010; this survey has a margin of error of plus or minus 3.0 percentage points for the full sample and larger percentages for various subgroups (for more details, see page 110 in the full report). The report also draws on more than two decades of Pew Research Center surveys, supplemented by our analysis of Census Bureau data and other relevant studies.

Some Caveats

A few notes of caution are in order. Generational analysis has a long and distinguished place in social science, and we cast our lot with those scholars who believe it is not only possible, but often highly illuminating, to search for the unique and distinctive characteristics of any given age group of Americans. But we also know this is not an exact science.

We acknowledge, for example, that there is an element of false precision in setting hard chronological boundaries between the generations. Can we say with certainty that a typical 30-year-old adult is a Gen Xer while a typical 29-year-old adult is a Millennial? Of course not.
Nevertheless, we must draw lines in order to carry out the statistical analyses that form the core of our research methodology. And our boundaries-while admittedly too crisp-are not arbitrary. They are based on our own research findings and those of other scholars.

We are mindful that there are as many differences in attitudes, values, behaviors and lifestyles within a generation as there are between generations. But we believe this reality does not diminish the value of generational analysis; it merely adds to its richness and complexity. Throughout this report, we will not only explore how Millennials differ from other generations, we will also look at how they differ among themselves.

The Millennial Identity

Most Millennials (61%) in our January, 2010 survey say their generation has a unique and distinctive identity. That doesn't make them unusual, however. Roughly two-thirds of Silents, nearly six-in-ten Boomers and about half of Xers feel the same way about their generation.

But Millennials have a distinctive reason for feeling distinctive. In response to an open-ended follow-up question, 24% say it's because of their use of technology. Gen Xers also cite technology as their generation's biggest source of distinctiveness, but far fewer-just 12%-say this. Boomers' feelings of distinctiveness coalesce mainly around work ethic, which 17% cite as their most prominent identity badge. For Silents, it's the shared experience of the Depression and World War II, which 14% cite as the biggest reason their generation stands apart. (See chapter 3 in the full report)

Millennials' technological exceptionalism is chronicled throughout the survey. It's not just their gadgets -- it's the way they've fused their social lives into them. For example, three-quarters of Millennials have created a profile on a social networking site, compared with half of Xers, 30% of Boomers and 6% of Silents. There are big generation gaps, as well, in using wireless technology, playing video games and posting self-created videos online. Millennials are also more likely than older adults to say technology makes life easier and brings family and friends closer together (though the generation gaps on these questions are relatively narrow). (See chapter 4 in the full report)

Work Ethic, Moral Values, Race Relations

Of the four generations, Millennials are the only one that doesn't cite "work ethic" as one of their principal claims to distinctiveness. A nationwide Pew Research Center survey taken in 2009 may help explain why. This one focused on differences between young and old rather than between specific age groups. Nonetheless, its findings are instructive.

Nearly six-in-ten respondents cited work ethic as one of the big sources of differences between young and old. Asked who has the better work ethic, about three-fourths of respondents said that older people do. By similar margins, survey respondents also found older adults have the upper hand when it comes to moral values and their respect for others.

It might be tempting to dismiss these findings as a typical older adult gripe about "kids today." But when it comes to each of these traits -- work ethic, moral values, respect for others -- young adults agree that older adults have the better of it. In short, Millennials may be a self-confident generation, but they display little appetite for claims of moral superiority.

That 2009 survey also found that the public -- young and old alike -- thinks the younger generation is more racially tolerant than their elders. More than two decades of Pew Research surveys confirm that assessment. In their views about interracial dating, for example, Millennials are the most open to change of any generation, followed closely by Gen Xers, then Boomers, then Silents.

Likewise, Millennials are more receptive to immigrants than are their elders. Nearly six-in-ten (58%) say immigrants strengthen the country, according to a 2009 Pew Research survey; just 43% of adults ages 30 and older agree.

The same pattern holds on a range of attitudes about nontraditional family arrangements, from mothers of young children working outside the home, to adults living together without being married, to more people of different races marrying each other. Millennials are more accepting than older generations of these more modern family arrangements, followed closely by Gen Xers. To be sure, acceptance does not in all cases translate into outright approval. But it does mean Millennials disapprove less. (See chapter 6 in the full report)

A Gentler Generation Gap

A 1969 Gallup survey, taken near the height of the social and political upheavals of that turbulent decade, found that 74% of the public believed there was a "generation gap" in American society. Surprisingly, when that same question was asked in a Pew Research Center survey last year -- in an era marked by hard economic times but little if any overt age-based social tension -- the share of the public saying there was a generation gap had risen slightly to 79%.

But as the 2009 results also make clear, this modern generation gap is a much more benign affair than the one that cast a shadow over the 1960s. The public says this one is mostly about the different ways that old and young use technology -- and relatively few people see that gap as a source of conflict. Indeed, only about a quarter of the respondents in the 2009 survey said they see big conflicts between young and old in America. Many more see conflicts between immigrants and the native born, between rich and poor, and between black and whites.

There is one generation gap that has widened notably in recent years. It has to do with satisfaction over the state of the nation. In recent decades the young have always tended to be a bit more upbeat than their elders on this key measure, but the gap is wider now than it has been in at least twenty years. Some 41% of Millennials say they are satisfied with the way things are going in the country, compared with just 26% of those ages 30 and older. Whatever toll a recession, a housing crisis, a financial meltdown and a pair of wars may have taken on the national psyche in the past few years, it appears to have hit the old harder than the young. (See chapter 3 in the full report)

But this speaks to a difference in outlook and attitude; it's not a source of conflict or tension. As they make their way into adulthood, Millennials have already distinguished themselves as a generation that gets along well with others, especially their elders. For a nation whose population is rapidly going gray, that could prove to be a most welcome character trait.

Download Complete Report [PDF ]

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<sub>1. Lisa B. Kahn. “The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy,” Yale School of Management, Aug. 13, 2009 (forthcoming in Labour Economics).
2. This Pew Research estimate is drawn from our analysis of government data for women ages 18 to 29 who gave birth in 2006, the most recent year for which such data is available. Martin, Joyce A., Brady E. Hamilton, Paul D. Sutton, Stephanie J. Ventura, Fay Menacker, Sharon Kirmeyer, and TJ Mathews. Births: Final Data for 2006. National Vital Statistics Reports; vol 57 no 7. Hyattsville, Maryland: National Center for Health Statistics. 2009.
3. We do not have enough respondents ages 83 and older in our 2010 survey to permit an analysis of the Greatest Generation, which is usually defined as encompassing adults born before 1928. Throughout much of this report, we have grouped these older respondents in with the Silent generation. However, Chapter 8 on politics and Chapter 9 on religion each draw on long-term trend data from other sources, permitting us in some instances in those chapters to present findings about the Greatest Generation.</sub>

Egypt's Muslim Brotherhood: widening split between young and old

Egypt's Islamic opposition to autocratic President Hosni Mubarak, the Muslim Brotherhood, faces a split along generational lines as older conservatives' influence is rising.

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By Ursula Lindsey Correspondent
posted December 21, 2009 at 1:41 pm EST

Cairo —

Egypt’s main opposition group, the Muslim Brotherhood, is facing a change in leadership that could sideline reformists. That could deprive Islamists of an avenue for participating in Egyptian politics, and some could become radicalized.

Mahdi Mohammed Akef, the general guide of the Egyptian Muslim Brotherhood for the past six years, will step down in January amid a widening split in the organization.

Mr. Akef, who has held together a group that includes moderates and conservatives, young and old, urban and rural, says that the organization’s internal disagreements are one of its strengths. But his blowup with the group’s 15-man Guidance Council when he tried to appoint a younger, reformist member to the elderly and predominantly conservative council has ignited an unprecedented public debate in Egypt.

The goal of the group, which has never been allowed to form a political party, is to make Islam “the sole reference point for ordering the life of the Muslim family, individual, community ... and state.”

But within the Brotherhood there are sharp differences over how to oppose President Hosni Mubarak’s autocratic regime, what rights should be accorded to women, and how strictly Islam should be interpreted.

Old guards and new Brothers

Many of these differences play out along a generational fault line between younger reformists, who seek a more active political role for the banned organization, and older conservatives whose influence is rising.

“Akef is the last of the historical leaders of the group ... the leaders who ... joined the group early on, who have met the founder Hassan Al Banna, who have some sort of historical legitimacy,” says Ibrahim Al Hodaiby, grandson of a former general guide and a writer on Islamist movements.

The Brotherhood’s older members came of age in the 1950s, when the group was at war with the government. It was eventually banned, its members arrested and tortured by the thousands.

This senior group is “directed towards building the organization more than opening up to society,” says Hossam Tammam, editor of the website Islam Online. Their focus is on training new members, proselytizing, and social work.

Image via Wikipedia

The Brothers who came of age in the 1970s after the group formally renounced violence, meanwhile, are something different. These men were active on university campuses and in parliament. Today they are willing to form alliances with other movements and parties and are “more likely to produce reformist ideas,” says Mr. Tammam. But while the reformists are younger, the conservative bloc is in ascendancy.

Akef’s successor, to be chosen in January, is expected to be an old-guard conservative.

That worries Brothers like Abdel-Moneim Mahmoud, a young journalist and blogger. He froze his membership after some of his criticisms were not well received.

“The stage we’re in requires the moderate, the reformist side of the group,” he says. “We need a strong political movement ... to stand against this oppressive regime. This is our duty right now. It’s more important than anything else.”

Image by madmonk via Flickr

Mr. Mahmoud’s ideas were shaped in 2005, when Egypt, under pressure from the United States, experienced a moment of political opening. The Brotherhood, alongside other groups, participated in street protests calling for political reform and an end to the Mubarak regime. Mahmoud was encouraged to form alliances with outside activists and to give his opinion freely.

But subsequent government repression led the Brotherhood to “tak[e] a step backwards,” says Mahmoud, who explains that “whenever there is freedom, reformist ideas [within the group] will predominate; when there’s tyranny, conservative ones will.”

Tammam says government repression is the glue holding the Brotherhood together. If the Egyptian political system opened up, “the internal differences would become apparent in a way that might lead to the existence of more than one Brotherhood.”

But if reformists within the group are being routed, they’re still putting up a fight. The next general guide will almost certainly put an end to this cacophony and perhaps drive members like Mahmoud out for good. But the internal rift is unlikely to disappear.

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Beyond Language Learning

s/pores » 学语以外 : Beyond Language Learning

李慧玲 : Lee Huay Leng

English version

Translated by Francis Lim Khek Gee, with additional translation by Tan Siok Siok

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我们回到上海时，赶紧把在汕头买的潮语配音《白雪公主》卡通片拿出来播放，听着皇后用潮州话问那镜子：“魔镜，魔镜，世界上那个芝娘最美丽？”全家人都被逗乐了。

小时候由外婆照顾、有点潮州话基础，但后来疏于应用的表弟这次跟我一起到潮汕去。才几天在潮汕浸濡，他的潮州话大有进步。表弟比我小了将近12岁。 我哥问他现在知不知道“厕所”潮州话怎么讲，他可以字正腔圆的说出。换作以前，他一定用“toilet”取代。表弟说，在岛国的经验里，潮州话是老人、至 少是成年人的语言。没有想到在潮州，碰到三岁的小孩，原来都是说潮州话的。它就像在岛国英语会从孩子的口里源源不断的流出来一样，词汇丰富，表述生动。

我不知道从哪年开始，我们日常的语言有了年龄之分，甚至有阶级之分。但是我确实经常听到这样的说法，不是关于方言的——方言已经不在家长选择的语言 之列了。是关于孩子入学前，一些会讲华语的祖父祖母在家跟他们华语，有的父母也跟孩子讲华语，而小孩上了学跟其他同学接触，说的都是英语，回到家跟兄弟姐 妹讲的也是英语。

在他们的概念里，华语成了老年人（至少是部分成年人）的语言，平时跟自己同辈的人说话，正常还是用英语的。

这样对不对，好不好？家里该讲什么语言？父母分别讲英语和华语，还是全都讲一种语言？孩子的语言学习是个费力的工程，家长要趁早尽心怎样的规划？

回去祖父和外婆的潮汕老家，不同的空间，让人有不同的体悟。我观察那里碰到的店员、路上的行人、亲戚的小孩。除非是外省来的人，否则人们彼此交谈， 都是用潮州话。我心里纳闷，他们为什么不用普通话？或者，他们也应该知道英语的市场价值有多重要吧？为什么亲戚似乎一点不急于教小孩英语？我问了一下，孩 子学英语吗？父母都说等入了学，课堂老师会教。

后来我问在村里当小学华文老师的长辈，他说，老师们也还在学英文，学了就教孩子。谈起来，似乎也都不很当真。我分辨不出那是按照我们的标准看时，一 种眼界不够开阔，目光不够长远的表现，又或者是一种在完全不同的国情里的自信和自得。我的潮汕亲戚没有想要做世界第一，或者全国第一，只想在原来的土地上 继续生活。而本事和他们的语言是没有关系的——至少我感觉他们是这样的思维方式。还有一点：他们不要求我们，但是自己家里的孩子如果不会说潮汕话，对他们 来说是比较难接受的。

我参考着他们的方式，想象如果我也有小孩，到底要怎么教育他们，用什么语言教育他们。我在北京的一个朋友，牛津大学回来的，但我见她跟两岁的孩子一 句英语不说，都只有普通话，甚至逗着让孩子学给我们听听幼儿园里山西人的口音。我问她时，她一副不着急的样子，觉得英语以后自然是会的。

回到岛国，完全是另一个环境，另一种思维。有用和没有用，有多少用处，是一个总在思索求生存的国家衡量人和事情的标准？我读过历史，不怀疑国力强大 能使某一种语言和文化地位攀升，识时务者自然要紧跟其后。有时也想到路易十四时代，法文如何盛行。但是如果换一个方式思考，语文的学习，不是因为它的现实 价值，采用哪一种方法比较理想，也就同样不是关键了。孩子小时，大人教他们一种不一定能与全世界对话的语言，为的是那是属于他们自己文化与传统的一部分 ——这样的教育，着重自我面对的态度，是一种自我尊重和对原则的坚持。这不重要吗？

而后，再去想实用价值和教授的方法的问题。

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李慧玲，新闻工作者，曾经担任《联合早报》驻香港、北京记者。也是公民团体圆切线创社社员。

As soon as we got back to Shanghai, we played back the dubbed in Teochew version of “Snow White”, which we bought in Shantou. The whole family was tickled pink when we heard the Queen asked the Magic Mirror, in Teochew: “Mirror, mirror, on the wall, who is the fairest of us all?”

With me on this trip to Chaoshan was my cousin, who knows some Teochew as Grandmother brought him up, but thereafter he has little use for the language. After just a few days of immersion in Chaoshan, his Teochew improved greatly. He is almost 12 years my junior. When my brother asked him if he knew how to say “toilet” in Teochew, he was able to answer with precision. In the past, he would have used the English word “toilet”. My cousin said, in the Singaporean context, Teochew is a language of the elderly, or at least the grown-ups. He was surprised to find that in Chaozhou, even three-year olds speak Teochew. It is like the fluent English pouring forth from children in Singapore, rich in vocabulary and vivid in expression.

I am not sure when the languages we use daily started taking on age, and even class distinctions. However, I have often heard it said—not concerning the use of dialects, as they are no longer a language option for parents—that before the children enter school, some grandparents who know Mandarin will speak to them in Mandarin. Some parents might also speak to them in Mandarin. But once they start interacting with their schoolmates, speaking only English, they end up speaking English to their siblings at home too.

In their minds, Mandarin has become the language of the elderly (or at least of some grown-ups), while English is the norm when communicating with their peers.

Is this right or wrong, good or bad? What language should be spoken at home? Should one parent speak English while the other Mandarin, or should only one language be spoken at home? Language learning for kids is an arduous task; what sort of plans should parents put in place?

When I returned to Chaoshan, the hometown of my grandfather and maternal grandmother, being in a different space inspired a different understanding. I noticed that the shop assistants, pedestrians, relatives’ kids all spoke Teochew unless they are from another province. I was puzzled: why didn’t they speak Putonghua? Don’t they know the commercial value of the English language? Why did my relatives not feel a sense of urgency to teach their children English? I asked them, “Are the kids learning English?” The parents all said that teachers would teach them when they start school.

Later I asked an elder who was a Chinese teacher in the village. He said that the teachers themselves were still learning English, which they then teach the children. He did not seem to take it too seriously. I am not sure if we should judge according to our own standards, seeing this as a lack of broadmindedness and long-term vision, or see it in a totally different social context: as a mark of confidence and self-assurance. My relatives in Chaoshan do not aspire to be number one in the world or number one in the country; they only wish to keep on living in their homeland. Capability is not linked to language—at least that is my sense of their way of thinking. One more thing: they don’t expect us to speak Teochew, but will find it hard to accept if their own children don’t speak the language at home.

I observe the way they do things and wonder: if I have kids, how would I educate them, and in what languages? I have a friend in Beijing who has just returned from Oxford University; she speaks to her two-year-old child not in English, but only in Putonghua. She even coaxed the child to mimic the Shanxi accent overheard in the kindergarten. When I asked her about this, she did not appear anxious, and felt that English learning would come naturally in the future.

I returned home to a completely different environment with different mode of thinking. Is a thing useful or not: to what extent is it useful has become the criterion for evaluating people and matters in a country that constantly ponders its own survival. Through reading history, I do not doubt that the rise of a nation may bring about the elevation of status of a particular language and culture. The smart and sharp observers quickly fall in line. Sometimes I reflect upon the reign of Louis XIV, when the French language was all the rage. But if we think in another way, that we learn a language not for its practical value, then finding the best method would become less crucial. When the adults teach their children a language that might not necessarily facilitate global dialogue, but because it is an intrinsic part of their culture and tradition—this type of education emphasises self-awareness, and a sense of self-respect and integrity. Isn’t this important?

Only later would one consider questions of usefulness and pedagogy.

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Lee Huay Leng is a journalist who works for Lianhe Zaobao. She was its correspondent in Hong Kong and Beijing and she is now based in Singapore. Huay Leng is also the founding member of Tangent, a civil society group.

The Leaner Baby Boomer Economy

By David Welch

Mercedes is the quintessential boomer brand. Drive down an American highway, and odds are good that the person piloting the Benz in the next lane was born between 1946 and 1962. And Mercedes-Benz (DAI) has prospered right along with America's huge postwar generation. Back in 1986, when the first baby boomers turned 40, Mercedes sold 99,000 cars in the U.S. In 2006, when those boomers hit 60, the automaker moved almost 250,000 vehicles, a fifth of its global total.

This year, Mercedes will sell a third fewer cars in America. In Montvale, N.J., Kristi Steinberg, who runs Benz's North American market research operation, has a nagging fear: that sales won't recover for a long time because boomers, history's wealthiest generation, are tapped out. "I don't know if anyone knows yet if this is a blip," she says, "or a defining moment like the Great Depression."

Executives such as Steinberg always knew boomers would curb their free-spending ways as they approached retirement. But not in their most nightmarish imaginings could they have predicted that an economic maelstrom would cripple the customers they have courted and counted on for 30 years.

FAITH IN RISING MARKETS

When 79 million people—nearly a third of Americans—start spending less and saving more, you know it won't be pretty. According to consulting firm McKinsey, boomers' conversion to thrift could stifle the economy's hoped-for rebound and knock U.S. growth down from the 3.2% it has averaged since 1965 to 2.4% over the next 30 years. "We would have gotten here in 5 or 10 years as boomers retire, but we pushed it up," says Michael Sinoway, managing director of consulting firm AlixPartners. "Now [companies] are scared things won't come back." And that's why everyone from Mercedes to Nordstrom (JWN) to designer Vera Wang are scrambling to remake themselves for the Incredible Shrinking Boomer Economy.

Not so long ago, boomers were never going to die. Filled with a self-confidence born of unprecedented prosperity, many thought rising markets would assure their future. If the economy faltered, well, it would rebound more strongly than ever, as it had so many times before. And so boomers spent—and borrowed—as if there were no tomorrow.

Meet Tim Woodhouse, 56. He owns Hood Sailmakers in Middletown, R.I., a business that helped finance a plush life. Woodhouse owns a boat, five Ducati motorcycles, and every few years treated himself to a new Porsche 911. He figured he'd retire when he felt like it. Then the markets crashed, the economy tanked, and suddenly Woodhouse felt a lot poorer. In April, with business slowing and his real estate holdings leaking value, Woodhouse hit the brakes. "I was scared," he says. "My net worth took a real hit." Woodhouse sold the Porsche and bought a Mini Cooper. The boat spends more time tied up these days than out on the water. He and his wife dine out less often, and they don't entertain at home much either.

Woodhouse and millions of boomers like him are doing what people normally do when they near retirement: They're living more frugally. Companies have long factored in this actuarial reality, gradually tweaking their products and marketing to appeal to the next generation. With boomers, however, many companies became complacent. It wasn't that they ignored younger consumers but that they counted on boomers to keep spending longer. And why not? Until recently boomers typically reached their spending peak at age 54, according to McKinsey. Contrast that with the previous generation—a thriftier bunch whose consumption typically peaked at 47.

Now many companies are scrambling to appeal to Generations X and Y. You can already see this thrust in the stores. Clothing designer Vera Wang is selling a casual line called Lavender aimed at twenty- and thirtysomethings. It's fashion, but not the pricey garments the company typically has sold. Meanwhile, says Wang, her namesake brand needs to get a lot less expensive. In one instance, Wang made a high-end dress using fabric that costs $5 a yard instead of $12 but used the fabric in several layers to give the garment a richer look. As a boomer herself, Wang, 60, feels her generation's pain. You don't have 30 years to reinvent yourself," she says.

Even as Mercedes continues to target boomers, it has quietly recruited 500 people aged 20 to 32 for a focus group it calls Generation Benz. Mercedes researchers are seeking their views on the economy, car ads, model designs, and more. The automaker sent 20 Generation Benzers into dealerships wearing flip-flops and other casual attire to see how much attention they received. Four of the 20 were ignored. The results, says Steve Cannon, vice-president for marketing, served as a wake-up call to Mercedes dealers "that we have to start paying a lot more attention to tomorrow's customers, especially if tomorrow is coming faster than we thought."

VALUE SHOPPING

Can younger consumers pick up the slack? Consider the demographics. Generation X, Americans born between 1964 and 1980, is generally estimated to be about two-thirds the size of the boomer cohort. And with boomers working longer, especially since the crash wiped out many retirement funds, it may take longer for Xers to move into their prime earning (and spending) years. And what about Generation Y, the 81 million-strong group born between 1981 and 1994? Right now, 14% are unemployed and will have their own hole to claw out of when the economy revives, according to Edward F. Stuart, who teaches economics at Northeastern Illinois University. In other words, companies will need boomers for years to come.

The trick will be finding a way to fulfill the needs and wants of a generation that is used to being catered to—but is now on a budget. Timothy Malefyt, an anthropologist who studies consumer trends for the ad agency BBDO New York (OMC), argues that boomers, having ridden a wave of technological change, are highly adaptable and well versed in problem-solving. (Or at least they see themselves as such.) Already, he says, they are making a virtue of value shopping, once viewed by this group as hopelessly déclassé. For many boomers it's no longer about keeping up with the Joneses, it's about outthinking them. "If you make boomers feel they've failed, you'll lose them," Malefyt says. "They want to feel they've outsmarted the system or their circumstances."

That's why some companies are coalescing around "cheap chic," a marketing conceit that has become synonymous with Target (TGT) but also has been tried by the likes of JetBlue, Ikea, and Mini. The latter is owned by BMW, another classic boomer brand. BMW didn't plan it this way, but the Mini is one solution for a company whose cars are becoming too pricey for many boomers. A fully loaded BMW 3 Series costs $40,000 plus change; a comparably equipped Mini: $25,000. The Mini, while a feat of engineering and retro style, can't compete with a BMW, which the company bills as "the ultimate driving machine." But the Mini possesses cheap chic in spades. In recent months, says BMW, fiftysomethings have been trading in their Bimmers and other luxury brands for Minis.

PAMPERING ON A BUDGET

Starwood Hotels & Resorts Worldwide (HOT) has embarked on a crash course in cheap chic—or what it prefers to call "style at a steal." The chain has long appealed to the boomer yen for luxury and pampering. Its high-end W, Sheraton, and Westin hotels offer spacious rooms, well-staffed front desks, valets, and extensive room service menus. So the polyester sheets and small-bar soap that typify the value hotel experience wouldn't do. Starwood's 40-year-old chief of specialty brands, Brian McGuinness, also knew boomers grew up challenging convention and still like to feel that they're on the cutting edge. But they also demand creature comforts. "They once drove Beetles and ended up in Bimmers," McGuinness says. "We wanted to strike that balance." Plus, don't tell them but boomers are getting older and presumably creakier. So edgy can't equal bare-bones minimalism.

After six months of research and brainstorming, Starwood came up with two cheap chic hotel chains: Aloft, named to echo the "urban cool" of loft apartments, and Element, a low-cost option aimed at people who prefer suites with every "element" of their daily lives—including spa-like bathrooms. Early last year the team mocked up an Aloft prototype and invited some boomer-age guests to stay. The mock hotel had an aggressive neon color palette, piped-in scents reminiscent of an Indian spice market, and garage band tunes on the sound system. To help bring the room rate down to the $150-to-$170 range, they cut out full-service restaurants, room service, and valets. The test subjects were fine with parking their own cars, and most said they'd rather explore and find their own restaurants than eat in their rooms. The garage music? Not so much. Starwood replaced it with contemporary rock and international music. The neon palette gave way to muted tones, and a mild citrus replaced the spice.

Starwood has opened 25 Aloft hotels so far, and McGuinness says occupancy rates meet or exceed the average in most metro markets. Starwood won't say if the downturn prompted it to accelerate the rollout of its new hotel brands. But the company is opening two Aloft hotels each month, the fastest rate the industry has seen. David Loeb, a Robert W. Baird analyst who has been covering the hotel industry for years, says Aloft's ambience may be too hip and jarring for fiftysomethings. But he says if the chain finds the right balance, it might appeal to boomers and Generations X and Y. Starwood is advertising the new chains heavily online. "Boomers and Gen Y congregate in the same places on the Web," McGuinness says.

Starwood started changing its approach to boomers before the economy went south. Other companies are adjusting on the fly. OSI Restaurant Partners has watched its eateries lose boomer customers, whether middle-class types who frequented the company's Outback Steakhouse and Bonefish Grill restaurants or wealthier people who once dined on filet mignon at the more upscale Fleming's Prime Steakhouse & Wine Bar. OSI's chief operating officer, Paul E. Avery, reduced menu prices and offered smaller cuts of beef at Outback to maintain margins before retiring in early July. The company has gone on an ad blitz pushing the more modest portions for $9.99. This is obviously a tricky balancing act at Outback, where a big slab of meat was the chain's main attraction.

The good news, says Chief Branding Officer Jody Bilney, is that people who order the less expensive entrées typically end up buying dessert or more alcohol, so the average ticket is still about $19 per person. At Fleming's, OSI is offering more wines under $10 a glass and a fixed-price menu that caps everything but drinks as low as $36 a person. Before the downturn diners typically spent $60 apiece. OSI is responding to a recession but is prepared to run its business this way if boomers remain frugal over the long run. "If anyone tells you they know that the impact of the last 12 months is permanent or temporary, they're blowing smoke," Bilney says.

Nordstrom isn't waiting to find out. The purveyor of affordable fashion believes that its customers—many of them boomers—will be under pressure for years to come. So even as it starts building fewer full-price department stores, Nordstrom has tripled the pace for opening lower-priced Nordstrom Rack stores. It will open 13 in 2009 and nine next year. Rack stores offer Nordstrom's usual name brands but for 30% to 70% less than they fetch in the main stores. Nordstrom figures boomers still want fashion, but at a discount.

What many companies are attempting to do now has worked in the past. After the crash of 1929 few people could afford a Cadillac, so General Motors (GM) created a budget model to keep its luxury sales going. The 1934 LaSalle had art deco touches, including chrome portholes along the hood. To cut costs, GM stuck the car on an Oldsmobile chassis and gave it a smaller engine. The LaSalle's cheap chic was a hit with Depression-era drivers, and when the economy recovered, Cadillac again became a totem of material success. Of course, America was about to experience the greatest boom in history. That's unlikely to happen this time.

With David Kiley

Welch is BusinessWeek's Detroit bureau chief.