In the midst of a record peacetime expansion, the shop-till-you-drop "yuppies" are feeling the first pangs of an economic pinch that may herald an era of frugality for most Americans.
Madison Avenue, which invented the term as shorthand for "young urban professionals," defines yuppies as the 3.5 million top-earning baby boomers whose incomes average $51,000 a year. Earning nearly three times the $16,753 average for their generation, they rank in the top 20 percent of U.S. wage earners and are a bellwether of economic trends.In the 1980s they set the tone for a decade of national overconsumption, while the evidence suggested a decline in middle-and lower-class earning power. Now, there is a pervasive sense that people in high-income jobs, those the Senate Budget Committee defines as paying more than $46,450 a year, also are beginning to feel squeezed.
"There is a good bit of truth to that nagging feeling that living standards, even for upper-income people, are slipping," said Sandra Shaber, an analyst with the Futures Group, an economic consulting firm.
The 76 million baby boomers, along with the smaller baby bust generation born in the 1960s, face an economy radically different from the post-war prosperity enjoyed by their parents: a nation $2.7 trillion in debt, owing foreigners nearly $500 billion and borrowing from abroad at a rate of roughly $400 million a day.
As the government ran up its record budget and trade deficits, yuppies fueled the market for upscale imported cars, wines, clothing and consumer electronics, vacationed abroad and relished gourmet foods. Less affluent baby boomers struggled to imitate them, building record levels of consumer and mortgage debt.
But the heyday of easy spending may be over. The sharp decline of the dollar since 1985 has made imports more expensive. Meanwhile, soaring housing costs have put home ownership out of bounds for many younger people and rising interest rates are beginning to pinch the growing number with adjustable-rate debt.
The fact that even yuppies feel threatened is a barometer suggesting that problems like high budget and trade deficits, lagging productivity, declining real income and massive foreign debt are beginning to erode the standard of living of most Americans.
"Essential things that our parents and even our older brothers and sisters could buy with a lot less money when they were our age, we can't afford, even though we're `rich,"' says Paul S. Hewitt, executive director of the Retirement Policy Institute, a Washington research organization.
Hewitt and his journalist wife are in their mid-30s and have a combined income of $115,000, which puts them ahead of 95 percent of all U.S. families.
To illustrate how times have changed, he describes how his parents bought the home he was raised in for $28,000 in 1958, roughly $113,000 in today's dollars, and had a monthly mortgage payment of $122 at 6 percent interest.
Today, the same house might sell for $700,000. With 20 percent down and a fixed-rate mortgage averaging 11 percent, the monthly payment would be about $4,500.
"To qualify for such a large mortgage, our income would have to be well above $200,000," Hewitt said in an interview. "By contrast, my dad, who at the time was younger than I am now, qualified for his mortgage with an income of less than $6,000."
Typical baby boomers have not come close to enjoying the rising standard of living their parents experienced at the same age.