Baby boomers are going to retire and take down the pension system. Generation X is lazy. Generation Y is spoiled and undisciplined, and they’ve pretty much blown out their eardrums by having them stuffed with ipods all the time anyway.

Ah generational analysis. I love it, I use it, I think it’s a good way to get a handle on what’s coming next in the economy and a fabulous marketing tool. It’s also an easy way to fall into stupid generalizations that don’t do anybody any favors as a way to forecast anything. Post-recession, much of the pre-conceived ideas about the generations are being tossed anyway. 

Let’s step back a bit.

“Generations” the term takes some definition anyway. According to a bunch of online dictionaries I consulted, ‘generations’ basically means “A group of individuals born and living at about the same time’. 

There’s a couple of ways that dividing the population into generations is useful.

One is just to look at the sheer size of the different generations.  The bulge of the population in North America now aged 50 to 60something–yes, yes its the famous baby boom–ss significant enough that you have to give it a name and look at the implications of where it is going.   That’s really not generational analysis – its demographic analysis. You look at the different sizes of the different age groups in a place, and you can make some assumptions about what comes next. If you see a blip in the number of people aged in their early 20s, for example, you can be pretty sure that the housing market is set to be hit with a surge of first-time buyers in the next few years.

With demograhic analysis, you assume that every generation is pretty much the same, and will do things at the same time, more or less. Twentysomethings, may say that job satisifaction is more important than money for example, but once they hit thirtsomething and the mortgage market, you assume  that they will take the cash. There’s a grain of truth in that view.

“Generational” analysis is different, and a bit trickier.

Using generations analysis means assuming that the economic and cultural events experienced people will color their life decisions. Say your parents lost a ton of money in the tech wreck of 2000 and didn’t pay for your college education as a result. You’ll probably be wary of tech stocks for most of your life right? A generation of people who feel the same way would probably mean that there is a generational bias against high risk stocks, which would certainly have market implications. Or take another example. A generation of girls who play with Barbie dolls will look at the world differently than one who played with Betsy Wetsys.

Really?

True blue economists prefer the demographics approach to the touchier-feelier generations approach. Marketing and psycho-graphic loving types often talk a lot about the generations approach but are a little soft on factoring in the numbers that go with generations analysis. 

Honestly, you can’t have one without the other, especially now.

That demographic time bomb thing has not gone away, recession or no recession. The boomers are headed to their sixties, and there are a slew of implications of that, however you slice it.

Oh, and talking about life-altering-events-affecting-the-economy? Well, put the recesion at the top of the list, and don’t take it off for a while.

For now, the recession has given us sagging house prices, shattered portfolios, a changed (not in a good way) job market and bargain basement interest rates.  Next to come are higher taxes, pressure on tuition rates, and maybe a bunch of other stuff like much higher inflation.  Life choices will indeed be altered in the years ahead.

There are a lot of parts to this discussion.

How do you define a generation? Which ones are how old now anyway? Where is everyone going post-recession?

Look for upcoming posts dealing with all of it, starting with a demographic snapshot of the United States and Canada, circa post-recession 2010.