Generational strife has struck the U.S. workplace.

Nurtured on a steady diet of self-esteem, the swaggeringly confident children of the ’80s and ’90s are flying the nest and starting to land in the workforce. They’re clamoring for quick feedback, meaningful involvement, and pumped-up recognition—and roiling old-school colleagues who dub them impatient, needy, and arrogant. The kids are frustrated too: Entry-level duties are a far cry from the dream jobs they’ve been made to feel are their birthright.

Business headlines have chronicled the fallout from this culture clash, wagging their fingers at the naïveté of youth while casting a sympathetic eye toward the flummoxed managers who are forced to navigate the newbies. But for all the calls to knock these cocky kids down to earth, there are signs that this generation could change how we work—maybe for the better—and employers might have little choice but to play nice.

The key is understanding what’s behind Generation Y’s bad rap. Young adults who grew up with too much praise may struggle with workplace relationships, according to Jean Twenge, a psychologist at San Diego State University and the author of Generation Me: Why Today’s Young Americans Are More Confident, Assertive, Entitled—and More Miserable Than Ever Before (Free Press, 2006). Rigid business hierarchies and managers who aren’t willing to inflate their fragile egos can come as quite a shock.

“There’s disappointment. Sometimes depression happens,” Twenge says, noting that depressive disorders, once associated with middle age, are now more common in young people. “Also, young workers, when they’re faced with a job that disappoints them, will simply leave.”

Job hopping contributes mightily to the image of a self-centered generation, but recent research indicates that there’s more at work when young people jump ship: They may not recognize their ability to learn and improve over time, reports Stanford (March/April 2007). Carol Dweck, a psychologist at Stanford, says we’re too focused on results with young people, and it has taught them to value performance instead of process. They stop thinking of themselves as hard workers or creative thinkers, for example, and start identifying themselves as inherently gifted individuals who always deserve a blue ribbon. Consequently, they give up easily and avoid situations in which they might fail. In other words: They run only the races they know they can win.

So should we be bracing for a workforce of disappointed young people skipping from job to job in search of managers who recognize their talent? The current job market appears to support this vision: According to the U.S. Department of Labor, we’re a year into a retirement bulge that is expected to continue for the next 18 years as boomers retire by the millions. Young people certainly won’t have trouble finding work—but that’s a gray forecast for the employers who can’t hang on to the kids.