There are three clear problems with generational labelling.
First, it stereotypes: How can we assert that someone born on the 1st of January 1985 will be fundamentally different from someone born at some point of time in 1984. Going by Mr Gronbach's categorization, 31st December 1984 will be the dividing line between Generation X and Generation Y. One can indeed argue that the person born on or after a certain date may have a fundamentally different life, because of the quirks of the school administrations, immigration policies of different countries, and business cycles. However, because such big events don't necessarily move in a pattern, the generational variations are more likely to be a complex, and more chaotic, thing, rather than the neat characterization in boxes that this Gen X/Y business suggests.
Second, because there is no agreement on the labelling among various people who use these labels. Mr Gronbach's labelling was somewhat straightforward: The GI Generation (born between 1905 and 1924), the Silent Generation (born between 1925 and 1944), the Baby Boomers (born between 1945 and 1964), the Generation X (born between 1965 and 1984) and Generation Y (thereafter). However, new 'generations' keep cropping in: There are the millennial, indeed, people born after 1995, and now Generation Z, I would not know whether this is meant to convey a sense of finality or just tiredness with generational labelling. One can't reliably use such labelling if it means different sets of things to different people.
Third, because such labelling is unhelpful and lead, sometimes, to generational wars. It is more like - I need to be like this because I am Gen Y - than the other way round. Popular press used such labelling with great abundance and little care, oblivious of the fact that this is a way to bring on a new sort of 'class' war. While lives of people vary, for a multitude of reasons, and our calendared lifestyles mean that everyone do not get the same opportunity, such generational labelling essentially undermine continuity of culture, and the commonness of human spirit, and overemphasize the consuming habits of a given period.
Extending the last point, I shall say that the discourse on Generational Labelling is a contribution marketers made to social theory, not from the perspectives of disengaged observation but with an intent to intervene, which makes it a shrewed strategy but a flawed theory. The futility of such labelling is clearly evident when such ideas are imported, en masse, into other countries with a different history altogether. I could never say that the Generation Y in India were those born after 1985, because the country's history and culture is quite different. But this is precisely the label used in Indian media, which is in a desperate race to equate the consuming habits of the just adults (which include the millions which work in call centres and software 'factories') with those of the West. But, such labelling is misfit, as Indian generations seemed to have lag effect (Indian 'GI' generation, if there was any, are those who fought in the country's freedom struggle and were born after 1915) and Indian Generation Y behave more like the American baby boomers, taking out mortgages and buying first family homes, while, at the same time, facing their first recession in a lifetime, unlike the baby boomers.
Finally, apart from the sheer absurdity of fitting everyone in the world into these neat categories, generational labelling displays the same problems of oversimplification and reductive tendencies that the other big stereotype, the clash of civilizations, have shown. The point about such theories is that they all undermine the power and the position of an individual. If we keep faith on the individual effort in shaping the circumstances, and belief systems of an era, such big stereotypes should be useless. However, these theories, based on an overtly simplified versions of our history, we make the mistake of forgetting the big lesson of history - the power of individual efforts and the futility of stereotypes - and therefore, become condemned to repeat history's big mistakes.