My thoughts: I don’t know kids going off. I do however see observence levels slipping and hemlines rising. And I have a hunch why: we live in second/third generation Judaism. Religion is becoming more institutionalized and set from day to day. I know many “nisht of Shabbos geredt” yidden. Their commitment is skin-deep and unauthentic. And their kids pick it up. They know that you need to talk a good talk, but in practice you can cut corners, cheat and tune out. And nothing can affect them, because they say to themselves “Sure, sounds nice, but its all just talk, right?”
They need to see mesirus nefesh, that is the only thing that will get through to them, I think.