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Incomes Of Younger Americans Down 10% Since 2007

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A December 3rd article from Derek Thompson of the Atlantic highlights that since the Great Recession began back in 2007, the median wage for Americans between the ages of 25 and 34, adjusted for inflation using very conservative government inflation figures, has decreased in every sector except for health care.

Thompson notes that his data come from a recent statistical analysis of the Census Current Population Survey by Konrad Muggleston, an economist with Young Invincibles.

Younger Americans incomes not matching inflation

The retail, wholesale, leisure and hospitality sectors taken together employ more than 25% of the 25-34 age  group, and wages are down more than 10% across these sectors since 2007. This doesn’t mean that younger Americans are actually having their pay cut by their employers, it means that wage growth (if any) is not keeping up with inflation. As a result, the spendable incomes these twenty-somethings and thirty-somethings have slipped significantly since the recession.

Younger Americans

Things aren’t a whole lot better for the youngest group of workers (between 18 and 24). With the exception of  health care, the sectors that typically employ part-time students and recent graduates are also seeing wages fall further and further behind inflation.

No pressure on wages as job market still soft

One of the main reasons that real wages are dropping in so many sectors for young workers is that the Great Recession devastated demand for hotels, amusement parks restaurants, resulting in lower pay across those industries. Moreover, as Thompson notes “…as the ranks of young unemployed and underemployed Millennials pile up, companies around the country know they can attract applicants without raising starter wages.”

Younger Americans

Globalization and technology have also played in major role in the current poor work circumstances of younger Americans. A study by David Autor, David Dorn, and Gordon Hanson last year showed that even though the computerization of workplace tasks hasn’t reduced employment per se, it has reduced the number of higher-paying, routine jobs. These higher-paying jobs have been replaced with cheaper jobs, and real pay has dropped.

Healthcare wages been the exception to the rule for several reasons. First, the sector is growing as everybody wants and needs healthcare. Second, a large percentage of total U.S. healthcare costs are paid by  the government (i.e. Medicare, Medicaid, and the employer insurance tax break), which continues to pay its bills and even grow during a recession. Although many industries suffered during the Great Recession, health care was propped up by steady government spending and has had to pay higher wages to keep attracting skilled workers.

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