1. Art and Diseño

January 29, 2015
Economics Group
Sarah Watt House, Economist
[email protected] ● (704) 410-3282
Erik Nelson, Economic Analyst
[email protected] ● (704) 410-3267
Alex V. Moehring, Economic Analyst
[email protected] ● (704) 410-3247
Millennials in the Economy V: Income Finally Picking Up
Millennials have experienced weaker earnings growth than older workers since the recession, but recent data
point to a pickup. Over the past decade, the income gap between young and old households is little changed.
Median Weekly Earnings of Full-Time Workers
Wages Finally Accelerating for Millennials…
Despite a noticeably stronger labor market in 2014, wage growth continues
to flounder. Median weekly earnings for full-time workers have increased
an average of 1.9 percent per year since 2008, nearly on par with inflation.
With less work experience than their older counterparts and a larger shift
into low-paying jobs, young workers have fared even worse (top chart).
Median weekly earnings for 25-34 year olds have risen an average of only
1.6 percent per year and just 1.5 percent for 16-24 year olds working full
time.
More recently, however, wages for Millennials are staging a bit of a
comeback. Median weekly earnings for 16-24 year olds have risen well
ahead of older workers over the past year (middle chart). The increase
comes as younger Millennials are working more hours and suggests slack is
diminishing at the lower end of the skills spectrum. Wages for older
Millennials (ages 25-34) have also accelerated and, while not growing as
quickly over the past year as younger workers, have done a bit better at
keeping pace with older workers since the recession.
…But Lingering Income Effects From Graduating in a Recession
Even as wages have picked up recently for younger Millennials, the effects
of beginning their career in a weak labor market are likely to linger.
Research finds that graduating in a recession can have long lasting negative
effects on wages. Average starting salaries may be flat or even lower in
some fields relative to the pre-recession environment, initial raises are
likely to be more modest and more workers may be underemployed.
Altogether, the implicit earnings loss can persist for around a decade.1 For
the unlucky subgroup of Millennials to graduate during the Great
Recession, the effects on earnings may be even more biting and persistent
than past research suggests given the severity of the most recent downturn.
Four-Quarter Moving Average, Q1 2008=100
118
118
16-24: Q4 @ 110.5
116
35-44: Q4 @ 112.7
114
45-54: Q4 @ 112.6
55+: Q4 @ 115.7
112
112
110
110
108
108
106
106
104
104
102
102
100
100
98
98
2008
2009
2010
2011
2012
2013
2014
Median Weekly Earnings
Year-over-Year Percent Change of 4-Quarter Moving Averages
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
16-24: Q4 @ 4.8%
25-34: Q4 @ 2.4%
35-44: Q4 @ 0.8%
45-54: Q4 @ 1.7%
55+: Q4 @ 0.9%
-2%
-2%
-4%
-4%
02
03
04
05
06
07
08
09
10
11
12
13
14
15
Younger Households' Income
Income Gap Fairly Steady Over Past Decade
With historically slow wage growth, it is not surprising that, after adjusting
for inflation, household income for Millennials has fallen since the Great
Recession. Between 2007 and 2013, real income for households headed by
someone under the age of 35 fell 14.6 percent. Most other households,
however, have also seen real income decline over this period. Compared to
all households, Millennials are only lagging slightly behind in the wake of
the recession. In 2013, the median income for households younger than age
35 was 76.1 percent of the median for all households–down from 2007 but
virtually unchanged since 2004 (bottom chart). The recent acceleration in
weekly earnings is likely to have helped narrow that gap somewhat over the
past year, but the income disparity between Millennials and older
households remains noticeably wider than the prior generation.
116
25-34: Q4 @ 112.2
114
Median Income of Households Under 35 Relative to All Households
100%
100%
95%
95%
92.3%
90%
90%
85%
80%
83.3%
80.0%
85%
81.8% 82.1%
76.2%
78.3%
75%
80%
75.6% 76.1%
70%
65%
65%
60%
60%
55%
55%
50%
50%
1989
1992
1995
1998
2001
2004
2007
2010
2013
Source: U.S. Department of Labor, Federal Reserve Board and Wells Fargo Securities, LLC
Altonji, Joseph G., Lisa B. Khan and Jamin D. Speer. (2014). “Cashier or Consultant? Entry Labor Market Conditions, Field of Study and
Career Success.” NBER Working Paper No. 20531.
1
75%
70%
Wells Fargo Securities, LLC Economics Group
Diane Schumaker-Krieg
Global Head of Research,
Economics & Strategy
(704) 410-1801
(212) 214-5070
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John E. Silvia, Ph.D.
Chief Economist
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Mark Vitner
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Jay H. Bryson, Ph.D.
Global Economist
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Sam Bullard
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Eugenio J. Alemán, Ph.D.
Senior Economist
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Anika R. Khan
Senior Economist
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Azhar Iqbal
Econometrician
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Tim Quinlan
Economist
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Eric Viloria, CFA
Currency Strategist
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Sarah Watt House
Economist
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Michael A. Brown
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Michael T. Wolf
Economist
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Zachary Griffiths
Economic Analyst
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Mackenzie Miller
Economic Analyst
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Erik Nelson
Economic Analyst
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Alex Moehring
Economic Analyst
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Executive Assistant
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