What Do Millennial Workers Want? A Raise.
My recent research shows that median compensation — wages plus the value of benefits from employers such as health-care premiums and 401(k) contributions — for a 30-year-old in 2014 was below that of a 30-year-old ten years earlier, after inflation. In fact, 30-year-olds today make around the same amount of money that 30-year-olds made in 1984.
The failure of wages for 30-year-olds to grow is especially discouraging considering that 30-year-olds today, on paper, should be the best-paid group of 30-year-olds in U.S. history. Today, 30-year-olds are 50 percent more likely to have finished college than they were in the mid-1980s, and despite the recent slowdown in productivity growth, the economy is still 70 percent more productive than it was then.
When we break down the numbers by educational attainment, the picture grows even more disappointing. A 30-year-old without a college degree makes less today than 30 years ago. And even though college-educated 30-year-olds have seen a modest increase in pay since 1984, they still make less than this age group did in 2004. Meanwhile, the real cost of a four-year public college has grown 30 percent over the last ten years, and student-loan debt has exploded.
The main reason pay for 30-year-olds hasn't budged is that they have entered a labor market where the deck is stacked against workers. The first challenge to Millennial workers' bargaining power is the incomplete labor-market recovery. Employers don't raise wages because they feel generous; they raise wages because they have no other option if they want to hire and retain qualified workers. When there are a dozen workers willing to do a job, it becomes that much harder to bargain for a higher wage.
Despite a record 71 months of private-sector job growth, there remains a great deal of slack in the Millennial labor market. The share of 25- to 34-year-old men with a job is 2.6 percentage points below its pre-recession level and a striking 6 percentage points below its level in 2000. In fact, between 1980 and the Great Recession, there were only eight months when the share of 25- to 34-year-old men with a job was lower than it is today.
The second challenge to Millennials' bargaining power is that they are almost entirely unable to join the institution that could help rebalance power — namely, unions. Unions traditionally have helped balance power by letting employees band together to negotiate for higher wages, better benefits, and additional job security. While union wages are not immune to the disempowering effect of weak labor markets, their growth rates are less cyclical than nonunion wages. Unfortunately, not only has union membership sharply declined among all workers in recent decades, but Millennials are also the generation least likely to belong to a union.
So what can we do to help 30-year-olds pull ahead? Policymakers traditionally suggest that raising the economy's productivity and educational attainment are solutions to stagnant wages. But the failure of median compensation for 30-year-olds to grow since 1984 despite more education and productivity strongly suggests that these solutions are not sufficient by themselves.
Instead, raising the wages of Millennials will require leveling the playing field between workers and employers. The first step is for the Federal Reserve to pursue an empirically driven monetary policy that recognizes that further interest rate hikes make no sense in a period of low employment rates, practically non-existent inflation, and negative interest rates in other advanced economies. The second step is to reverse the decades-long decline in union coverage by making it easier for workers to join together and bargain collectively.
Another important way to help Millennials is to recognize that not all of them are just trying to land that first full-time job: The oldest group of Millennials will turn 35 this year. As Millennial workers begin to raise children, they will have to balance work and family in an economy where two incomes are more necessary than ever.
Unfortunately, research finds that women see their wages decline 7 percent for each child they have, and about half of this "motherhood penalty" is explained by mothers' losing work experience and seniority while becoming more likely to take on part-time and seasonal jobs. Enacting the right set of work-family policies, such as paid family and medical leave and subsidized child care, would permanently raise Millennial mothers' wages, as they would need to take less time off from work to care for their families and would find it easier to hold full-time jobs.
Work-family policies wouldn't just benefit Millennial mothers. Millennial fathers report more egalitarian views regarding family and gender roles than did men of previous generations, but because the United States remains one of the few wealthy countries that do not guarantee the right of paid leave to fathers, many of these fathers are unable to take leave even when they want to. Extending work-family policies like paid leave to Millennial workers would help promote work-family balance for both men and women.
The U.S. economy has not rewarded young workers for achieving the highest educational attainment of any generation and working in a more productive economy. Fortunately, with the right set of monetary, labor, and family-friendly policies, Millennial workers can not only catch up with where they should be, but also leap ahead.
Brendan V. Duke is the associate director for economic policy at the Center for American Progress. He turned 30 years old last year.