Underpaid and Overeducated: Why Young People Can’t Get Ahead

tired young man in office

Millennials are better educated than previous generations, but their wages don’t reflect it. | Source: iStock

Millennials are the best-educated and most productive generation in American history, but you wouldn’t know it from looking at their paychecks. The average 30-year-old in 2014 earned about the same as his baby boomer counterpart did in 1984, and was taking home less than a 30-year-old Gen Xer did in 2004, according to the results of a new study by the Center for American Progress (CAP).

“The median hourly compensation of today’s 30-year-olds has scarcely budged from that of previous generations,” Brendan Duke, associate director for economic policy at CAP and author of the report, said.

Those born between 1981 and 1997 are 50% more likely to have earned a college degree than boomers and work in an economy that’s 70% more productive than it was 30 years ago. In theory, those gains should translate into higher wages. Yet median hourly compensation – the combination of salary plus the value of benefits like health insurance – hasn’t kept pace. A 30-year-old in 1984 took home a median wage of $18.99 an hour. By 2004, the median hourly wage had climbed to $20.63, but by 2014 it has sunk to $19.32. (Wages were adjusted for inflation.)

wages for 30-year-olds over time

Source: Center for American Progress

The story is a bit better for workers who have finished college. A 30-year-old with a degree can expect to earn about $2.50 more per hour than his baby boomer counterpart. But today’s educated young workers are also earning nearly $2 less per hour than Gen Xers did at the same age. And millennial 30-year-olds who skipped college earn less on average than both Gen Xers and boomers did at the same age.

Why aren’t young people taking home bigger paychecks, even though they’re more likely to have a degree and work in a more productive economy? In their report, the left-leaning CAP argues it’s because they’ve had the bad luck to enter “a labor market where the deck is stacked against workers.” Jobs are scarce, labor unions are weak, and the “motherhood penalty” depresses wages for young women. The solution, they argue, is embracing more worker-friendly policies.

thoughtful young man

Leveling the playing field between workers and employers could improve wages for millennials, according to CAP. | Source: iStock

“How do we move the needle on millennial wages? Improving worker bargaining power – which has been severely weakened over the past few decades – and better work-family policies may be the keys,” Duke said. CAP also wants the Federal Reserve to halt interest rate hikes, since rising interest rates could hamper wage growth.

Boosting union membership is key to leveling the playing field between workers and employers, according to CAP. In 1984, 17% of 30-year-olds were union members, but in 2014, less than 6% were. Union members earn a median weekly wage of $980 compared to $776 a week for non-unionized workers, according to the Bureau of Labor Statistics.

Though union membership has dropped dramatically in recent decades, millennials have a more positive view of the labor movement than other generations, according to data from the Pew Research Center. Fifty-seven percent of millennials surveyed in 2015 said they believed unions have a positive impact on the country, compared to roughly 40% of boomers and Gen Xers, and perceptions of unions have been improving over the years. But most people don’t have the option to join a union, and organizing one can be difficult, particularly if you fear retaliation by your employer.

“It’s not about whether workers want to unionize. It’s really about whether it’s feasible to make that happen,” Ruth Milkman, a sociologist who studies labor issues, told The Atlantic. “In general, if you ask the majority of workers, ‘If you could have a union, would you like that?’ they say yes, but the opportunity to do that is rather limited.”

Even if young people are eventually able to bargain their way to better wages, it may be too late for them to make up the ground they’ve lost. In the United States, people under age 30 are now poorer than retirees, according to an analysis of income data by The Guardian. Low wages and staggering amounts of debt are making it hard for this generation to build wealth, which could leave them playing catch-up for the rest of their lives.

Follow Megan on Facebook and Twitter

More from Money & Career Cheat Sheet: