NCPA - National Center for Policy Analysis

Young Adults See Their Pay Decline

March 8, 2012

Young people entering the job market are taking the brunt of the downward pressure on wages caused by high unemployment, according to a new analysis of pay trends, says the Wall Street Journal.

  • In data compiled for a coming report, the Economic Policy Institute (EPI) found that the average inflation-adjusted hourly wage for male college graduates aged 23 to 29 dropped 11 percent over the past decade to $21.68 in 2011.
  • For female college graduates of the same age, the average wage is down 7.6 percent to $18.80.

The EPI data are another sobering sign for college students and have implications for the economy.  With wages falling for many young people and about flat for the nation as a whole, consumers have limited ability to pay down debts and revive the economy with more spending.

The job market has improved in recent months.

  • The seasonally adjusted unemployment rate has fallen to 8.3 percent from a peak of 10 percent in October 2009.
  • But there are still nearly four unemployed people for every job opening, says Lawrence Mishel, president of EPI.

Downward pressure on wages is likely to persist as long as unemployment remains high.  At the current rate of job growth, the United States is still at least four years away from "a normally functioning labor market" with a rough balance between supply and demand for labor, said Lawrence Katz, an economics professor at Harvard University.

For the entire working population, average hourly wages have risen modestly over the past 10 years.  But that is partly because many of the lowest-paid workers have lost their jobs and are no longer included in the average.

Source: James R. Hagerty, "Young Adults See Their Pay Decline," Wall Street Journal, March 6, 2012.

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