The term “wage gap” commonly refers to a percentage calculated by dividing the median annual earnings for women by the median annual earnings for men. But in this article, I am referring to the so-called generational wage gap (GWG).
The generational wage gap represents the differences in income earned by Generation Y, X and the Baby Boomers at the same age. In other words, comparing how much your parents earned when they were your age versus how much you earn now. According to the New York City Comptroller’s Office, young workers in New York City (where I work) make about 20 percent less than the generation before them.
This is shocking to many. Why haven’t decades of economic growth trickled down to Millennials’ paychecks? There’s a lot of speculation. Times are tough. Generation Y is more educated than previous generations. The economy is not serving up the jobs prepared for in school. More people than ever fall into the 22 to 35 year old age group and have college degrees. We are living during a time of high productivity in the country. The economy is 70 percent more productive than when Baby Boomers were the same age.
Millennials are more educated than generations before them but are earning less.
There are a lot of questions as to why Millennials are not winning in the generational wage competition. I want to point out a detail that sometimes is overlooked, Millennials are the largest generation ever in the U.S. — meaning there are a lot more people fighting to survive and succeed at the same time. Working Millennials in general cover an age group spanning 17 years, while Gen Xers cover a range of 16 years. When Gen Xers were born, births averaged around 3.4 million per year, compared with the 3.9 million annual rate during the 1980s and 1990s (when Millennials were born).
Also there is the obvious unmanageable student loan debt, lack of job opportunities in desired fields, and salaries not supporting an independent lifestyle. We also have to factor in that living expenses are higher today (even after you factor in inflation).
It seems a Millennial just cannot get a break, or is it really about the Gen-Yers breaking through the barriers of a challenging environment? Generations before have done it, dealing with their own set of barriers. Although the economic landscape has shifted dramatically, we can jump this hurdle. It’s time to come to grips with the offerings the economy and government has put on the table and progress in building wealth.
Many Millennials prioritize making an impact over making money.
I asked BH Wealth Management Associate Financial Planner and Millennial Vicky Kreyman how tough the labor market is right now for Millennials compared to what earlier generations faced.
Kreyman says it has been much harder for Millennials entering the workforce than previous generations. She goes on to say that an education in a certain major does not guarantee a job in that field of study, but there is a silver lining. “You see so many young professionals in their twenties and thirties becoming entrepreneurs and not relying on formal education to be successful. It is not that education is not important anymore, it’s that education has become even more important. Millennials are having to reinvest into their education every few years with how quickly technology is developing. Skills they learn in college become irrelevant at a much quicker pace than for older generations, and employees starting out their careers must learn to keep up with this increased supply and demand of knowledge.”
She adds that earning a master’s degree, or even a doctorate degree is important in certain cases but doesn’t guarantee a higher paying job. Focusing on getting certifications and honing in on a particular skill set can help get ahead in the job search and set you apart.
And when it comes to career choice, many Millennials’ desires don’t seem to match up with what jobs are available. Many Gen Yers I speak to say they are looking for jobs to change the world, make an impact for a cause, offering a healthy work-life balance — and making a lot of money is not necessarily their main priority. According to the U.S. Bureau of Labor Statistics, estimates for job opportunities in STEM (science, technology, engineering, and mathematics) are among the strongest of the professional fields. Employment in occupations related to STEM is projected to grow to more than 9 million between 2012 and 2022. That’s an increase of about 1 million jobs over 2012 employment levels. However, many millennials I speak with are not interested in going in that direction.
I asked Kreyman about her experience working with Millennial clients and her take on their choice of career pursuits. She says the “reality is that many Millennials are needing to find a stable, maybe even unsatisfying, job in order to pay down their debts, even if it is only temporary.”
The generational wage gap exists in part from government regulation on businesses.
The labor market being stacked in favor of employers over workers seems to be a primary cause of this poor median compensation growth. Millennials have already spent most of their entire working lives in a labor market that is loose (many more job seekers than actual jobs) and where private-sector labor unions working on behalf of employee groups have gone away.
I had a profound conversation with Sedhom Law Group Managing Partner and founder Rania Sedhom. She spoke on behalf of employers and the challenges they are facing in today’s economy. Her clients own businesses and do the hiring. To be fair, we need to come to grips with their obstacles employing people.
Sedhom says with government regulation, particularly on wage laws, there are greater costs and overwhelming paperwork for many business owners. Mid-career professionals (Millennials) tend to be one of the groups paying the price. She says with the ongoing and new regulation imposed on business when it comes to hourly pay and overtime rules, motivated workers are not able to demonstrate their flexibility as easily. Sedhom and I shared some of our own experiences entering the workforce and the hurdles we jumped to get ahead at any organization. And flexibility was key to making waves at work.
But business owners are scared to have employers stick around the office longer on their own accord. Even if an employee volunteers to go for more education or training that could be counted as work hours, and with imposed federal rules, business owners may be required to pay the employees for the time they spend on company grounds.
To overcome the generational wage gap, Sedhom suggests Millennials manage their expectations, learn how to communicate and negotiate their salary, and be comfortable bargaining for raises.
Though it may seem a lot of the responsibility to succeed is falling on the individual worker, there are some policies in place that protect young professionals better than previous generations, especially if they choose to start a family. Policies such as guaranteed access to paid family and medical leave and subsidized child care exist more today. With these family- and worker-affirming policies in place, Millennial women—who are increasingly becoming mothers—would suffer a smaller motherhood earnings penalty than previous generations of female workers.
Starting a side hustle or your own business is another weapon against the generational wage gap.
It’s also important for Millennials to remember they are not confined to their 9-to-5. If you’re struggling with your income, make the time for a second part time job or an entrepreneurial pursuit. You don’t have to rely only on your salary alone to meet income needs. Side hustles come in many forms, and tapping into some of your free time could provide the boost you need to overcome the generational wage gap.
Part time pursuits and side hustles often lead to bigger ideas, and new businesses. Millennials can take their skills and start their own business rather than remain in a corporate environment. The entrepreneur spirit is strong among this generation, and the opportunity to branch off on your own is always there should you choose to take that path. While the risks with starting your own business are apparent, being your own boss can also mean endless earning potential. Your hard work and success could directly benefit your net worth.
Passive income is another way to overcome the generational wage gap. There are many means, whether investing in property or the stock market, that can bring in additional money outside of your career. While Millennials live in a time where competition is high and the economy is recovering, they also live in a time where you can rent out a room in your home to cover the bills.
My general advice for myself and those in all age groups is to get checked by reality and then leap ahead. The generational wage gap is real but that doesn’t mean we can’t take it on full force. It’s tough out there but every generation is faced with hurdles.
Overcome the challenges by continuing to reinvest in your education. Get a certificate that sets you apart or take an online course that teaches you new technologies. Practice clear communication with managers at your workplace and let them know you are willing to go above and beyond. Don’t be afraid to negotiate for a higher salary. Take that second job or turn an interest into an entrepreneurial endeavor. A generational wage gap may exist, but that doesn’t mean Millennials can’t close it.