Since the late 1970s, social science researchers, the media, private foundations, and policymakers have directed considerable attention to the labor market problems of young adults and their families. Most of this attention has focused on high school dropouts, the poor, minorities, and inner-city youth. But an equally troublingand broaderproblem has received comparatively less notice: the steep and sustained decline since 1973 in the real (inflation-adjusted) earnings of young men and women generally.
Even adjusting for demographic and socioeconomic characteristics, the labor market problems of young workers are disproportionately severethey include higher than average unemployment and relatively low earnings when employed. This sustained drop in earnings has been especially dramatic for young adults with no postsecondary school education. Most proposed remedies have emphasized the quality of the labor supply. But improving education and training, while often worthwhile and necessary, is not by itself sufficient to raise earnings.
If this downward trend, which has persisted through recession and recovery alike, is to be reversed, then policymakers and educators must address the demand side as well as the supply side. Raising young adult wages will require not only better academic performance, training, apprenticeships, and school-to-work programs, but also full-employment policies, changes in the configuration of jobs and careers, and larger young adult union membership.
Prior to 1973, the annual and weekly earnings of both young adults and older workers had been improving markedly. Between 1967 (the year the Bureau of Labor Statistics began tracking weekly earnings of wage and salary workers) and 1973, the real median weekly earnings of 16- to 24-year-olds rose by approx i mately 8 percent. Since 1973, however, the earnings of young adults have fallen almost continuously. Between 1973 and 1979, the weekly earnings of young men working full time fell by 7 percent.
Young men experienced a 19 percent decline in earnings (a real value of $72 per week) between 1979 and 1989. This decline cannot be attributed solely to business cycle contractions. About half of the 19 percent decline did take place during the recessionary period of 1979-1982. But between 1982 and 1989, a period of strong overall job growth, the weekly earnings of young men fell by another $33, or 9 percent. Earnings declined still more between 1989 and 1994, dropping yet another 9 percent.
The result of all this decline? A young man under 25 years of age employed full time in 1994 earned 31 percent less per week than what his same-aged counterpart earned in 1973. Annual earnings trends display the same pattern. Using findings from the U. S. Census Bureau’s annual work experience surveys, we estimate that between 1973 and 1993 the median real annual earnings of young males employed on a full-time basis for at least 27 weeks fell from $18,600 to $13,700, a decline of 26 percent.
Young male high school dropouts experienced a 32 percent decline in real annual earnings, while high school graduates with no college education experienced a 29 percent decline. In 1993 a young male high school graduate earned in real terms only what a comparably aged high school dropout was earning in 1973. And a four-year-college graduate in 1993 earned only slightly more than a high school graduate earned 20 years earlier. Young women also experienced earnings declines over this period, but of a smaller relative magnitude.
From 1973 to 1994 the real median weekly earnings of young women fell 14 percentcompared to a decline of 31 percent for young men. Because the earnings declines among young men have been significantly larger than the earnings declines among young women, the median weekly wages of young men and women have substantially converged. Whereas in 1973 the average young woman working full time earned only 75 percent of what her male counterpart earned, a young woman in 1994 typically earns 95 percent of what her male equivalent does.
Near-equality of earnings between the sexes, sadly, has been attained only as part of a broader decline in the earnings of all young adults. Of course, wage declines during this time have clearly not been confined to young adults. The earnings of full-time employed males older than 24 have also declined. The relative size of older men’s earnings declines, however, has been much smalleronly a 9 percent decline for men over 25 compared to 31 percent for men aged 16 to 24.
As a consequence, the relative weekly earnings position of young men has deteriorated dramatically since 1967. In the late 1960s, a young man employed full time could expect to earn nearly three-fourths of what an older man earned. Until 1973, a majority of young men could earn enough to support a family. By 1994, however, their relative weekly earnings had dropped to only one-half the earnings of older men, leaving them hard pressed to contend with the costs of raising children.