Why young people are earning less
- Written by Jeff Borland, Professor of Economics, University of Melbourne
That COVID is hurting young workers more than older ones is widely recognised.
What’s less well known is that even before COVID-19, in the decade leading up to it, incomes for young people (aged 15 to 34) were falling in real terms while incomes for others continued to climb.
A graph that was created by the Productivity Commission for this morning’s report, Why did young people’s incomes decline? tells the story.
The report follows Monday’s report on declining job mobility for young people.
Commission estimates based on HILDA dataDisposable incomes are incomes after tax. The graph shows that in the years immediately after the Melbourne Institute’s HILDA Household Income and Labour Dynamics in Australia survey began asking the question, the real incomes of young Australians climbed in line with those of older Australians.
In the decade since 2008 they’ve gone backwards. Jennifer Rayner’s book Generation Less noted that the living standards of young and old were beginning to pull apart in ways that would strain common bonds.
Last year’s Grattan Institute report said today’s young were in danger of being the first generation in memory to have lower living standards than their parents.
Where the Productivity Commission study substantially advances our understanding is by presenting a detailed analysis of why incomes of the young have declined.
Read more: It really is different for young people: it's harder to climb the jobs ladder
It finds that young people’s real incomes have fallen since the global financial crisis mainly because they have fared worse in the job market.
Income can come from three sources – labour income, transfer income (government payments), and other income (which includes payments from non-resident parents and investment and business income).
The report finds that about three-quarters of the fall in real incomes of the young has been due to a decrease in their labour incomes (with the rest being due to a fall in other incomes).
Lower wage jobs, lower hours
The decline in labour income for the young is a result of both slower growth in hourly wages and of them working fewer hours. Hours of work have decreased as the young have shifted away from full-time towards part-time work.
With this shift has been a move to working for smaller firms, where wages are typically lower.
The next big question is what has caused the decline in labour incomes for the young.
Authors: Jeff Borland, Professor of Economics, University of Melbourne
Read more https://theconversation.com/why-young-people-are-earning-less-143549