Millennial Economics: The Big Squeeze


Millennials and the workforce
The growing divide – college degrees are necessary but are they sufficient?
The educated workforce? Not so much….
The college cost conundrum


Millennials offer a key testbed for the future of work. They are relatively unprotected by seniority and personal networks, and they are hitting the workforce now.

When I think of Millennials, I imagine highly educated techies running the world from the back of my local Starbucks, or handling their complex social media avatars by voice command while biking to work from their gentrified inner city loft. It’s a future I would find challenging (I don’t especially like Starbucks and don’t really have the body for all that skintight biking gear), but running the world from a coffee shop seems pleasant enough.

Unfortunately, the real world of Millennials is far from that.

Millennials are less engaged in the workforce, have worse jobs, at lower pay, and with fewer benefits than their predecessors. A college degree has become a more important credential even for jobs that did not previously need one, but college costs and associated student debt are rising fast. And house prices – especially in big urban areas where the best jobs are – have moved away from them: for many, home ownership is no longer even an aspiration: a room in a shared house is already a step too far.

This post comes in two parts. The first explores how Millennials connect to work in an environment and in ways that are different from their predecessors. The second (due next week) looks at how Millennials have adapted, and the role played by technology.

These two posts together show how work patterns are changing and how Millennials are responding: they are the canary in the coalmine, the cohort that is most sensitive to change because it is least protected by seniority, established career paths, and strong work-based social networks. They come largely naked into the working world, and they show most plainly the forces that are operating in the labor market.


Millennials and the workforce

The percentage of Millennials working “good jobs” is down in several ways.

Labor force participation (LFP) measures who is in the labor force (either working or looking for work) and who is not. People can drop out for many reasons – they may be disabled, have to care for someone, or are simply discouraged because they can’t find work. But since WWII, almost all men in the working age-group have worked, and women increasingly participated as well. In 1980, 96% of young men (25-34) were in the labor force, and by 1997 so were 76% of women.

Those peaks are now past.   In 2015, male participation in this age group was 88%, down 8 percentage points from its peak, and female participation had also dropped by  three percentage points. This decline appears small, but means that about 2 million young men and women are missing from the workforce.

For those who are in the workforce, unemployment rolls around with the business cycle. Figure 1 shows the impact of three recent recessions on unemployment rates for various types of workers. Unemployment has always been higher for young workers who are less established in their careers. But the Great Recession hit young workers much harder than previous recessions; unemployment for them peaked at 16% in 2011.

Here’s the Caption to look at when there’s also a credit. Somebody

For young high school (HS) graduates or HS dropouts without a college degree, unemployment is still a scourge. Despite a sharp fall after the recession ended, 18% of them are still unemployed, and that’s a significant increase over the past 25 years.[1]

The growing divide – college degrees are necessary but are they sufficient?

A college degree may protect you from unemployment, but is college now the “new high school?”  Employers are now demanding higher credentials, often for the same job. In a recent survey, 30% of employers said they were hiring more college-educated workers for jobs previously held by high school graduates. Technical jobs were a particular target , and a bachelor’s degree is now required for many more jobs since 2007, including dental laboratory technicians and hygienists, photographers, claims adjusters, and electronics engineering technicians.[2]

These new requirements work like a ratchet: employers tighten requirements during recessions, and loosen them when they find it harder to hire.  But loosening only affects about 20% of the jobs where credentials were tightened, so over time more and more jobs require a degree.[3]

Skills and earnings – does a college degree really pay off?

Overall, median earnings for young adults fell about 10% in real terms between 1979 and 2015, from $27,200 to $24,000 in 2016$. Almost 40 years of economic stagnation or worse.

The decline of median wages is clearly not good. But the real story is the rapidly growing chasm between the earnings of those Millennials with a college degree and those without. In the mid-1960s, at the far end of the postwar boom, a college degree earned you a premium of about 25% over other workers who had only finished high school. By 2013, that premium was over 60%; real earnings for high school grads were down 18% in real terms since 1979.

The chasm is almost as large for those with an associates degree or some college – that gets you a premium of just 10% over high school grads, but their real wages are still declining.

However, while good jobs at good wages increasingly require college, not all college grads get good jobs. First, almost half of college grads have historically worked in reasonably well-paid jobs that did not require a college degree. Those jobs are down by a quarter since 2002. .

Second, the supply of college jobs has been flat since 2007. All the growth in jobs for recent grads has been in non-college jobs (that is, jobs that don’t require a college degree).

Overall, about 20% of recent college grads are either unemployed or stuck in low pay jobs; and another third are working in better paid jobs that don’t require a degree.   Just under half are college grads in college jobs.

Millennials – the educated workforce? Not so much….

The lack of good jobs – and especially good jobs that don’t require college – is important. Much of the public policy blather has focused on retraining displaced workers and increasing the number of college graduates. But if the jobs aren’t there that won’t help.

The reality is that most Millennials do not have a college degree. In fact, only a third do, and that number is growing by only about 5 percentage points per decade. At that rate, it will be 2050 before even half of the population has a college degree. It is sheerest fantasy to suggest that the economic problems of the less educated will be solved by more education.

This divergence also leaves more minorities behind: far fewer make it as far as a college degree (for reasons beyond this post). Even in 2016, while 40% of whites age 24-29 have at least a college degree, only 21% of blacks and 16% of Hispanics do so.  More women have college degrees and advanced degrees than men. So as college degrees become an ever-more necessary credential for getting a foot on the career ladder, minorities are still very poorly placed.

Anatole France once said “The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.” Today, the need for a college credential fairly and meritocratically happens to exclude those – particularly minorities but also poor whites – who were not blessed with the right parents, the right education, the right environment to prepare them for college.

The college conundrum

So a college degree is key, but college is not free: costs are up three-fold in real terms in 30 years. Over the past 4 decades, high income families have gone from spending four times as much on college to spending seven times as much – which shows both that college is increasingly unreachable for poor families, and that it is also a rapidly growing burden on the better off.[4]

As a result, students are now piling on debt, and student loans now total more than $1.26 trillion. 44 million Americans have student loans, and the average 2016 graduate has $37,172 in student loan debt, up six percent in a single year. Student debt is now the largest and fastest growing type of debt for young adults , and unsurprisingly, a growing share of student loans are not being repaid.

But direct costs are only part of the story. Economists also talk about “opportunity costs” – what has to be given up in exchange for a college degree.

A high school graduate working at the median wage for non-college workers gives up $135,000 in earnings to get a degree (in 5 years).  That’s enough money to buy a home, start a business, or invest in a family or for the future. Invested over a working lifetime, that could return more than $3 million, far more than the much-touted $1 million “college premium” (the additional earnings that college grads can expect over a working lifetime, according to the College Board).

So for most people, while good jobs increasingly require at least a college degree, the direct and indirect costs of college are formidable, unless you are in a program that fast-tracks you into the economic elite. Most college degrees don’t do that.


In every measurable way, Millennials are worse off economically than predecessor generations. Good jobs are harder to find, and the share of college jobs is flat in the face of a growing college-educated population

Worse, the gap between the college educated and the rest is becoming a chasm. Jobs and earnings both reflect polarization in the US economy and the decline in good jobs for those without a college degree. Those who tried for a college degree and failed [5] get the worst of all worlds: crushing student debt and no additional access to better jobs and earnings.

Even for the college-educated, life is not all sunshine and roses. Big gaps are appearing between the 40-odd percent of college graduates with college jobs, and the rest. A fifth of college grads are out of the workforce or unemployed even after 6 years of expansion.

In the end, all the trends come together in data on the total assets and the net worth of Millennials .

The charts illustrates the Big Squeeze in three ways. First, most young adults have minimal net worth, and median assets are down since 1989 and down quite sharply since 2004. Second, the Squeeze is significantly affecting the top quartile of young adults, whose net worth is down by a 40% since 1989. Third, the current recovery isn’t helping.[6]

William Gibson once said “the future is already here. It’s just unevenly distributed.” The future is thickly distributed among Millennials, in their jobs and prospects, habits and behaviors, housing and marriages. How they respond to the Big Squeeze tells us a lot about what the future will look like. That’s the subject of the next post.


1 thought on “Millennial Economics: The Big Squeeze”

  1. Pingback: see this

Leave a Reply