Studies: Older workers’ wages are declining
Tuesday, March 17, 2020
Since age brings experience, it’s easy to believe that older workers command more pay than their younger counterparts. But studies show a grimmer reality.
According to The Wall Street Journal, “Americans under 35 report being happier with their paychecks than people over 55 for the first time since 2011.” (This conclusion is based on 2018-19 research by The Conference Board.) The increased satisfaction among younger workers may be due to millennial and Gen Z workers experiencing faster wage growth than the general population.
What’s interesting, though, is that millennials, too, are experiencing the diminishing wage gap. As reported by USA Today, Gen Zers are earning nearly as much as — and in some cases, more than — millennials. Workers aged 20-24 not only represent an overwhelming portion of new hires but also receive pay increases averaging 6% — almost double the annual pay raise for all U.S. workers.
The Conference Board, as well, says that younger workers’ wages “have risen sharply” and the wage gap between 20- to 24-year-olds and 25- to 34-year-olds recently fell to its lowest in 36 years.
The decline in older workers’ wages is starkly apparent in a 2019 report by Schwartz Center for Economic Policy Analysis (SCEPA). According to the report, older workers’ wages have trailed younger workers’ wages for roughly the past three decades. From 1990-2019, the median wages for men age 55+, with a bachelor’s degree, decreased by 2.9%. Conversely, wages for men age 35-54, with a bachelor’s degree, increased by 8.7%. (Women have seen a slight hike in wages, but due to the gender wage gap, their pay remains lower than men’s.)
A 2019 Bankrate survey found that the older people get, the worse their wages become. Per the study, half of workers age 55-64 did not get a pay increase in the past 12 months. Workers age 65-73 fared even worse, as nearly 3 in 5 did not receive a pay increase, the worst of all surveyed age groups.
Accelerated wage growth among younger workers could be due to the sought-after skills they possess plus their tendency to switch jobs more. Qualified young workers who switch jobs in a tight labor market have a distinct advantage: to attract them, employers must offer competitive pay — and this could be close to, or even more than, what their older counterparts are making. (Older workers tend to stay with their employer longer and receive only annual pay increases.)
The SCEPA report asserts that decline in older workers’ wages in a healthy economy means that “older workers has lost bargaining power in the labor market.” This shrinking bargaining power stems from, among other things:
1. Inadequate retirement security. The average older worker earning less than $40,000 per year has no retirement savings. Median retirement savings for older workers earning $40,000-$115,000 per year is only $60,000. For those earning more than $115,000 per year, the median savings is only $200,000.
2. Job instability. “Older workers are the fastest growing age group in alternative employment arrangements,” such as independent contractors, temporary agency workers, on-call workers, and gig workers. They’re also more likely to suffer involuntary job losses and, consequently, unemployment.
3. Deterioration of workers’ rights. From 2004-2017, older workers had a steeper drop in union membership rates than younger workers.Moreover, older workers approaching retirement age are substantially more likely to be paid at or close to minimum wage than younger workers.
4. Geographic inflexibility. Workers who are unable — or unwilling — to relocate for a better job have fewer employment options. Older workers often fall in this category, as they are less likely to move for a job, compared to younger workers.
5. Age discrimination. This is illegal in the workplace. Yet, the evidence indicates that “more older people seek work than there are employers willing to hire them,” which puts employers in the driver seat when it comes to salary negotiation with older workers.
We frequently hear that older people are working longer. But less-touted data conclude that they often lack leverage in improving their wages and working conditions.
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