|WACO, November 20 - The aging of the workforce is a demographic fact. The oldest members of the Baby Boom generation (people born between 1946 and 1964) have begun to reach retirement age, and the effects are being picked up in overall measures of the economy.
Young workers are an increasingly important component of the labor force, even as they face difficulties finding desirable jobs.
The most recent data from the Bureau of Labor Statistics indicates that between 2008 and 2012, the distribution of hours worked clearly shifted toward younger age groups. In 2008, Baby Boomers worked almost 41 percent of total hours, with 42% worked by Generation X (persons born between 1965 and 1982) and less than 13 percent by Generation Y (those born between 1983 and 2001). In 2012, the Baby Boomer share of hours worked had fallen to 35 percent, with Generation X at less than 41 percent and Generation Y up to nearly 21 percent. That’s a fairly big swing considering it happened over just four years, and the trend will continue.
While stereotypes tend to oversimplify, there are measurable differences in the prevailing attitudes of workers of different ages. The Board of Governors of the Federal Reserve System (Fed) recently released results of a survey of young workers (“In the Shadow of the Great Recession: Experiences and Perspectives of Young Workers”). In this study of Americans age 18 to 30, questions centered on work-related topics such as educational attainment, job satisfaction, and expectations. This age group is approximately equal to the older members of Generation Y (also called the Millennials) who are already working age.
One of the issues revealed in the survey results is that young people need more information about the job market and how to educate themselves to find good jobs. Only 42 percent of respondents who were working had a job closely related to their field of study. About one in four indicated they received no information about career planning while in high school. Without adequate information, it is impossible to make an informed decision regarding higher education, contributing to mismatches between degrees/training and employer needs, underemployment, difficulty repaying student loans, and other problems. Although it is promising that young workers are responding to the need for higher education, it is crucial that they have enough information to make good decisions. It is a basic tenet of economics that markets need reliable information to function efficiently.
Some 28 percent of survey respondents said they are overqualified for their current jobs, indicative of a trend toward more-educated candidates pushing out less-educated persons for positions which really may not rely on skills learned in college. In addition, 23 percent of respondents reported that the financial benefits of their education do not outweigh the costs. Even so, those without adequate education are more likely to be unemployed. Of the unemployed respondents, 83 percent have not completed a postsecondary degree. Lower levels of education were linked to less optimism about job futures, and financial considerations remain a significant barrier to seeking additional education.
Part of the problem is clearly that younger workers have been entering the job market during a recession and sluggish recovery. The U.S. workforce is still experiencing fallout from the Great Recession, with little wage growth and lingering unemployment. Young workers have been among the most hard-hit groups, with many either unable to find work or underemployed. While it is disturbing that so many of the young people surveyed have not yet found jobs which fully use their talents and training, the Fed’s survey nonetheless reflected some positive developments(such as 66 percent of respondents were somewhat or very satisfied with their jobs over the past five years). There is also good news on other labor-market fronts, including evidence that salaries for young women are about equal to those for men, and women tend to be more likely to pursue higher education.
The loss of millions of experienced workers will be felt in the decades to come, and shortages in various occupations are projected to arise. There will be opportunities for workers prepared to fill the breach. However, today’s young workers are challenged by entering the workforce at a time when good jobs are few and far between. As the Fed study noted, an alarming number of high school and college students receive no information on career planning. Far too many have taken on debt to obtain degrees poorly suited to well-paying work and are struggling with the resulting financial burden.
There is little doubt that virtually all young people could benefit from more and better data to assist them in the higher education decision process. Helping individuals is also essential to the overall economy. The Baby Boom generation will continue to downshift into fewer work hours, and how prepared young workers are to take over will directly affect future productivity and prosperity.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.