Wage growth for young American private sector workers continues to outpace that of older workers, according to the ADP Q3 2016 Workforce Vitality Report. Workers holding jobs for at least one year saw an 8.7 percent increase in wages while those switching jobs saw a 5.0 percent wage bump.
Quarter after quarter, these younger workers have consistently grown wages quicker than their older compatriots. What's driving these youth employment trends?
Younger People Make Less in Overall Earnings
First, there is a statistical explanation for the large, consistent increase. Younger people tend to make less money at the start of their careers and trade up as they earn promotions. So those between 16 and 24 are increasing their wages more rapidly than older workers already making higher overall income in established careers. According to the Bureau of Labor Statistics (BLS), men ages 16-24 have median weekly earnings almost half of what workers 25 and older earn — $210 weekly compared to $403 weekly. The gap between women was smaller, though still sizable: $196 compared to $324 for older workers. Because young workers start from a lower absolute wage, their raises correspond to larger percentage increases in relative wages.
Wage Gap vs. Wage Growth Gap
But even within the 16-24 age group, there are notable demographic differences at play.
When we look at earnings by gender, this picture becomes clearer. The BLS reports that from Q2 2015 to Q2 2016, male workers aged 16-24 saw median weekly wages increase by one dollar — from $209 to $210. Women saw a $9 increase — from $187 to $196.
Even though young women see higher wage growth, both as a percentage and an in overall dollars, they continue to make less than their male counterparts. For older workers, the wage gap exists, but there is no difference in wage growth between the sexes — wages increased 2 percent for both men and women.
These gender trends are consistent with WVR data over the past year, and they are driven by the concentration of women in industries like education and health services, which have tended to have tighter labor markets and more competition for positions, according to Bloomberg.
Younger Workers Earn Minimum Wage
According to the BLS, workers under 25 make up half of minimum wage workers. As more states continue to approve minimum wage increases, it is logical that the age group most likely to fill minimum wage positions also sees the highest percentage wage growth.
BLS also notes that leisure and hospitality is the industry with the highest percentage of workers earning hourly wages at or below the federal minimum (15 percent). Not surprisingly, the leisure and hospitality industry has seen consistent wage growth over the past year per WVR. A high percentage of young minimum wage workers has helped the industry display consistently high wage growth.
Wage Growth: Gender and Minimum Wage Matter
There are all kinds of macroeconomic factors influencing wage growth for young workers, but it is hard to overlook the gender dynamics and policy changes that shape the state of wage growth for young people. The wage growth that younger workers are experiencing gives them the opportunity to trade up and earn promotions so that they can build a steady financial future.
To learn more about employment growth trends, download the ADP Research Institute® report: Workforce Vitality Report.
Subscribe to SPARK updatesSign up