The Declining Fortunes of the Young
By Era Dabla-Norris , Carlo Pizzinelli, and Jay Rappaport
Will I do as well as my parents?
A positive answer to this question once seemed a foregone conclusion; now, for recent generations, less so. Despite being more educated than their parents, millennials—those born between 1980 and 2000—may have less job stability during their working life. Concerns that it might be more difficult to break into the middle class, or to have enough retirement savings, are also rising to the fore in policy debates in many advanced economies.
These concerns stem from the fact that the nature of work and the economic returns to different skills and education-levels are changing rapidly. The number of well-paid middle-skill jobs in manufacturing and clerical occupations has decreased substantially since the mid-1980s in the United States and Europe. Job opportunities today are more concentrated in relatively high-skill, high-wage jobs and low-skill, low-wage jobs.
This “hollowing out” of the middle classes has been linked to the disappearance of routine occupations—jobs with a higher share of tasks performable through a set of easily codified rules (such as bookkeeping, clerical work, and some manufacturing jobs)— driven by technological progress and global integration.
Automation and artificial intelligence continue to replace workers and may also limit job creation in growing sectors. By extension, younger workers’ wages may stagnate, or they may be forced to move to low-skill and low-pay occupations.
At the same time, earnings and income gaps between generations have widened significantly in many countries. Many of these trends were exacerbated by the global financial crisis. In Europe, for instance, incomes declined for young people after the 2007 crisis due to unemployment. They have since recovered but have not grown. The rise of the so-called “gig” economy, and increases in temporary contracts, exacerbated the problem and further decreased job stability, particularly for the young.
New IMF staff research has zoomed-in on how these trends vary by gender and the level of education using labor force data from the United Kingdom over the period 2001–2018.
Non-college educated workers
In the United Kingdom, workers without a college (university) degree have experienced the most drastic decline in routine jobs. Non-college-educated workers are 5 to 15 percentage points less likely to be employed in routine jobs now than they were two decades ago. This trend has had a big impact on younger generations, as middle-wage, middle-skill job opportunities they would take up continue to evaporate.
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