Cumulative earnings among young workers
It has been
known for some time that the real and relative (to other workers) annual earnings
of younger male workers (under 35) have declined over the 1980s and 1990s. Many
studies have documented the increase in school attendance of younger workers,
the decline in full-time employment rates and earnings of young males and the
increase in full-time employment rates of young females. However, since these
earnings declines have been persistent, the cumulative impact on the wealth position
of younger workers and families could be significant. This article provides estimates
of cumulative earnings of youth, and examines the cumulative impact of earnings
decline during the 1973-1984 and the 1988-1999 periods.
Between 1988 and
1999, on average, Canadian-born men aged 26 to 35, in 1999, cumulated about $260,000
in earnings (in 1999 dollars), i.e. $40,000 or 13% less than their counterparts
over the period 1973 and 1984. In contrast, Canadian-born women of the same age
amassed $178,000 between 1988 and 1999, about $20,000 more than between 1973 and
1984. As a result, cumulative earnings of young Canadian-born individuals dropped
on average by roughly $10,000 between these two periods for this age group. Young
immigrants fared even worse since their cumulative earnings dropped by more than
$30,000.
This decline in cumulative earnings is likely the main factor underlying
the decline in median wealth of young families since median wealth of young Canadian-born
and immigrant families (aged 26 to 35) fell by $8,000 and $22,000, respectively.
The decline in earnings has contributed to an increased wealth gap between younger
and older families. Student debt has also played a role but its impact is much
more limited. For instance, previous work has shown that between 1982 and 1995,
average amounts owed at graduation by male bachelor's graduates increased
by about $4,000 (in 1999 dollars). This is ten times smaller than the decline
in cumulative earnings of young Canadian-born men ($40,000 between 1973-1984 and
1988-1999. The substantial decline in cumulative earnings of young immigrants
was associated with a decline in homeownership among these families.
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