GIRL FRIDAY
FORBES WOMEN
The New Pay Gap: Boomers, Gen-X And Millennials
Jan. 5 2011 – 10:52 am
Forget the gender pay gap, a little known victim of the recession is the long-term earning potential of Millennials.We call them The Stuck Generation.
At 24, Carter Salsky took his first job out of college as a sales assistant at a small ad agency in New Haven, Conn. “I was seriously pumped to land that job, because the firm was small and I knew I’d move up quickly,” says Salsky. “I had a friend who was hired there a few years ahead of me and had already seen two promotions and significant raises. I knew I’d be able to move out of my parents’ house in no time.”
Salsky joined the firm in May of 2007, and by the following summer his starting salary of $35K had been bumped up by 10%, and a Christmas bonus seemed imminent despite the economy.
The bonus never came. Like most sectors in 2008, Salsky’s firm was hit hard by the October crash of the stock market. He was disappointed to go without a bonus but still confident he’d see a raise at his annual review—until he learned that the company had announced a salary freeze. Fast forward to January 2011 and Salsky, now 28 and four years with the same agency, still earns under $40,000. And he still lives at home with mom and dad.
While Salsky’s arrested development is unfortunate, it’s all too familiar for Millennials who’ve been dealt a particularly low blow by the recession. A 2009 study of 25,000 Millennials conducted by the Futures Company found that nearly 20% of the employees polled between the ages of 21 and 30 had seen at least one pay cut since 2008 and 14% suffered a layoff. In contrast, only 8% of Baby Boomers surveyed lost their jobs in the same year.
Pay freezes, pay reductions and other corporate cost-cutting measures like slashing 401(K) contributions that began in the wake of the crash have lingered through the recession, keeping many young employees in a holding pattern of low earning. Even as recently as 2010, national averages of pay increase budgets have continued to fall to as low as 1.9% (from 3.5% in 2009 according to Salary.com). For Salsky and his peers, who have had to get cozy with mom and dad longer than expected, the immediate effects seem bad enough, but experts and human resource professionals are showing a growing concern for what wage freezes might mean for Gen Y’s lifetime earning potential.
Call it the new wage gap. Not between men and women, but between Boomers/Gen X and their Millenial counterparts.
Starting Salary, Last Paycheck
“Maximizing your first salary is really important because it determines your salary for the rest of your life,” says Matt Wallaert, chief scientist atGetRaised.com. Millennial workers (Americans born between 1981 and 2000) are typically new employees, says Mark Szypko of Salary.com. As of 2010, 40% have been at their jobs for fewer than 12 months. Being hired into, or newly employed during the past few years of the ice-cold job market when starting salaries have been low and raises non-existent, may have lasting repercussions on the careers of the generation.
“Your final salary is heavily dependent on your starting salary,” agrees Glenn Hiemstra, the founder of Futurist.com, employing an argument long-used to discuss the controversial gender pay-gap (wherein earning less than men in annual salary leaves women facing a career wage deficit that sets them back hundreds of thousands of dollars throughout their lives.)
Szypko paints the picture: “Say I’m hired into a position at $40K instead of the $70k job that I’m qualified to do. Then even a promotion into that next role probably wouldn’t bring me up to that $70K level. So as long as I stay in that organization my salary will be repressed and could stay with me for my career.”
What’s more, to compensate for an inability to provide salary increases for employees, both Hiemstra and Szypko have seen a trend in managers giving title-only promotions to young employees. leaving scores of over-qualified, under-earning workers. Salsky says he went from sales assistant to account coordinator to account manager without a pay increase.
Bad Economy, Good Values
While Hiemstra agrees that Gen Y has suffered a financial blow, he points to evidence that their values—the way they think about money–are shifting in a positive way, just maybe as a result. “Even before the recession took hold, Millennials were already in the process of redefining the American Dream—downshifting away from big income to other strong values,” he says. It’s a world view that depends less on financial success than personal goals and emotional connections, he says. Millennials have become less concerned about becoming wealthy than Gen X and the Baby boomers before them.
This isn’t news. There are plenty of studies of Millennials that talk of a shift away from consumerism—they are reportedly less likely to own a car, less likely to buy a home and more likely to do volunteer work than previous generations. But is this because they don’t want to own cars, buy homes or have jobs—or because the economy is such that these goals seem like pipe dreams?
“Sure, it’s been reinforced by the economy,” says Hiemstra. But while it’s easy to understand a shift towards frugality in particularly tough times, he also sees it as a “truly a significant value shift that’s not likely to change back when the economy recovers.”
Szypko sees the job market on a slow uptick since 2009. The predicted salary increase rates for 2011 are at 2.8%, up from 1.9% in 2010, and he notes that while base salaries for career level positions only rose 0 .5%, many jobs and job families are moving at rates much higher, specifically for hot skills or high demand jobs for top performers. But extremely low voluntary attrition rates are keeping the private sector at an extremely slow recovery in terms of job availability.
“Nobody is leaving their current jobs because they can’t afford to,” he says. “The number of people in the workforce over the age of 55 is at an all-time high, which unfortunately means fewer new positions opening up for young employees who can be left out in the cold.”
The Left-Behinds
If underpaid employed Millennials are the “Stuck Generation,” then the unemployed are the “Left Behinds,” a group who might find themselves even more devastated than their working stiff counterparts. Katie Herald graduated fromAmerican University in 2009 with a degree in marketing and communications. She’s unable to find a job in her field and is currently waiting tables “to ride [the recession] out.”
But what will make Herald an attractive candidate when the economy turns around and she finds herself competing with recent graduates of the class of ‘11 or ‘12 for entry level positions? Sadly not her three years slinging burgers at Applebee’s. Instead, Szypko’s advice for 20-somethings who’ve found their dream job doesn’t exist upon graduation is to look for alternative routes—AmeriCorps or intern positions which will help to bolster their resume in preparation for applying for jobs when the market re-opens and salaries are again on the rise.
As for the underemployed like Salksy, “It may be that these employees will never catch up,” says Wallaert, who notes that raises offered within firms are most often lower than what an employee could hope for by leaving the company for a new position. Hiemstra agrees, and places the onus on employers: “It will be a particular challenge to employers of Millennials in terms of retention. If you’ve got young people who worked hard through harder times and now they’re behind and you’re not going to enable them to catch up, then the logical thing to do for that employee to do is to look outwards.”
GIRL FRIDAY
FORBES WOMEN
The New Pay Gap: Boomers, Gen-X And Millennials
Jan. 5 2011 – 10:52 am
Forget the gender pay gap, a little known victim of the recession is the long-term earning potential of Millennials.We call them The Stuck Generation.
At 24, Carter Salsky took his first job out of college as a sales assistant at a small ad agency in New Haven, Conn. “I was seriously pumped to land that job, because the firm was small and I knew I’d move up quickly,” says Salsky. “I had a friend who was hired there a few years ahead of me and had already seen two promotions and significant raises. I knew I’d be able to move out of my parents’ house in no time.”
Salsky joined the firm in May of 2007, and by the following summer his starting salary of $35K had been bumped up by 10%, and a Christmas bonus seemed imminent despite the economy.
The bonus never came. Like most sectors in 2008, Salsky’s firm was hit hard by the October crash of the stock market. He was disappointed to go without a bonus but still confident he’d see a raise at his annual review—until he learned that the company had announced a salary freeze. Fast forward to January 2011 and Salsky, now 28 and four years with the same agency, still earns under $40,000. And he still lives at home with mom and dad.
Pay freezes, pay reductions and other corporate cost-cutting measures like slashing 401(K) contributions that began in the wake of the crash have lingered through the recession, keeping many young employees in a holding pattern of low earning. Even as recently as 2010, national averages of pay increase budgets have continued to fall to as low as 1.9% (from 3.5% in 2009 according to Salary.com). For Salsky and his peers, who have had to get cozy with mom and dad longer than expected, the immediate effects seem bad enough, but experts and human resource professionals are showing a growing concern for what wage freezes might mean for Gen Y’s lifetime earning potential.
Call it the new wage gap. Not between men and women, but between Boomers/Gen X and their Millenial counterparts.
“Maximizing your first salary is really important because it determines your salary for the rest of your life,” says Matt Wallaert, chief scientist atGetRaised.com. Millennial workers (Americans born between 1981 and 2000) are typically new employees, says Mark Szypko of Salary.com. As of 2010, 40% have been at their jobs for fewer than 12 months. Being hired into, or newly employed during the past few years of the ice-cold job market when starting salaries have been low and raises non-existent, may have lasting repercussions on the careers of the generation.
“Your final salary is heavily dependent on your starting salary,” agrees Glenn Hiemstra, the founder of Futurist.com, employing an argument long-used to discuss the controversial gender pay-gap (wherein earning less than men in annual salary leaves women facing a career wage deficit that sets them back hundreds of thousands of dollars throughout their lives.)
Szypko paints the picture: “Say I’m hired into a position at $40K instead of the $70k job that I’m qualified to do. Then even a promotion into that next role probably wouldn’t bring me up to that $70K level. So as long as I stay in that organization my salary will be repressed and could stay with me for my career.”
Bad Economy, Good Values
While Hiemstra agrees that Gen Y has suffered a financial blow, he points to evidence that their values—the way they think about money–are shifting in a positive way, just maybe as a result. “Even before the recession took hold, Millennials were already in the process of redefining the American Dream—downshifting away from big income to other strong values,” he says. It’s a world view that depends less on financial success than personal goals and emotional connections, he says. Millennials have become less concerned about becoming wealthy than Gen X and the Baby boomers before them.
This isn’t news. There are plenty of studies of Millennials that talk of a shift away from consumerism—they are reportedly less likely to own a car, less likely to buy a home and more likely to do volunteer work than previous generations. But is this because they don’t want to own cars, buy homes or have jobs—or because the economy is such that these goals seem like pipe dreams?
“Sure, it’s been reinforced by the economy,” says Hiemstra. But while it’s easy to understand a shift towards frugality in particularly tough times, he also sees it as a “truly a significant value shift that’s not likely to change back when the economy recovers.”
Szypko sees the job market on a slow uptick since 2009. The predicted salary increase rates for 2011 are at 2.8%, up from 1.9% in 2010, and he notes that while base salaries for career level positions only rose 0 .5%, many jobs and job families are moving at rates much higher, specifically for hot skills or high demand jobs for top performers. But extremely low voluntary attrition rates are keeping the private sector at an extremely slow recovery in terms of job availability.
“Nobody is leaving their current jobs because they can’t afford to,” he says. “The number of people in the workforce over the age of 55 is at an all-time high, which unfortunately means fewer new positions opening up for young employees who can be left out in the cold.”
The Left-Behinds
If underpaid employed Millennials are the “Stuck Generation,” then the unemployed are the “Left Behinds,” a group who might find themselves even more devastated than their working stiff counterparts. Katie Herald graduated fromAmerican University in 2009 with a degree in marketing and communications. She’s unable to find a job in her field and is currently waiting tables “to ride [the recession] out.”
But what will make Herald an attractive candidate when the economy turns around and she finds herself competing with recent graduates of the class of ‘11 or ‘12 for entry level positions? Sadly not her three years slinging burgers at Applebee’s. Instead, Szypko’s advice for 20-somethings who’ve found their dream job doesn’t exist upon graduation is to look for alternative routes—AmeriCorps or intern positions which will help to bolster their resume in preparation for applying for jobs when the market re-opens and salaries are again on the rise.
As for the underemployed like Salksy, “It may be that these employees will never catch up,” says Wallaert, who notes that raises offered within firms are most often lower than what an employee could hope for by leaving the company for a new position. Hiemstra agrees, and places the onus on employers: “It will be a particular challenge to employers of Millennials in terms of retention. If you’ve got young people who worked hard through harder times and now they’re behind and you’re not going to enable them to catch up, then the logical thing to do for that employee to do is to look outwards.”