Crosstabs - A Closer Look at the Economics & Demographics of Colorado
There is a lot of conversation around Millennials and the workplace, and how they differ from older generations. A quick Google search will return studies on generational gaps in everything from communication styles to technology preferences. But when it comes to earnings, how are Millennials faring compared to their older counterparts?
According to a recent article in Business Insider, the median annual income for Millennials in Colorado was $24,000, just 63.2% of the median for all workers. This may seem surprising given Colorado’s reputation as a magnet for high income Millennials attracted to the state’s high-tech industries, but by digging a little deeper, the reasons for this difference in wages becomes obvious.
Quarterly Workforce Indicators (QWI) data from the Census Bureau tells us there are two main reasons Millennials are earning less. First, Millennials tend to work predominately in service-related industries where pay is lower and they were less likely to reach the statewide average weekly wage, which was $1,042 in 2015. Second, earnings tend to increase as people age and progress in their careers. Millennials who have only recently entered the workforce are still on the bottom rungs of their career ladders, earning entry-level pay that is significantly lower than that of older, more experienced workers.
In 2015, Millennials (shown here as workers under the age of 35) made up 35% of Colorado’s workforce. The chart below shows the industries in which Millennials are overrepresented (>35%) and those in which they are underrepresented (<35%). Let’s take a closer look at the industries employing the most Millennials. As you can see, they comprise 58% of workers (148,100) in accommodations and food services, an industry with an average weekly wage of less than $400 in 2015. Of course, this industry has benefits which likely appeal to younger Millennials. Low barriers to entry and flexible hours could be a good fit for those still in school who are looking to earn extra money and gain employment experience.
Chart 1: Colorado 2015 QWI Industry Employment by Age
Arts, entertainment & recreation is the next highest ranking industry with Millennials filling nearly 50% (27,500) of its jobs, and this is another industry that tends to pay minimum wage or slightly more. Why do Millennials make up such a large percentage of this industry? In part, it’s due to the number of Millennials migrating to Colorado to fill jobs at ski resorts and other seasonal employment, while many younger Millennials will land their first summer job at an amusement park, bowling alley, or country club. Retail has the 3rd highest share of Millennials at 45%, and the average worker in this industry earned just $578 per week in 2015.
The chart also highlights industries where Millennials were underrepresented, all those below the red line. Many of these industries in which Millennials comprise a smaller share of employment are also among Colorado’s highest-paying. Utilities, for example, paid an average weekly wage of $1,600 in 2015, $500 more than the average for all industries. Millennials made up the smallest share of employment in Utilities at 17%, meaning only 2,600 of them earned the industry’s above average wages.
Of course, this data showing a large concentration of Millennials working in lower paying service industries tells only part of the story as to why workers under the age of 35 earn less than the median for all workers. The remainder of the story lies in the fact that on average, workers earn higher wages as they age due to the impact of finishing education, accumulating experience, earning promotions and enjoying the benefits of compounding wage increases as they age over the course of their career. The average worker between the ages of 25-34 in Colorado earns 18% less than the industry average due to their relative inexperience and for workers between the ages of 14-24 the large numbers of them working part-time and entry level job means this wage gap is considerably larger.
The takeaway here is that Millennials aren’t all that different from earlier generations. Although they currently earn less than older generations, their incomes will rise considerably over the course of their careers as was the case for Baby Boomers and Gen Xers. Over the next two decades, the education, experience and professional career paths of Millennials will boost their earnings greatly. Millennials born in 1980 and 1981 are now in the 35-44 age group; this cohort earned 39% more than the 25-34 Millennials earned. As the Baby Boom generation leaves the labor force over the next decade, this will also open up higher paying positions for younger generations to fill.
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