The Young And The Debtless

This Labor Day, wage-workers have little to celebrate. Though unemployment is down, job insecurity is up. Health and pension benefits are dwindling. Weakened worker bargaining power is reflected in flat earnings.

According to a new report from the Census Bureau, real wages of fulltime workers fell 2.3 percent for men and 1 percent for women between 2003-04, and median family income declined by $1,669 since 2000. Productivity is up 15 percent, but gains have gone to profits, not wages.

The Economic Policy Institute calculates that the median hourly wage, $16.13 in July 2005, is right where it was in November 2001, when the current recovery began. Adjusted for inflation, the median wage back then was $16.15.

One group of workers is particularly hard-hit by multiple trends -- the young. The young are less likely to have jobs with decent health insurance. If they have pensions at all, they are typically plans at risk for stock-market fluctuations; they are far less likely to have defined benefit pensions whose payouts are guaranteed.

The young have not just lower wages but lower career horizons. Union workers, who enjoy higher average wages, tend to be in their 40s and 50s. When these workers retire or are laid off, either the jobs vanish or their successors typically get lower wages. Even some union contracts have settled for two-tier wage systems, with much lower pay scales for newcomers performing the same work.

Job prospects of the young are only the beginning of their pocketbook challenges. Today's average four-year college graduate has over $20,000 in loans, whose payments cut into disposable income. That figure has nearly doubled in a decade.

The real estate boom has been great for homeowners, but terrible for young families trying to buy in. Homeownership rates among 25- to 34-year-olds declined from 51.6 percent in 1980 to 45.6 percent in 2000. Hard pressed young people purchasing homes are more likely to reduce payments with adjustable-rate mortgages or interest-only loans. These financing mechanisms, however, put them at grave risk of getting slammed when the housing bubble pops.

Their gamble is that appreciation in the value of the house will allow them to build up equity, as the last generation did. But someone who goes deeply into debt to buy at the peak of the market can be wiped out if the property value declines.

The big exception to this story, of course, is young people with affluent parents. Consider two hypothetical 28-year olds, Smith and Jones, who earn identical paychecks.

Smith is paying $200 a month on college loans. His barebones health insurance policy has a high employee premium contribution and costly co-pays. He is paying $600 a month for a one-third share of an apartment, and has no prospect of buying a home any time soon.

Jones, despite identical earnings, has very different financial prospects. His parents paid his tuition, so he has no college loans. His father is offering a ''loan" to help with a down-payment on a condo. His family is also there in case of unforeseen medical expenses.

America has always celebrated its mobility. When my father, back from World War II, became the first member of his family to buy a home, he did it on a modest paycheck with a GI loan. He managed it on one income while my mother stayed home with me.

Seldom in our history were the economic prospects of the young more determined by their parents' status. Children of the elite have always had a head start, but in the past young people without affluent parents could also afford the two big tickets to the middle class -- a college degree and a home.

This new reality is not just a historical accident. It reflects deliberate policy. If we chose, we could have policies for affordable college educations, universal health coverage, and first-time homeownership. For those not lucky enough to have rich parents, public programs could help hard-working young people get a foot on the ladder, as they once did. But instead of decent social policy for all, we have only socialism within the family. So it isn't really ''the young" who are hobbled, but the children of the non-affluent. Prosperous middle-aged people have every right to subsidize their offspring, of course. But other young Americans deserve a shot, too. Labor Day should be a moment not just to examine wages and income trends. It's a time for a hard look the values that structure our society.

Copyright © 2005 by The American Prospect, Inc. This article may not be resold, reprinted, or redistributed for compensation of any kind without prior written permission from the author. Direct questions about permissions to

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