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Born in 1988? Sorry.

Author: Peter R. Orszag, Adjunct Senior Fellow
July 8, 2014
Bloomberg.com

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It's bad luck to be born 20 years before a time of high unemployment. It affects your income when you enter the workforce, naturally, but that's not all. It can keep your earnings relatively low -- and chip away at your health and happiness, as well -- for a lifetime.

Many studies have documented the income effect. A typical estimate, from a 2010 study, is that every percentage point increase in the unemployment rate during the year a person enters the workforce reduces his or her wages by 6 percent to 7 percent on average. And the reduction persists, though it diminishes somewhat over time. Even 15 years on, a person's wages are 2.5 percent lower for every percentage point increase in the unemployment rate that happened when he or she graduated from college.

This can make for big differences among members of the same generation who are born just a few years apart. Compare a person born in 1988, who graduated in 2010, when the unemployment rate averaged 9.6 percent with someone born in 1984 who graduated from college in 2006, when the unemployment rate averaged 4.6 percent. The person unlucky enough to be born in 1988 had a 30 percent to 35 percent lower wage at graduation. And at their respective 15 year reunions, the 2010 graduate is expected to be earning 12.5 percent less than the 2006 graduate.

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