Why Millennials Don’t Make Enough Money

What's up you guys? It's Graham here. So this has been a really good week. I've had the chance to cover my two favorite topics on the history of the universe. One would be Robin Hood's investing platform, and number two, as you could see from the title of the video today, Millennials.

Now, in the past, I've covered why Millennials are not buying homes. I've covered why Millennial net worth has dropped 34%, but I haven't yet covered the reason why all of this is happening in the first place. And that is because Millennials are not smashing the like button for the YouTube algorithm! That's right—less than 10% of my audience actually destroys the like button for the YouTube algorithm. For every like button that goes without being destroyed, it's a day a Millennial goes without getting avocado toast.

So, make sure to do your part and smash the like button and give a Millennial the iced coffee they so desperately need. Just kidding! The reason why Millennials aren't buying homes and the reason why their net worth has dropped a staggering 34% is because they're just not making as much money in the first place. And no, this has absolutely nothing to do with the rising cost of education, housing, or just life in general. It's literally that they're just not making enough money in the first place.

And that brings us to today and the reason why Millennials are making 20% less than previous generations. So let's cover exactly what's going on, why they're not making as much money, and if you're in this predicament as well, how you could start making more money just as easily as it is to smash the like button.

Now first, let's go over some very saddening facts as though your day is not already ruined. The cost of education rose 65% in the last ten years. Student loan debt increased 160% between 2004 and 2017. Because of that, Millennial net worth dropped 34% since 1996. 62% of Millennials are living paycheck to paycheck. 8% fewer Millennials own homes than previous generations.

And like I just mentioned, a significant factor to all of this is that Millennials are now earning 20% less money than Baby Boomers did at the same age, despite being more educated than ever. So why is this? Well, first of all, CNBC says that because Millennials entered the workforce during the Great Recession, they started out with lower salaries than they would have made otherwise, and that's a big reason for this price drop.

So let's look into this for a second and see just how much truth there is to this sort of claim. For something like that, I've consulted my go-to expert for everything, and that would be Google. First, I looked for actual statistics—how much did wages actually go down during the Great Recession? And yeah, no surprise, their wages went down dramatically in 2009, so much so that 10 years later, we're still just barely recovering and getting back to where we once were.

As it turns out, those early years of developing your career are instrumentally important to building up your income. It was found that during the first 10 years of work, people experienced 70% of their overall wage growth. Entering the workforce at a time of recession led to an average of a 9% loss of income right off the bat.

Now, thankfully, that loss of income is only temporary, being cut in half after five years of working and returning to normal after 10 years of being in the workforce. But still, that's a lot of money being left on the table during the first few years when you could really be using that towards something that matters a lot more, like those $5 caramel iced macchiatos from Starbucks. So good!

But as with anything, these are averages, and as we all know, averages don't tell the entire story. It's kind of like walking into a movie theater in the middle of a movie without seeing the beginning or without staying for the end—with no context whatsoever. And that type of information is really important to break down because with an average, that does mean that a lot of careers are doing much better, and a lot of careers are doing much worse.

And that's where things get interesting. The company Glassdoor surveyed each job across various industries to find the ones that were doing well and growing and paying more and other jobs that were paying less and declining. What they found was rather surprising. The job titles which had the highest demand, highest job growth, and also highest salaries were those within specialized industries, mainly sales, nursing, financial advisors, and developers, to name a few.

Those careers were seeing their highest growth within populated cities, which just so happens to be where our economy is leaning and where job growth is going to be the most competitive. So it makes sense those jobs are just going to be paying much more. On the other hand, the careers that were declining and paying less were often tied to manufacturing or careers that were more prone to economic shift, automation, or outsourcing. That includes forklift operators, delivery drivers, retail sales consultants, and so on.

So, in effect, graduating during a recession does impact how much money Millennials make once they enter the workforce overall. But which industry you're working in has a much bigger impact on your starting salary and how much money you make. Picking a career within a specialty that's in demand and that isn't easily replaced will help you make more money right off the bat.

Next, I can't talk about Millennials not making as much money without talking about wage growth—or actually, the lack of wage growth. Technically, the term is wage stagnation if you want to be fancy about it. This is the notion that even though our salaries have gone up over time in terms of a dollar amount, the actual purchasing power of that money has not. In fact, if we look at the hourly earnings since the 1960s, we could see that wages haven't really changed adjusted for inflation.

Well, the price of pretty much everything else has been going up that much faster, meaning that Millennials are effectively earning less doing the same amount of work. Now, the reason we're seeing wage stagnation could be a video in and of itself, but I'm going to keep this brief as it pertains to Millennials.

First, it's no surprise that more people are entering the workforce. This means employers can be pickier about who they hire and pay less because there are more people applying for the same job. This competition means employers don't need to raise salaries because there's no shortage of people willing to fill those positions who want the work.

Now secondly, even though there can be benefits of getting a college degree, and it can be a prerequisite for getting a job in the first place, it's certainly becoming a lot more common and therefore less impactful in terms of boosting your salary. It's almost the notion of if everyone has a college degree, then the value of that degree is worth less on the open job market.

In fact, the value and earnings of a college degree really seem to appeal to the late 1990s, and since then it's seen a very slow decline. Given the cost of skyrocketing education and the lessened value as it becomes more common, this could be why we are more educated than any other generation, but we're not seeing the monetary value and equivalent of that degree.

The third reason: during a recession, employers are often very quick to cut and decrease salaries. But during the good times, they're much slower to go and raise them back up again. Data backs this up, showing that just now we're getting back to the point we were at ten years ago. This causes a lot of people to be stuck in a job that isn't paying as well as it should, and then they just stay there.

Now real talk here: most companies are gonna want to pay you the bare minimum not to leave, and not a penny more. In addition to that, many companies have guidelines in terms of how much they could give you a raise every year. So once you're in a job, almost consider it like you're in this income rent control. They're only going to increase your salary a small amount based off how much you're already getting paid and based off the health of the business.

But rarely will they ever give you a 100% increase in price because you've worked really hard and you bring in a lot of money to the company, and you deserve it. To make matters even worse, sometimes the raise they do give you is only enough to match the rising cost of everything else, effectively almost like keeping you at the same salary.

Now, in addition to that, others might argue that wage stagnation also arises from automation, outsourcing, de-unionization, and also record-high CEO pay. And I'm sure all of that, to a certain extent, has an effect on wage growth. But instead of diving into economics, I would rather focus on what we could do right now to improve the situation, and this is the next part that we should focus on.

Now remember how I said that staying within the same company for a long time is almost as though you're on an income rent control? Well, the solution around that to start making more money almost immediately could really be as simple as just switching companies. There have been multiple studies that have shown that people who switch jobs every two to three years make about 50% more than someone who stays within the same company.

If you switch jobs just once, you could see yourself with an average of a 15% pay raise. But here's the cold hard truth: loyalty within a company is very rarely rewarded, and job security almost always comes down to you looking out for yourself. A business is, in essence, a business. And even though businesses should be paying a fair price for a fair service, part of running that business is to generate a profit, which means paying less for a service if they can get away with it.

According to Forbes, the reason why sticking with one company doesn't work is that at most companies, you start off at a base salary, and then from there, you're raised up a percentage from what you're already earning. Now, that limits your income because by moving to a new company altogether, you could start off this baseline at a much higher level instead of waiting for you to get promoted throughout the ranks over the years.

Because of that, you could command a much higher salary right from the very beginning. Companies that compete for talent will also pay significantly more for acquiring a certain skill. And while, for so many, there are more incentives just to want in, in addition to that, job hoppers are believed to have a higher learning curve, be higher performers, and also be more loyal.

They’re seen as taking charge of their own career; they keep their skills sharp and can adapt to a variety of tasks. They know how to get a job if they need one, and all of those are qualities any employer should be happy to have. On the other hand, employees that stay at their job for too long, especially if they feel underpaid, tend to produce poor results, are less motivated, and are less satisfied with their work. That means they also make less money and are less likely to smash the like button.

So given all that, if you find yourself being underpaid or feel like you deserve more money, then consider switching jobs and looking elsewhere. That might help give you a 20% boost in salary to help make up for this statistic about Millennials. In addition to that, it's also interesting to note that wage stagnation does not apply to the top 1% of earners. In fact, wages for this group went up 138% since 1979.

For some context here, the bottom 90% of earners only saw a 15% increase. Now, I know me saying something like, "Well, just get into the top 1% of earners and then you won't see any wage stagnation," is a lot easier said than done, but it does paint a picture to see that the highest-paid earners who do see wage growth are generally in a very specialized, high-demand field.

According to LinkedIn, those industries include technology, health care, and finance. So if you're considering switching careers, going back to school, or re-educating yourself in a different field, picking something that's in a very desirable, up-and-coming field should help you make a lot more money as well.

In addition to that, relocating for a job is also going to help you make a lot more money. In fact, incomes in U.S. metro areas increased by 1.3% in 2016, which is six times higher than non-metro areas. So with all this information, the best way that you could start earning more money is to specialize in a field that's in-demand, be good at what you do, and make yourself very difficult to replace.

Then, switch companies every few years. The job market does reward talent, but unfortunately, it does not reward loyalty. So switching companies every few years is going to be necessary to make sure you're paid what you're worth and also just to keep your skills sharpened. In addition to that, consider relocating to other areas that pay more, and those just happen to be bigger, larger, and metropolitan cities.

But in terms of which areas are paying more than others, the results are pretty eminent. Because the way I see it, to Millennials, earning less is certainly disheartening, but that does not mean there's nothing you can do about it. It's gonna help to take a more proactive approach, and even though it's going to take more work upfront to set yourself apart, I do think it's going to be amazingly worth it.

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Thank you again for watching, and until next time!