Trends and Challenges for Work in the 21st Century

Working in the New Century

To set the stage for understanding what work, workers, and workplaces will be like in twenty-first century America, we need first to appreciate the demographic, educational, and employment changes that have shaped the American workforce of today.

THE U.S. POPULATION IS BECOMING LARGER AND MORE DIVERSE

Who are the workers of the future? Many of them will be older versions of ourselves. In fact, over half of the population of 2030 is alive today.

Over the next fifty years, the population of the United States is expected to grow by nearly 50 percent, from about 275 million in the year 2000 to an estimated 394 million people in 2050. U.S. population growth is influenced by immigration and emigration rates, as well as by birth and death rates. Immigration will play the largest role in the growth of the United States through mid-century.

Immigration trends tell us to expect 820,000 immigrants to arrive annually in the United States. Two out of three will be working age upon their arrival. By 2050, we expect immigration to have increased the U.S. population by 80 million people. Fully two-thirds of the projected U.S. population increase will be due to net immigration.

In addition to immigration, the other key determinants of the U.S. population size will be birth and death rates. Particularly important to the American labor force is the large number of people born after World War II, from 1946 to 1964. This baby-boom generation--which has been a major force in the labor market for the past 20 years--has now reached its prime working years and makes up about 47 percent of the workforce. The youngest baby boomers, just reaching 35 years of age, will continue to participate in the workforce for many years. As this population ages, the median age of the workforce will rise.

Between 2011 and 2029, the baby boomers will be reaching the traditional retirement age of 65. Their retirements will dramatically affect the workforce of the future. Not only will the demographic profile of the workforce change considerably, including a rise in the number of people with disabilities, but also millions of Americans will be faced with balancing work and family, particularly the care of elderly parents.

Despite the fact that the post-baby-boom generation (born after 1964) is much smaller in size, the number of youths is expected to rise by 2020, partly as a result of immigration. In 2000, there will likely be over 70 million children under 17 years of age. By 2050, this under-17 population is expected to rise to over 96 million.

The other key component of population change is the death rate. Over the next 50 years, the number of deaths annually is likely to increase nearly 50 percent.  In just 30 years, baby boomers--now 30 percent of the population--are projected to drop to only 16 percent.  Nevertheless, the oldest age groups are projected to increase their share of the population through the middle of the next century. In 1995, 33.5 million people were age 65 or older, and, by 2050, the elderly population is expected to more than double, representing 20 percent of the population.

Life expectancy is projected to rise from 76 years in 1995 to 82 years in 2050.  Even those already 65 years old have life expectancies of an additional 15 to 20 years. Because all of the increase in older Americans after 2030 can be attributed to increases in the number of people 75 years and older, there may be little direct effect on the composition of the workforce, although the impacts on families, jobs, and the marketplace (such as demand for medical services) will likely be significant.

The Changing Face of the Workforce

Masked in these total population changes are the details of race and ethnicity. Immigration trends, coupled with varied birth rates, will bring more diversity to the American workforce. In 1995, the United States was estimated to be 83 percent white, 13 percent black, 1 percent American Indian, Eskimo, and Aleut, and 4 percent Asian and Pacific Islander.  Ten percent of Americans, mostly blacks and whites, were also of Hispanic origin. Nearly one in eleven Americans was foreign born.

Although Hispanics are typically white or black, they are shown here as a separate category, independent of racial background. Looked at either way, the data show that the future racial and ethnic makeup of America will be considerably different than it is today. Trends show that whites will be a declining share of the future total population while the Hispanic share will grow faster than that of non-Hispanic blacks. By 2050, minorities are projected to rise from one in every four Americans to almost one in every two. The Asian and Pacific Islander population is also expected to increase. Growth rates of both the Hispanic-origin and the Asian and Pacific Islander populations may exceed two percent per year until 2030. Even at the peak of the baby-boom era, the total population never grew by two percent a year. By 2010, Hispanics are likely to become the largest minority group. In fact, after 2020, the Hispanic population is projected to add more people to the United States every year than will all other groups combined.

EDUCATIONAL ATTAINMENT IS RISING

Deciding how far to go in school is one of the most important decisions an American worker makes, regardless of his or her race or ethnicity. Educational attainment plays a critical role in virtually every labor market outcome. On average, the more education people have, the more likely they are to seek and find jobs, earn higher wages, and retire with a pension. Employment, wages, and benefits, for a discussion on earnings.)

Nearly 83 percent of all adults ages 25 and over have completed high school, and 24 percent have obtained a bachelor's degree or more. This is a dramatic increase from just 30 years ago, when fewer than 54 percent of this group had completed high school and fewer than 10 percent had completed college. And as the younger populations age, the average educational attainment of the population will continue to rise. Eighty-seven percent of young adults, 25 to 29 years old, completed high school in 1997.

Though educational attainment is universally rising, levels vary considerably across racial and ethnic lines. Looking at 1997 data on young adults, Asian Americans have the highest high-school graduation rates at over 90 percent. For the first time in 1997, the high-school graduation rates for young blacks and whites were statistically on par at 86 and 88 percent respectively. High-school completion rates that year, however, were far lower--62 percent--for young Hispanics. Particularly troubling is that over the decade, there has been no significant change in the rate of high-school completion for young Hispanics.

The lower educational attainment rates for Hispanics are, in part, due to lower high-school completion rates by Hispanics who immigrated to the United States. High-school completion among all foreign born is considerably lower than among the native born--65 percent versus 84 percent. For example, the proportion of foreign-born Hispanics with less than a high-school diploma was almost twice as high as that of native-born Hispanics--57 percent compared with 31 percent.

Not only are more Americans graduating from high school, but also more are going to college. Sixty-six percent of 1998 high-school graduates entered colleges or universities in the fall. This proportion has risen over the last two years, after remaining steady from 1992 to 1995 at about 62 percent. This trend is expected to continue as the rewards to those with more schooling continue to rise and attract more young people to college.

Nearly two-thirds of the new college students were enrolled in four-year institutions, while the rest attended two-year colleges. Young women enrolled in college at higher rates than young men--69 percent and 62 percent, respectively--a trend likely to help close the gap between women and men's average earnings. Although blacks and whites graduated from high school at roughly equal rates, at the end of the century, blacks continued to lag behind in both enrollment in and graduation from college. Nearly seven out of ten young white high-school graduates went on to college compared to only six of ten young black high-school graduates and five out of ten young Hispanic graduates. Of those 25 and over, just 13 percent of black and 11 percent of Hispanics were college graduates in 1997, compared to 25 percent of whites and 42 percent of Asian and Pacific Islanders.

The gap between the education levels of people with disabilities and those without is particularly troubling. The percent of adults with disabilities who have not completed high school is more than double that of adults with no disabilities. And fewer than 10 percent of adults with disabilities have graduated from college; a rate achieved by the general population 30 years ago.

Nevertheless, the situation is improving. Laws and policies requiring equal access for people with disabilities, coupled with advances in assistive technologies, should soon result in rising rates of educational attainment for people with disabilities. Additional education not only improves the chances of labor market activity for workers with disabilities but also reduces the gap in labor market participation between people with severe or significant disabilities and those with no disabilities.

Educational attainment has a significant impact on earnings levels throughout a worker's life. Differences in educational attainment across these groups, among other factors, will cause the wage and pension gaps among these groups to persist.

WOMEN ARE WORKING MORE; MEN ARE

WORKING LESS

Clearly, the level of labor force participation is an important determinant of earnings. A worker who puts in more hours and weeks of work generally receives higher total earnings. In 1997, 78 percent of all employed persons usually worked full time (35 hours or more a week), a proportion little changed since the early 1970s. In contrast to the stability over time in average weekly hours worked, there has been a noticeable trend toward more year-round work. During 1997, 72 percent of people with any work experience worked year round (at least 50 weeks), compared with just 65 percent thirty years earlier. 

This trend towards year-round work primarily reflects the increasing likelihood of employed women working year round. Since 1967, the percentage of women participating in the labor force has increased by nearly half, from 41 percent to 60 percent, and the proportion of employed women working year round has climbed by 18 percentage points, from 52 to 70 percent. During the same period, the labor force participation rate of men has actually declined, from 80 percent to 75 percent, and the proportion of employed men working year round rose only slightly, from 74 to 77 percent.

Full-time year-round work varies considerably by age. Over the past few decades, more prime age workers (25 to 54 years of age) were working full time year round, rising from 52 percent to 63 percent. In contrast, full-time year-round participation of the young is dropping as they stay in school longer. In the future, we can continue to expect the young to reduce their labor force participation as the need for additional education rises. However, a decline of older workers' participation has begun to reverse with the economic expansion and will likely continue as long as good employment opportunities remain plentiful. Rising trends in full-time and year-round status are likely to continue.

Employment rates differ significantly between men and women, and those differences will likely continue into the future. While women's employment rates are rising and men's rates are declining, women are expected to continue to leave the labor market periodically to assume the lead role in child rearing. Since 1950, the proportion of men in the labor force has declined from 86 percent to 75 percent. In contrast, the trend for women is on the rise. In 1950, one-third of women worked outside the home. Almost fifty years later, 60 percent of women are in the labor force.

Women are increasingly working prior to having children and returning to the workforce while their children are still preschool age. This is particularly likely for families maintained by single women, a group that is growing significantly. In 1975, 16 percent of mothers with children under six years of age did not have a spouse in the household; by 1998, this figure was 26 percent.

WAGE INEQUALITY: WILL THE RICH GET RICHER AND THE POOR, POORER?

The last few years of the 1990s have provided significant real earnings growth for nearly all groups. However, this recent trend does not counter a trend of the past two decades. Earnings among high-, middle-, and low-wage workers have grown at different rates.

High-wage earners have had comparatively larger increases in their wages than middle- and low-wage workers.

Twenty years ago, the average college graduate earned 38 percent more than the average high-school graduate. Today, it is 71 percent more.

Real weekly earnings for workers with less than a high-school diploma fell from $462 in 1979 to $337 in 1998. This downward trend continued for all workers who were not college graduates- nearly three-quarters of the civilian labor force in 1995.  In contrast, workers with a college degree attained gains during the period, with real weekly earnings rising from $758 in 1979 to $821 in 1998.

Over the past quarter century, wage gaps between workers with different education levels have increased, largely due to falling real earnings for those with less education. Even with improvements in the late 1990s, workers who lack the required education and skills will continue to face declining job opportunities and wages.

Over the long term, not only have the earnings of more highly educated workers been increasing relative to the wages of less highly educated workers, but inequality has increased even within groups of workers with the same educational attainment. The spread between lower-paid and higher-paid workers in each education group widened, particularly in the 1980s, reflecting the fact that education level is just one dimension of skill. This increased wage inequality within groups having similar educational attainment may indicate increased differentials in other workers' skills for those with similar education. The rapid growth in employers' need for more-skilled workers may be the key to explaining rising inequality and changing wage structure.

A commonly accepted way of assessing the change in wage inequality is to measure the extent to which change occurs in the ratios of high-wage, middle-wage, and low-wage workers. For the period 1979 to 1998, chart 2.3 illustrates the wage gap as the ratio of a high-wage worker's earnings (at the 90th percentile of the wage distribution) to those of a low-wage worker (at the 10th percentile). Similarly, to learn whether the wage gap is growing or falling across the entire wage distribution, we can compare the ratio between high- and middle-wage (at the 50th percentile) workers' earnings with that between middle- and low-wage workers' earnings.

We can see in chart 2.3 that the gap between high- and low-wage workers expanded rapidly during the 1980s. After forty years of narrowing inequality, the high-to-low wage ratio increased by 19 percent between 1979 and 1999 (from 3.7 to 4.4), largely because low-wage workers' earnings fell dramatically.

During the 1980s, the 90/50 and 50/10 ratios both increased rapidly; relatively speaking. During the 1990s, however, low-wage workers began to catch up with middle-income workers, due in part to increases in the minimum wage and similar government policies. The steady widening of the gap between high and middle earners is largely responsible for the overall increase in inequality over the last 25 years.

What the fastest growing jobs require

Among the 30 occupations the BLS projects to grow the fastest (from 1996-2006), educational requirements and earnings of workers are quite varied. Only about half of these occupations require education or training beyond high school.

However, jobs requiring an associate's degree or higher are projected to grow faster than the average for all occupations. Occupations requiring a bachelor's degree will grow almost twice as fast as the overall average. The three fastest growing occupations, which are all computer-related, require at least a bachelor's degree and have average earnings much higher than the average for all full-time wage and salary workers. And all of the 20 highest paying occupations require at least a bachelor's degree. Note, however, that while jobs usually requiring an associate's degree or higher are expected to grow faster than average over the 1996-2006 period, the majority of new jobs are expected to be in occupations requiring less than an associate's degree.

Thus, most low-skilled workers may not lack employment opportunities. The challenge is how to make those jobs pay more than they currently do.