Diverging employment pathways
among young adults
attain decent wages by age 30
This analysis identifies adults who experienced some form of socioeconomic disadvantage in adolescence and tracks their employment over time. We use a strategy called trajectory analysis to segment this population into four groups based on their earnings and benefit histories from ages 18 to 31. We find:
- Two of the four groups, accounting for more than half of the study population, experienced persistent economic hardship, low earnings, and few fringe benefits throughout their 20s.
- The lowest-earning groups are racially diverse. While white people make up the plurality or majority of the two lowest-earning groups, these two groups also have disproportionately large shares of Black adults, aligning with other research that Black people face structural barriers to economic opportunity in the United States.
- Adults who are white or male are overrepresented in the two higher-earning trajectories.
Young people, regardless of their family circumstances, race, or gender, should be able to successfully transition into adulthood and economic security. Too often, though, what’s past is prologue, and adolescent disadvantage begets economic struggle in early adulthood.
In this analysis, we seek to better understand the different pathways young people take as they transition from adolescence to adulthood, focusing specifically on those who experienced socioeconomic disadvantage in adolescence. We track their earnings and employment-related benefits from the ages of 18 to 31, and then, using trajectory analysis, segment them into different groups based on these two aspects of their employment histories. This allows us to get beyond averages and point-in-time snapshots to show a fuller range of experiences and outcomes. Throughout, we describe the study population along a number of relevant characteristics: their demographics, education and training experiences, family composition, and work and employer characteristics.
(Refer to Essay 1 to learn more about our data and methods.)
Who is in the study population?
To identify adults who experienced socioeconomic disadvantage in adolescence, we assess whether they met any of the following criteria in their teens:
- Lived in a low-income family
- Neither parent had a postsecondary degree
- Mother was aged 19 years old or younger when her first child was born
- Family received public assistance
Anyone who met at least one of the above criteria is included in the analysis.
How to interpret the trajectory results and charts
The trajectory analysis considers two variables: annual earnings and employer-offered benefits. Benefits are measured as an index scaled from 0 to 3, capturing whether a respondent’s employer offered health insurance, retirement benefits, or paid leave. A benefits index score of 0 means the respondent’s employer offered none of these three benefits and a score of 3 means a respondent’s employer offered all three.
The trajectory analysis identifies groups with similar trends for these two variables between ages 18 and 31 using a statistical technique called group-based trajectory modeling, or latent class growth analysis. Figure 1 charts the results of this analysis.
Trajectory analysis reveals sharply divergent employment experiences
The trajectory analysis reveals four distinct groups with markedly different outcomes. Two of the four groups—accounting for more than half of the study population—are in difficult economic circumstances, with low earnings and high poverty rates throughout their 20s. At age 30, members of these groups are struggling economically or among the working poor.
Trajectory group snapshots
Group 1: No earnings and benefits growth
About one-fifth of the study population falls into Group 1, which has the lowest earnings and benefits index scores. Average annual earnings are very low: about $4,000 at age 30. Almost no Group 1 members receive employer-provided benefits. They are the only group for whom poverty rates increase between ages 18 and 30, rising from 49% to 54%.
A declining share of Group 1 report they are employed between their early 20s and early 30s. Black people are overrepresented in this group and white people are underrepresented (although white people still make up the plurality). Women are also overrepresented, while Latino or Hispanic people are slightly underrepresented. This group is the most likely to have a child and the least likely to have a postsecondary degree. Members also face significant barriers to work—they are the most likely to have been incarcerated or to experience a work-limiting health condition, and an increasing number became disconnected from school and work between ages 16 and 23.
Group 2: Sluggish earnings and benefits growth
Group 2 is the largest group, including 36% of the population who experienced disadvantage in adolescence. They receive low average annual earnings throughout their 20s, reaching about $19,000 at age 30—only a 7% increase from earnings at age 25. Benefits scores are much lower than in Group 3 and 4. At age 30, members of Group 2 have, on average, only one fringe benefit, and 21% live in poverty.
Group 2 most closely mirrors the gender and racial/ethnic makeup of the study population as a whole—the group is close to evenly split between men and women, and white young adults make up just over half. They are less likely than Group 3 and 4 to have steady employment, with less than half working full time/year-round at any given age. Less than 15% have a postsecondary degree. Almost two-thirds are parents at age 27, and 12% have been incarcerated at some point by the time they turn 27. They are less likely to be covered by a union contract than Group 3 and 4 and less likely to have job-related training experience.
Group 3: Moderately increasing earnings and benefits
Group 3 has the second-steepest earnings and benefits trajectory and accounts for one-third of the population who experienced disadvantage in adolescence. Average annual earnings increase over time, but at lower levels and at a slower rate than Group 4. Average annual earnings at age 30 are about $42,000—an increase of 21% from age 25. Benefits index scores are similar to Group 4, and a very small share (about 2%) live in poverty at age 30.
Most members of Group 3 are employed after reaching their mid-20s and work full time/year-round. White people and males are slightly overrepresented in Group 3. Of the four groups, Group 3 has the second-highest education levels, union contract coverage, and job-related training experience. They have slightly less military experience than Group 4. Along with Group 4, they are less likely to be parents and are less likely to have been incarcerated than those in Groups 1 and 2.
Group 4: Steeply increasing trajectory
Group 4 has the highest earnings and benefits scores as well as the steepest increases in both over time. It is also the smallest group, accounting for only 9% of those who experienced disadvantage in adolescence. Average annual earnings for members of Group 4 reach about $97,000 (all dollar values in 2019 dollars) at age 30—an increase of 42% from earnings at age 25. Their benefits score at age 30 is 2.5, indicating that almost all receive the three types of benefits included in the analysis (health insurance, paid leave, and retirement benefits).
Group 4 is the most attached to the labor force—nearly all members are employed after age 22 and more than 80% work full time/year-round after age 25. This labor force attachment translates into a small and declining share living in poverty, reaching nearly zero at age 30. Members of Group 4 are disproportionately male and white. They are less likely to have experienced a work-limiting health condition. They are also the group most likely to have a postsecondary degree, to participate in job-related training in their mid- to late-20s, and to be in a job covered by a union contract. They also have relatively high rates of military experience.
The four trajectory groups differ in their employment experiences, demographic and familial backgrounds, and a range of other employment-impacting circumstances.
Differences among groups by race/ethnicity and gender are striking. Women make up nearly half of the study population (49%) but make up 58% of Group 1, the lowest-earning group, and 22% of Group 4, the highest-earning group.
White people account for 58% of the total study population but considerably more (71%) of Group 4. They are underrepresented in Group 1, at 49%—although that is still a large enough share to make up a plurality. Black people are overrepresented in Group 1 (31%) compared to their share of the study population (20%) and underrepresented in Group 3 (14%) and Group 4 (9%). Latino or Hispanic people appear in most groups roughly proportional to their share of the study population (17%), although they are somewhat underrepresented in Group 4 (14%).
Equally concerning is that those who started off with the fewest financial resources seem to have the most difficulty breaking into trajectory groups with better outcomes. Even though all are from disadvantaged backgrounds, the trajectory groups with higher earnings throughout their 20s come from families with considerably greater wealth. When Group 4 members were in their teens, the median wealth of their parents was nearly $97,000—nearly twice that of Group 3, three times greater than Group 2, and more than five times greater than Group 1. Moreover, the share of Group 1 members who live below the poverty line at age 18 is considerably higher than the other groups and is the only group in which that share increases between adolescence and age 30.
It’s possible that a portion of those groups with the flattest trajectories—namely, Group 1 and 2—choose not to work in a paying job. Some may stay out of the labor force to raise families, and indeed, Group 1 and 2 are the most likely to have children. By age 27, nearly three out of four Group 1 members and three out of five Group 2 members have a child. The high cost of child care may also prevent some from seeking employment. Having a partner to provide financial support and with whom to share expenses is another reason to stay out of the workforce. However, this does not appear to be the case with most of Group 1 and 2—only about one in four members of either group live with a spouse or partner.
Group 1 is the least consistently connected to the labor market over the study period; the majority report no earnings income in most years from ages 24 to 31. In comparison, almost all young adults in Group 3 and 4 report some earnings every year, and the vast majority work full time starting in their mid-20s. Group 4 is also the most likely to overwork, defined as working at least 50 hours per week for more than half of the year, with rates increasing over time, reaching one in three at age 30.
Young adults in Group 3 and 4 are more likely to work in positions covered by a union contract; of those employed at age 30, this is true of 24% of Group 4 and 15% of Group 3. Group 3 and 4 members are also more likely to have military experience (11% and 12%, respectively) than Group 1 (1%) and Group 2 (4%).
Turning to occupations, the four trajectory groups show substantial overlap in the types of jobs they hold at age 20, but their paths quickly diverge. At age 20, the most common occupations for all groups include service and sales jobs such as cashiers, retail salespersons, and waiters and waitresses. By age 25, young adults in Group 4 are moving up the career ladder, with higher-paying jobs such as carpenters, retail supervisors, and teachers. By age 30, members of Group 3 and 4 commonly work in management, professional, or administrative occupations. This trend is most obvious among Group 4, with its members commonly working as accountants and auditors, computer software engineers, financial managers, and registered nurses. Meanwhile those young adults in Group 1 and 2 who are working have largely stayed in low-paying service occupations. (For more detailed occupation information, please refer to the technical appendix.)
Barriers to employment
Members of Group 1 and 2 are positioned less well for future employment than members of Group 3 and 4. Group 1 in particular faces serious difficulties: A full 26% have a history of incarceration and 23% report a work-limiting health condition at age 27. Their disconnection from both school and work increases over time, from 16% at age 18 to 33% at age 23.
Members of Group 1 and 2 also have much lower education levels. By age 25, 3% of Group 1 and 6% of Group 2 have associate degrees, compared with 8% of Group 3 and 9% of Group 4. Differences are more striking with bachelor’s degrees: 3% of Group 1 and 7% of Group 2 hold these credentials, compared to 19% of Group 3 and 26% of Group 4. Furthermore, one in three members of Group 1 do not have a high school diploma or GED—a troubling reality given the strong link between education and labor market success. And members of Group 1 and 2 fall behind not only in formal education, but also in employment-related training; they are far less likely to participate in such training than Group 3 and 4 during their 20s.
The consistency of employment is obviously a major factor in dictating these earnings and benefits trajectories—after all, working is a prerequisite to both. But the demographics and early life experiences of the four trajectory groups point to the importance of other factors that are likely impacting these trajectories and preventing some from accessing opportunity—including the types of occupations in which these young adults are employed, military service, education and training experiences, as well as barriers such as incarceration, health limitations, gender discrimination, and structural racism. We discuss these factors further in our next essay in this series.