GEN-X GETS SHORT-CHANGED
The young earn far less nowadays
If "demography is destiny"--as economists who study population trends are fond of saying--then everything should be coming up roses for today's young workers.
Back in the 1970s and '80s, as successive waves of U.S. baby boomers entered adulthood, many experts attributed the boomers' job woes and relatively high unemployment to the large numbers of new workers crowding into labor markets. But experts also predicted things would get better for the succeeding "baby bust" generation. Indeed, BUSINESS WEEK opined in 1979 that this group was likely to "enjoy higher relative income and faster promotions because of sparser numbers."
Unfortunately for Gen-X, however, such predictions haven't proved accurate--at least, up to now. Indeed, according to two studies in a recent issue of the Monthly Labor Review, today's young adults are doing worse in economic terms than their boomer peers.
In the first study, Labor Dept. economist Kurt Schrammel notes that the number of U.S. workers age 25 to 34 fell by almost 1% each year from 1989 to 1996, after rising at an average 4% annual clip from 1970 to 1989. Yet he finds that this group's jobless rate of 5.2% in 1996 was essentially the same as it was in 1971 and 1989.
Furthermore, while real median weekly earnings of all workers declined between 1979 and 1996, they fell far more sharply (by 15%) among young adult workers--even though this group was made up of baby boomers in 1979 and of baby busters in the mid-1990s. And this pattern of deeper declines among younger workers compared with their elders was apparent among both men and women in every major occupational grouping.
In the second study, Labor Dept. economists Geoffrey Paulin and Brian Riordon assess how singles age 18 to 29 fared in the mid-1990s compared with their single counterparts in the early 1970s and mid-1980s. Over the entire period, they find that this group suffered a real average income drop of about 11%, with more than 80% of the decline occurring in the past decade.
Single Gen-Xers also seem to have fallen behind their boomer counterparts in a key measure of social welfare: the share of income they need to allocate to basic necessities. In particular, the study finds that they now spend more of their income on necessities, such as food at home, and less on luxury goods such as recreation and related expenditures.
In short, in spite of their smaller numbers, most of today's young adults seem to have a harder time making it in the workplace than their boomer parents did. Demography may influence destiny, but it is clearly only one of many complex economic factors that decide each generation's fate.BY GENE KORETZReturn to top
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STOCK ANALYSTS SHUN BAD NEWS
Good reports appear more quickly
Stock market investors who rely on research from their friendly broker might be well advised to scan the reports with a wary eye. The reason: Securities analysts appear far less likely to report bad news than good news.
In a study in the Journal of Accounting Research, Maureen McNichols of Stanford University's business school and Patricia O'Brien of York University in Toronto analyzed research reports covering nearly 3,800 companies from 1987 to 1994. The reports were written by 523 analysts employed at 129 brokerages. The results indicate that analysts as a group have a strong tendency to add coverage of stocks when their information is favorable and to drop stocks when the news turns really bad.
McNichols and O'Brien also report that analysts tend to drag their feet when they deliver bad news. While the median number of days between two upgrades of a stock by an analyst was 98, they found that the median period between downgrades was 127 days.
Perhaps not surprisingly, the researchers found that return on equity over annual intervals was higher for companies recently added to the analysts' coverage than for stocks with previous coverage, and it was much lower for stocks that had been dropped.
Why the rosy bias in stock coverage? McNichols notes that identifying "hot" stocks not only enhances analysts' reputation but also is likely to generate more revenue-producing trades for a firm than bad news. And delivering bad news may hurt a firm's relationship with a current or potential customer for investment banking or other services.
Whatever the reason, investors would do well to remember that good news from analysts may come early, but bad news tends to come late--if at all.BY GENE KORETZReturn to top