Employee sentiment rose in May: Get the latest from the ADP Research Institute’s Data Lab.

MainStreet Macro: Gen Z joins the workforce

June 05, 2023 | read time icon 4 min

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It’s graduation season. Some young adults will head to college, and some college graduates will continue with their studies. But most members of this year’s graduating class will become new entrants into a dynamic and evolving post-pandemic labor market.

Fortunately for those young job-seekers, the labor market is welcoming. The ADP National Employment Report showed private employers added 278,000 jobs in May and the Bureau of Labor Statistics reported 283,000 new private-sector jobs, numbers that were stronger than economists expected.   

Job openings had accelerated leading into May, going from an upwardly revised 9.7 million in March to 10.1 million in April. Initial jobless claims, a proxy for layoffs, remained low signaling that companies continue to hold on to workers.

And a drop in the number of people quitting suggests that all this new hiring isn’t just replacing workers lost during the pandemic, like we saw last year when its effects began to recede. Companies now are increasing their headcounts.

These solid job numbers are good news, of course, but they aren’t the whole story when it comes to younger workers. Unemployment ticked higher in May, to 3.7 percent from a historical low of 3.4 percent. For workers aged 16 to 24, however, the unemployment rate was 7.4 percent, up from 6.5 percent the previous month. 

This year’s graduating class will enter a workforce beset by unprecedented change, both in the U.S. and abroad. We mined ADP payroll data and our People at Work global survey for insights into what our newest class of young workers are facing, and to get a sense of what change they might bring to the labor market.

Pay growth is soaring

For workers aged 16 to 24, annualized pay growth peaked at 20 percent last spring, according to ADP Pay Insights data. That pace of growth has since slowed to 15 percent, which is still high, well above the 6.5 percent growth achieved by job stayers as a whole.

Pay growth might be higher for young workers than it is for their older colleagues, but their pay levels, not surprisingly, are much lower.

Average annual pay for all workers was $57,300 in May. Young men earned $32,600 on average, and young women only $22,7000.

Burnout is a problem

Our 2023 People at Work survey showed that Gen Z – workers between 18 and 24 – are putting in overtime and not necessarily getting paid for it.

On average, these young workers provided 8.5 hours of free work to their employers every week, putting in time after hours, on lunch breaks, and over the weekend. That’s an hour more of unpaid work than put in by workers aged 45 to 54, and three hours more than provided by workers 55 and older.  

There seems to be a trade-off to this dedication. Gen Z respondents to our survey were more likely to report stress at the workplace. They also admitted more frequently that stress was affecting their work performance. More than half of Gen Z workers reported feeling insecure about their jobs, compared to 24 percent of workers 55 and older.

Adaptability is a strength

Young workers have seen tremendous change in the workplace during their short tenure because of the pandemic. That’s made them both more cautious and more open.

On the caution side, our People at Work survey showed they had the lowest expectations for a bonus, pay raise, or promotion of all workers younger than 55. And they were just as likely as their older peers to expect an increase in responsibility.

At the same time, Gen Z workers signaled a high level of adaptability. One in 4 surveyed said they had thought about starting a business in the coming year. And they were 50 percent more likely to be open to gig work than workers as a whole, and more than three times as willing than people 55 and older.

My Take

Every generation leaves its own unique stamp on the workplace. From digital natives to digital nomads, the labor market’s newest recruits are facing an unprecedented global upheaval in the world of work.  Still, they’re already finding their footing within this changing landscape.

While the rest of us adapt to the post-pandemic workplace, younger workers are making it their own, bringing an open mind and new ideas about how work can be accomplished. Gen Z is the future of work. And this generation will continue to have a lot to say about how the workplace evolves. To the class of 2023 – congratulations, and welcome to the labor market!