Archive for Tuesday, July 25, 2006

Like other paper assets, college degree deflates

July 25, 2006


— The U.S. economy has been steadily growing, with unemployment low and corporate profits at historic highs.

So, why can't David Lewis get a decent raise?

Lewis worked his way up through technology companies around San Jose, Calif., finally landing a $77,000-a-year Web design position. But in five years in that job, he received only a single 5 percent pay increase.

That was troubling for someone facing the rising costs of rent, food, gasoline, and raising a newborn daughter. But Lewis, 36, found it especially troubling because he had done what has traditionally helped Americans share in a growing economy: He had earned a four-year college degree.

Wage stagnation, long the bane of blue-collar workers, is now hitting people with bachelor's degrees for the first time in 30 years. Earnings for workers with four-year degrees fell 5.2 percent between 2000 and 2004 when adjusted for inflation, according to White House economists.

It is a setback for these workers, and it may explain why surveys show that many Americans think President Bush has not been a good manager of the economy.

Not since the 1970s have workers with bachelor's degrees seen a prolonged slump in wages. These workers did well during the last period of growth, with average wages rising 12 percent from 1995 to 2000, according to an analysis by the Economic Policy Institute.

For Lewis, the decline in buying power prompted a radical decision: Last year, he moved his family from San Jose to Gardnerville, Nev., where the cost of living is lower.

"Nothing else was going down except wages," said Lewis, who graduated from California State University, Long Beach, in 1994 with a degree in fine arts. Now, he is starting his own Web design business while his wife, Kimberly, works for the county.

Widespread slump

Although earning a bachelor's degree is still worth hundreds of thousands of dollars in lifetime earnings, on average, the recent wage slump has affected a substantial part of the workforce. About 30 million Americans ages 20 to 59 have a four-year degree and no advanced degree, according to the National Center for Education Statistics.

White House economists did not lay out wage trends for people with master's and other advanced degrees. But other studies have found that wages for those workers were flat between 2000 and 2004, when adjusted for inflation, while confirming the decline for people with undergraduate degrees.

When wages for people with bachelor's degrees declined in the 1970s, the cause was a flood of baby boomers entering the job market. This time, economists say, much of the blame goes to trends familiar to workers with less education.

Off-shoring, which has shifted manufacturing and call-center jobs to Mexico and India, is increasingly affecting the white-collar sectors of engineering and software design. Companies have continued their long effort to replace salaried positions with low-paid, nonsalaried jobs, including part-time and freelance positions without benefits.

Those positions make up nearly half of the 6.5 million jobs created since 2001, said Paul Harrington, a labor economist at Northeastern University in Boston.

Harrington looked at the growth of salaried jobs during the past five economic recoveries and found that they increased an average of 11.5 percent, compared with 2.5 percent during the current recovery.

"There's clear deterioration in the college labor market," he said. "The American economy just does not generate jobs the way it has historically."

Alan Guarino, chief executive of Cornell International, an international staffing firm, sees a similar change in his own work as an employment recruiter. About 15 percent of workers with four-year college degrees are working at "gray collar" jobs below their skill level, such as in retail, because they cannot find better-paying jobs. Before 2001, the figure was about 10 percent.

"A very significant percentage of the jobs we are creating are contingent jobs," not salaried positions, said Guarino.

Economic anomalies

The sour opinion of the economy might seem unusual, given that gross domestic product has averaged a solid 3.8 percent growth in the past three years, including a 5.6 percent spurt in the first quarter of 2006. Unemployment remains at a low 4.6 percent.

But in an Associated Press-Ipsos poll released in July, 60 percent of respondents said they disapproved of how Bush was handling the economy.

"The administration is saying the only reason people are not sharing in the recovery is they don't have the right skills," said Lawrence Mishel, president of the Economic Policy Institute. But if college graduates are not doing well, Mishel said, "what does that say?"

Bush's advisers say graduates are earning less because their ranks are swelling, and they face tougher competition for better-paying jobs. But they see good news in the fact that productivity is increasing and that, eventually, wages will follow as they have in the past.

"Whether or not new college graduates are making more than they were five years ago, we do know the same people will be making more five years from now," said White House spokesman Ken Lisaius.

Not all college graduates are faring poorly. Starting pay is up for business administration, marketing and accounting majors, but down for humanities majors, according to the National Association of Colleges and Employers. Compared with 2005, starting salaries for accounting majors rose 5.5 percent this year, while those for English majors declined 4.1 percent.


rhd99 11 years, 11 months ago

Wow, this is amazing, especially since we have Business Man running the WHITE HOUSE who could not use his words effectively in speeches! Talk about education & degrees being used at the highest level! If college education isn't that valuable anymore, then what value do we place upon our PRESIDENT!?

Wilbur_Nether 11 years, 11 months ago

rhd99, his speeches are pretty influential. His April U.S. Energy Policy speech, delivered at the Wardman Park Marriott in D.C., was published in May's edition of "Vital Speeches of the Day." It's his speech pattern that I think you're disappointed in.

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