Friday, September 2, 2011

Real Wages of College Graduates Are Falling—Again

When we discussed Don Peck’s article, Can the Middle Class be Saved?, we noted that he described the four-year college graduate as “moving laterally” over time—neither falling behind, as were the lesser educated, nor sharing in the increase in wealth of those above them on the economic ladder. Heidi Shierholz at the Economic Policy Institute has provided the data to support that contention.

“The chart below tracks the average inflation-adjusted hourly wage for young college graduates with no advanced degree from 1979 to 2010.”

Shierholz is more focused on the trend over the last ten years.

“As college students head back to the classroom this semester, a harsh reality confronts them -- the rewards for the time, energy, and money that young people put into college are less than they were a decade ago. Since 2000, America’s young college graduates have seen wages, adjusted for inflation, deteriorate. This lack of wage growth may be particularly surprising to those used to reading about the vast unfilled need for college graduates, which if true would lead to increases in their earnings.”

What she says is certainly true, but her chart contains much more than that single conclusion.

Over the last thirty years the wages of young men in this category have increased less than 10%—consistent with Peck’s observation. Women did a little better over that period, as would be expected. Another obvious conclusion is that men do better—and worse— during boom and bust cycles. That is a little surprising for the college cohort; one would expect men without a college degree to see major fluctuations. Another surprise is the fact that women’s real wages have been trending slowly downward since the recession early in this century. There is probably a story to be told there, but I am not sure what it might be.

In spite of Shierholz’s contention, wages have not fallen as much as one might have expected—given the history contained in this chart and given the severity of the recession. Let us hope that we can still say that a year from now.

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