Bad News for Recent College Grads: Their Income Is Falling.

Gary North

This story appeared in the Los Angeles Times (July 24, 2006). The Times pulls its stories out of the free section and tries to sell them. So, this link may not work.

http://www.latimes.com/business/la-na-wages24jul24,0,2662782.story?coll=la-home-headlines

Let me summarize it.

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% from 2000 to 2004 when adjusted for inflation, according to White House economists.

This is a widespread phenomenon.

The recent wage slump has affected a substantial part of the workforce. About 30 million Americans age 20 to 59 have a four-year degree and no advanced degree, according to the National Center for Education Statistics.

What is the cause? Officially, the flood of baby boomers. Unofficially, it's the fact that there are too many college graduates without any visible marketable skills.

College worked to raise wages when the supply of graduates was controlled. Now the supply is rising: too many colleges, too many graduates. This is the result of tax-funding. Economic returns are falling. But the article doesn't mention this.

The article blames foreign workers. This is not true yet. There are not that many Indians and Chinese competing directly with white collar workers, although there will be.

This, however, is widespread:

And companies have continued their long effort to replace salaried positions with lower-paid, nonsalaried jobs, including part-time and freelance positions without benefits. Those contingent 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 said the number of salaried jobs increased an average of 11.5% during the last five economic recoveries, compared with 2.5% 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."

Employment recruiter Alan Guarino has seen a similar change in his work. He says about 15% of workers with four-year college degrees are working at "gray-collar" jobs below their skill level, such as in retail, mainly because they cannot find better-paying jobs; before 2001, the figure was about 10%..

This should come as no surprise:

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 Assn. of Colleges and Employers. Compared with 2005, starting salaries for accounting majors rose 5.5% this year, whereas those for English majors declined 4.1%.

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