2006 September 05 Tuesday
Younger Workers Making Less

Young workers are getting paid less.

Census Bureau data released last week underlined the difficulties for young workers, showing that median income for families with at least one parent age 25 to 34 fell $3,009 from 2000 to 2005, sliding to $48,405, a 5.9 percent drop, after having jumped 12 percent in the late 1990’s.

The good times rolled in the 1990s. But globalization and the pop of the dot com boom have been hard for many American workers.

Debts for college graduates have soared even as starting salaries have dropped.

In 2004, 50 percent of graduating seniors borrowed some money for college, with their debt load averaging $19,000, Dr. Rouse said. That was a sharp increase from 1993, when 35 percent of seniors borrowed for college and their debt averaged $12,500, in today’s dollars.

Even though the economy has grown strongly in recent years, wages for young workers, especially college graduates, have been depressed by several factors, including the end of the high-tech boom and the trend of sending jobs overseas. From 2001 to 2005, entry-level wages for male college graduates fell by 7.3 percent, to $19.72 an hour, while wages for female graduates declined 3.5 percent, to $17.08, according to the Economic Policy Institute, a liberal research group.

What I wonder: Have students responded to higher college tuition and lower starting salaries by choosing majors which provide more and better job skills? If they have shifted toward better paying training then the drop in college graduate wages understates the decline in demand for people with college degrees.

Health care coverage is down for jobs college graduates take.

In a steep drop over a short time, 64 percent of college graduates received health coverage in entry-level jobs in 2005, down from 71 percent five years earlier.

College has become too expensive. Time to make lectures available on DVDs and automate education.

Yet recently the demand for labor has begun to cause a big increase in compensation.

John Lonski, chief economist at Moody's Investors Service, points to the gross domestic product report, the broadest measure of the economy. Wage and salary costs of nonfinancial corporations were up 9.7 percent from a year ago, according to the GDP report released Wednesday. That's the biggest increase since the fourth quarter of 1984. Total compensation grew by 9.3 percent year over year, also the steepest increase since 1984's fourth quarter.

But this increase in demand is coming years into an economic recovery which probably does not have a lot of time left to run.

Since 2000 the amount of mortgage debt has increased 97% and lots of adjustable rate mortgage monthly payments are heading up due to higher interest rates.

Among the most exposed are those who bought into one of the great fads in mortgage lending in recent years -- adjustable rates. Next year, $1 trillion worth of adjustable-rate mortgages -- about 11 percent of all outstanding mortgage debt -- is scheduled to readjust to a higher interest rate for the first time, according to LoanPerformance, a research company. This will come after more than $400 billion of readjustments this year. That means millions of homeowners will either have to refinance or shoulder an increase of perhaps 25 percent in their monthly payments.

The higher payments for mortgages will cut demand for a wide variety of goods and services. The political fallout of wage trends, higher interest rates, and higher fuel costs works against Republican candidates.

"Republicans are worried," added R. Bruce Josten, an executive vice president of the U.S. Chamber of Commerce, a significant backer of pro-business -- and therefore predominantly Republican -- congressional candidates. "You have a portion of the middle class that doesn't believe it's benefiting from good economic news, and, in fact, it's not. . . . All the blame doesn't go to Congress, but voters are going to take it out on Congress anyway."

The Republicans should have hiked the minimum wage and deported all the illegal aliens. Their lower class voters would be more inclined to vote Republican.

Share |      By Randall Parker at 2006 September 05 09:30 PM  Economics Labor


Comments
Stephen said at September 6, 2006 1:27 AM:

The post-war years were an anomoly - things are getting back to normal now.

The middle class is screwed.

Wolf-Dog said at September 6, 2006 11:14 AM:

The notorious Bell Curve book of R. Herrnstein demonstrates that the lower class cannot compete with the upper class. (Here we can define the lower class as the below average income group, which makes this group the majority!)

Now given that the annual trade deficit of the United States is above 5 % of the GDP, it logically follows that the lower class defined above, must get continually impoverished because the GDP of the US is growing much more slowly than the foreign trade deficit. The US government regularly attempts to compensate by subsidizing the lower class (again defined above, we are talking about the majority here) by maintaining an annual deficit spending in the order of 2-3 % of the GDP annually. However, the annual subsidy which the US government gives to the lower class, does not get saved in the bank accounts of the lower class, but it is immediately spent by the lower class which is barely surviving. But means that the lower class continually transfers the annual subsidy (deficit spending of the government given to them) to the upper class (defined as the set theoretical complement of the lower class above, which is the above average income group). Note that the items that the lower class purchases from the upper class, are usually non-durable things, which means that by spending the subsidy given to them by the government, the lower class is in general not adding much to their net worth. Even the real estate the lower class bought during the boom of the last few years, actually added more to their mortgage debt, not substantially increasing their net worth. But the bottom line is this: In order to get out of the recession that started in 2001, the US government re-ignited the deficit spending, and since 2002, until 2006, more than $1 trillion of government deficit spending was done. ALL OF THIS DEFICIT MONEY WAS THUSLY TRANSFERRED TO THE UPPER CLASS.

Mark said at September 6, 2006 6:39 PM:

This is probably what it looks like when the social pendulum begins to swing the other way. Just as the 70s marked the end of the rise of liberalism and the beginning of the rise of conservatism, the 00s seems to mark the end of the rise of conservatism and the beginning of the rise of liberalism. Each worker with a falling income is likely one more voter in favor of redistributionist government. Each worker without health insurance is likely one more voter in favor or national health care. We are probably watching a movement end right now.

beowulf said at September 6, 2006 9:30 PM:

Gosh, businessmen (or rather business lobbyists) really do sell the rope that will hang them. You're right, they've spurned every chance to mollify the poor who'd otherwise vote GOP on social issues. Good luck dealing with the Democrats, idiots.

Automating education is such a big issue but the military is way ahead of civilians in education innovation. As Benjamin Bloom pointed out 20 years ago, the average student scores at the 50th percentile on achievement tests, but students with personal tutors score at the 98th percentile. If you're not trying to find a way to bring the equivalent of a personal tutor to every student (and automation is the only way to do it affordably), then you're not serious about education reform.

The Pentagon gets it. The Army has used the Keller Plan since World War II (Dr. Keller was hired to teach morse code back in the day) and the Navy's Intelligent Tutoring System research is light years ahead of any civilian education reform that's on the table. I guess we'll wait for China and Japan to adopt the research and in 20 years we'll belatedly try to catch up.


Post a comment
Comments:
Name (not anon or anonymous):
Email Address:
URL:
Remember info?

      
 
Web parapundit.com
Go Read More Posts On ParaPundit
Site Traffic Info
The contents of this site are copyright ©