Labor Market Blues
September 19, 2011
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Everyone says that they want an economic recovery. So, why don’t we have one? Most surveys of business people tell the same story: there is no recovery because business owners are unwilling to hire and they are unwilling to hire because people are not spending.
So, why aren’t people spending? One reason is that many people are unemployed. Another reason, one that business leaders doesn’t like to discuss, is that business has been boosting its profits by cutting worker pay. And not just for the less educated who are said to be the unfortunate victims of technology and globalization. Rather, as the chart below shows, for workers in almost all educational categories.
The average earnings of workers in almost all educational categories declined between 2000 and 2010. Talk about a lost decade for working people! Only those with an MD, JD, MBA or PhD enjoyed a real increase over the period, and those workers make up only 3% of the workforce.
The average earnings of college graduates, 19.5% of the workforce, declined (adjusted for inflation) by approximately 8%. Interestingly, the average earnings of high school graduates, 30.7% of the workforce, actually suffered a smaller decline.
These numbers make clear that the solution to our economic problems is not more education. Even those with Masters Degrees lost money on average. Recovery will require real structural change in the way our economy operates.