July 25, 2006 in Nation/World

College grads hit slump in wages

Molly Hennessy-Fiske Los Angeles Times
 

WASHINGTON – 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. But Lewis, 36, found it especially so because he had done what has traditionally helped Americans share in a growing economy: He had earned a four-year college degree.

Wage stagnation, 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.

Not since the 1970s have workers with bachelor’s degrees seen a prolonged slump in wages. 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 work force. 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.

When wages for people with bachelor’s degrees declined in the 1970s, the cause was baby boomers flooding the job market. This time, economists say, much of the blame goes to trends familiar to less-educated workers. 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.

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.

President 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.

Not all 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.

However, some experts say wage stagnation could become a permanent fixture for the bulk of four-year degree-holders.

Harvard University economist Richard Freeman, author of the 1976 book “The Overeducated American,” believes that college-educated workers will continue to see their wages erode, due to the global labor market.

Still, a college education can be a ticket to higher-paying jobs. College graduates earned an average $51,206 last year, while high school graduates earned $27,915, according to Census Bureau figures. Those with no high school diploma earned $18,734.

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