The Rural Patriot

July 25, 2006

The U.S. Economy and You (Part 2)

Filed under: US Economy,Wages — theruralpatriot @ 8:31 am

In Part 1, I touched upon the decrease in average annual wages from 2000 to 2004 for four-year college graduates.  Today we will take a further look at the possible reasons for this.

That Raise Might Take 4 Years to Earn as Well

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.

It is a remarkable setback for workers who thought they were well-positioned to win some of the benefits of the nation’s economic growth, and it may help explain why surveys show that many Americans think President Bush has not managed the economy well.

Not since the 1970s have workers with bachelor’s degrees seen a prolonged slump in earnings during a time of economic growth. These workers did well during the last period of economic growth, 1995 to 2000, with inflation-adjusted average wages rising 12%, according to an analysis by the liberal-leaning Economic Policy Institute.


There are several reasons causing this trend.  Offshoring of jobs has not helped to improve the situation.  Companies are replacing salaried positions with part-time/freelance/non-salaried, or lower paying positions.  They are reducing or eliminating benefits.  The current “economic recovery” has not increased the number of available jobs at the same rate of earlier recovery periods.  (2.5% compared to the 11.5% average)

“The administration is saying the only reason people are not sharing in the recovery is they don’t have the right skills,” said Lawrence Mishel, president of the Economic Policy Institute. But if college graduates are not doing well, Mishel said, “what does that say?”

The most common theme I had heard while watching the minimum wage debates in the House and Senate recently was, “improvements to the skill/education level are what is needed; not raising the minimum wage.  The solution lies in better education; not in raising the rate”, (even though it has not been raised in nine years, and according to Ted Kennedy’s statements on the Senate floor, studies have shown that states’ economies have improved when the minimum wage was raised). 

I’m guessing that those arguing against the rate hike were not aware of the The 2006 Economic Report of the President; the report where  statistics for this article were sourced from.

Bush’s advisors say graduates are earning less because their ranks are swelling and they face tougher competition for better-paying jobs.

I don’t think that it’s that simple; but, hey, that’s just me.

No one is arguing that college graduates don’t, on average, earn more money than those with a high-school degree.  The point is that the average wage has stagnated or has decreased for college graduates, and this situation may “become a permanent fixture for most people with four-year degrees”.

Tuition costs and interest rates are rising; financial aid programs are facing cuts.  Graduates are facing lower average wages and a stagnating job market.  But, keep your chin up, because that economy is going strong, baby!


1 Comment »

  1. (Yes, I know that I said in Part 1 that I would write today about U.S. personal debt statistics. Well, I decided to do this section today instead!)

    How are people affording to pay tuition costs these days? It just seems to be getting harder and harder to be able to do it. I don’t know many families that have set up a college fund for their children. Its an impossible feat for most that I know.

    Many of our college graduates have accumulated a large amount of debt due to having to secure loans; they are already facing a large financial responsibility upon graduation. Now, we find out that their average wages are lower than what they were in 2000.

    It seems that we are moving backwards instead of forwards.

    Comment by theruralpatriot — July 25, 2006 @ 7:37 pm | Reply

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