Is This Why I Went to College?

Posted by: Michael Mandel on September 11

To me, this chart sums up everything that is wrong with this economy, on so many different levels.


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I’ve run similar charts like this before. But now, with the just-released income data from the Census Bureau, we can see for the first time the entire business cycle from the peak in 2000 to the latest peak in 2008. And we can say, without fear of contradiction:

Boy, this sure was a putrid period for college grads!

Since 2000, the real earnings of college-educated workers have been on a downward trend (these are full-time workers with a bachelor’s degree only). They poked up ever so slightly in 2008, but not enough to even get back to 2006 levels, much less 2000.

How the heck can we run a modern economy when college grads have falling real wages? The answer is, we can’t.

For one, the only way we can compete globally is by having a better-educated and capable workforce. That means encouraging more young Americans to get a college education. But if the real pay for college grads is falling, then the pro-college argument becomes a lot tougher to make.

Moreover, if college-educated workers are doing worse, that suggests everyone with less than a college education is doing worse as well.

Third—and this is my own pet hobby horse—college-educated wages were falling even before the mass introduction of subprime mortgages, and even before the housing market really ran amok.

That suggests to me, at least, that there’s an underlying problem in the U.S. economy which goes far beyond the financial crisis. I’ve written about the innovation shortfall, and the problems with U.S. trade.

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Reader Comments

bw

September 11, 2009 09:50 AM

Have you looked for any correlation with retiring "baby boomers" that had only a bachelor's degree? Part of your quandry may be demographic based - if you see many retiring that were at the top of the wage earning scale being replaced by new grads, your results are skewed. This instantly makes me think of Circuit City firing its experienced (expensive) workers and replacing them with less experience (less expensive) workers.

A better analysis would further isolate returns on education - such as real wage per years after graduation from undergraduate program.

jennifer jones

September 11, 2009 10:08 AM

Michael What depressing, depressing data. As a working mother with two kids in college: UCLA and UCDavis, i am not surprised to read your findings. I too believe it has so much to do with innovation. Check out this editorial by Bob Ackerman that is also provocative on this topic http://www.mercurynews.com/opinion/ci_13146156

Mike in FL

September 11, 2009 10:50 AM

The main reason for the declining wages is uneven globalization. We have given/sold away our technology and higher education to many foreign countries. We now have people lets say in Korea with equal education, similar technology and willing to work for less. Forget about India, China, etc - am greatly surprised that college graduates make this much. Until the US retains it's technology and advanced education to Americans only then you will continually see an eroding of pay scales throughout the US to some generic world pay level. The US must maintain a significant advanced level of technology and education over the world average or they will be paid the world average. The free ride from the hard work of our past several generations is almost over. Plan on working a lot harder/smarter to make the same money.

Dees

September 11, 2009 11:04 AM

I don't think this analysis makes any sense. An absolute decline in real income for college grads is obviously bad, but what matters is if college grads are doing worse than the work force as a whole. Consult any graph of real household income, and you'll see that everyone's worse off, so this has nothing to do with college being more or less valued. It's just a nationwide decline in income.

Brandon W

September 11, 2009 11:49 AM

In the capitalist economy we have created, the only way to make money is to BE a "capitalist". In other words, you have to own the capital; own the means of production. A person can also do pretty well if they're the top lever-pullers (management) operating the capitalist's machine. Everyone else is a cog in the machine. And the cogs are cheaper in Asia. Especially when the Internet makes it practically free to have "knowledge work" done by cogs elsewhere.

Antonio

September 11, 2009 11:49 AM

The decline may have to do with what type of "degrees" most Americans are seeking today. I find it disturbing that so many of our graduates have degrees in Business Administration but far few have degrees in Engineering, Math, Finance, etc...There is a perception in colleges around the country that students feel that an engineering degree is for a science geek. The truth of the matter, give me an individual with an engineering degree and I can teach him business. This individual will be more efficient and of course always looking for a solution. The student majoring in business will have fundamentals but no concept of understanding problem solving.

DanTe

September 11, 2009 11:57 AM

Should do a graph of college grad salaries broken out by majors. I would bet that the art appreciation and philosophy majors, and those who spent 4 years studying "human communications" (how to talk) are the ones dragging down the curves.

Kip

September 11, 2009 12:05 PM

These data make perfect sense, through the combination of four factors:
1) Too many college grads competing for the same jobs, 2) Global brain drain on US colleges by foreign students, 3) A decline in solid manufacturing capability in the US has occurred too quickly for the economy to truly adjust to it, so during tough times we see the above, and 4) A college degree just isn't worth what it used to be, with grade inflation and everything else.
If the US wants its college-grad strength back, it needs to tighten admissions and stop pretending everyone should go to college for four years. It's expensive, it keeps potentially productive workers in school where they do not want to be, and it strains the legitimate uses of the higher educational system.

Betsy

September 11, 2009 12:08 PM

I think you could make the case that corporate salaries were inflated in the 90s . . .

clover

September 11, 2009 12:15 PM

Also, the quality of education offered at most state universities does not prepare a college grad for the real world. High school does not prepare you for the real world. It's a joke. And if you really hate yourself, get a liberal arts degree. You'll be making a few dollars above minimum wage AND be at least 20 grand in the hole. I know. I just got my B.A. last year. Good luck, grads. You're going to need it.

Clover

September 11, 2009 12:25 PM

The liberal arts programs at most state universities are selling a false bill of goods. They let people in that shouldn't be there & then take their money. If you really hate yourself, get a liberal arts degree. If you want to make a few dollars over minimum wage and be at least 20 grand in the hole, get your B.A. Ha. Just having a degree is not a ticket to a good job, my friends. Your career focus area & your networking skills must be RAZOR sharp. I got my B.A. last year... Good luck grads. You're going to need it.

BillCu

September 11, 2009 12:42 PM

"Well, the world needs ditch diggers, too."

- Ted Knight in the movie 'Caddy Shack'

Nick in NYC

September 11, 2009 12:43 PM

The problem in education can be directly linked to a similar ideal pushed much like home ownership. That ideal is as follows: "everyone is entitled to an education," or "anyone who puts their mind to it can go to college." You have a bunch of half-ass schools that anyone with half a brain diluting the education pool. Of course there is going to be a dropping rate in pay when college grads take jobs at best buy making $8/hour when my grandfather out of college could have worked anywhere and killed it. Its due to the quality of people coming out of undergrad institutions and the number of them. Graduating college was easier then graduating high school.

Tracey

September 11, 2009 12:58 PM

Question: Are we sure that if college-educated workers are doing worse, that suggests everyone with less than a college education is doing worse as well? You're comparing professional electricians and plumbers with philosophy and English majors. Maybe the trades are doing better?

Another question: what is the percentage of the population with a college degree in the same time frame?

Nick18

September 11, 2009 01:30 PM

Before I could pass judgment on this graph. I would like to see a lot more data. Does the same plot for Non-college grads see the same trend? The data that should be looked at is the average difference between a college grad VS non. If the relative difference remains constant and significantly high, there is no less incentive to get a degree. If the gap is decreasing then the author's idea could be relevant. This graph could potentially be explained by a normalization or correcting cycle because it's possible the that trend of the late 90's was unsustainable (bubble or salaries?). Additionally, it is entirely possible that world economic factors such as strengthening global competition may have led to this flatness. So in the end, this graph alone means nothing without additional context or comparison.

Cal Bear

September 11, 2009 01:37 PM

Former Federal Reserve chairman Alan Greenspan said; "Our skilled wages are higher than anywhere in the world," he said. "If we open up a significant window for skilled workers, that would suppress the skilled-wage level and end the concentration of income."

http://www.boston.com/business/globe/articles/2007/03/14/greenspan_let_more_skilled_immigrants_in/

Alan Greenspan @ 3:50 of video below says;

"We pay highest skilled labor wages in the world...If we would open up our borders to skilled labor, far more than we do, ah we would attract very substantial quantity of skilled labor which would SUPPRESS THE WAGE LEVELS of the skilled...if we bring the number of workers to SUPPRESS THE LEVEL OF WAGES relative to the lesser skilled, we will reduce the degree of inequality"

http://www.youtube.com/watch?v=oqx88MyUSck

Notice that Greenspan, in the video above, does NOT mention anything about "best and brightest".

Greenspan and Co stated goal to "SUPPRESS THE WAGE LEVELS of the skilled" is why 400,000+ annual "temporary non immigrant" H-1B/L-1 visas are issued. These estimates do not count exemptions; universities, "non-profits", "research institutions", etc are exempt from the H-1B quota. L-1 "temporary non immigrant" visas have no cap at all.

http://www.infoworld.com/article/07/12/28/52FE-underreported-visas_1.html

US Department of Labor, page 35 and page 36 (pages 34 and 35 of the actual document);

http://www.dol.gov/_sec/stratplan/strat_plan_2006-2011.pdf

"Foreign workers may be legally hired on a temporary or permanent basis when no American workers are available, able, willing and qualified, provided their employers file applications with the Department to adequately document the need...These conditions do not apply to foreign workers admitted on E-3 and H-1B1 visas. An E-3 or H-1B1 worker may be hired even when a qualified U.S. worker wants the job, and a U.S. worker can be displaced from the job in favor of the foreign worker. These conditions do not apply to foreign workers admitted on H-1B visas, except with respect to job opportunities with H-1B dependent employers. H-1B nondependent employers are not subject to the conditions, and their H-1B workers may be hired even when a qualified U.S. worker wants the job, and a U.S. worker can be displaced from the job in favor of the foreign worker. Additionally, the importation of the foreign worker will not adversely affect the wages and working conditions of U.S. workers."

Why are US citizens an increasingly rare breed in STEM programs across the country?

"A growing influx of foreign PhDs into U.S. labor markets will hold down the level of PhD salaries to the extent that foreign students are attracted to U.S. doctoral programs as a way of immigrating to the U.S.A. A related point is that for this group the PhD salary premium is much higher [than it is for Americans], because it is based on BS-level pay in students' home nations versus PhD-level pay in the U.S.A... [If] doctoral studies are failing to appeal to a large (or
growing) percentage of the best citizen baccalaureates, then a key issue is pay... A number of [the Americans] will select
alternative career paths... For these baccalaureates, the effective premium for acquiring a PhD may actually be negative."

http://www.nber.org/~peat/PapersFolder/Papers/SG/NSF.html

http://www.nber.org/~peat/ReadingsFolder/PrimarySources/TimeLine.html

NASSCOM Chairman Ganesh Natarajan explained:

"Last year, out of every three (H1B) visas applied for by a company, only one was issued. This year also the ratio was the same. The professional visa [proposed through WTO agreements] would have taken care of this irritant," said Natarajan. This visa restriction has forced IT firms to hire more American workers for onsite jobs. This pushes up their labour cost.

http://www.nytimes.com/2007/04/12/business/worldbusiness/12iht-visa.4.5257621.html?_r=1

The solution?

http://durbin.senate.gov/record.cfm?id=271783

CompEng

September 11, 2009 01:38 PM

"Mike in FL", Dees, and BrandonW sum up my initial reaction quite well.

Squeezebox

September 11, 2009 01:56 PM

All I know is that I work for the Federal government, have a B.S. in Business Administration, earn around 40k a year. I just got a master's degree in Public Admin. (this time at Uncle Sam's expense) and I'm still earning 40k. Education's a racket, plain and simple.

kevin

September 11, 2009 01:58 PM

This trend may reflect a general decline in income at the national level. However, this does not take away from the concern that there is a fundamental problem brewing in our economy regarding higher education and what that means for US competitiveness in the global marketplace. How can American industry expect their workforce to pay for an education that they will not get an adequate return on?

To drive this point home, this chart should include a tuition cost graph for the same time period. Hmm, real wages fell while costs more than doubled (not including the compounded interest on the ever growing loans faced by graduates). It does not take a country of economic geniuses to decide additional education it is not worth it at a certain point.

To put it into economic terms, the net present value of an investment in college is moving ever closer to 0.

j

September 11, 2009 02:44 PM

fairly bold conclusion to draw from the data set. for starters, i think it would be more to see a breakdown of the returns by industry.

on a personal note, i am a '07 grad working in nyc at a company with the largest marketshare in its industry...and have seen my annual gross decline close to 10K since i've started two years ago...can only imagine what the rest of the country looks like

viva la consumer-less recovery!

Marty Glover

September 11, 2009 02:57 PM

It would be interesting to see a graph that correlate the percentage of the workforce, or possibly the gross numbers in the work force, with bachelors degrees over that same time period. Many jobs that you used to be able to get witha high school education are now requiring the bachelors.

Jason

September 11, 2009 03:11 PM

Thank you for posting Bw...

These writers could do us all a service by reading "Basic Economics," before attempting to interpreting economic data. The average income rises dramatically mid to late career for college educated professionals as they gain experience and/or clients. As we are beginning to see huge numbers of baby boomers retire or take new part time jobs of course the "average" income will decrease with these changing demographics in our work force. In fact if they just make the study from 25 - 65 years old instead of "25 and older" we might actually see a much nicer picture the last decade.

And a comment for Squeezebox, a similar scenario played out in my City of about 30,000 residents. The local paper had an article about a "Code Enforcement Officer," who had a bachelors degree making $40K, and after getting a Masters in Public Administration (paid for by the City) he was promoted to the open position of "City Planner" and his salary jumped to $53K (as they have to disclose this in the public field). If your municipality isn't giving raises as not too many are in this economy, and maybe that's the top of the pay grade for your position, then get your resume out and start networking. The market will certainly reward your Master's degree.

David Merkel

September 11, 2009 03:18 PM

American salaries are on a long term trajectory down until they reach a productivity-adjusted equilibrium with cheaper salaries elsewhere.

http://alephblog.com/2008/06/21/rethinking-comparable-worth/

Ajay

September 11, 2009 03:34 PM

And you are wrong on so many different levels. First, your chart only includes salary, it doesn't include benefits which have been well-known to be rising (http://www.eurekalert.org/pub_releases/2009-08/cf-ehi082009.php). During the last 9 years health premiums more than doubled, soaking up all the wage increases that employees would otherwise receive as salary, but nevertheless received in the form of higher premiums that were paid by the employer. Taking that into account, total wages actually increased this decade exactly on trend, perfectly keeping in line with the last decade. Secondly, given greater global competition, it's laughable for college-educated workers to be complaining about only $80-90k/year in total wages, they should be happy it's not lower given the lack of innovation we've seen this last decade from those same people. As for college education increasing pay, don't make me laugh. College education is a mostly useless signaling mechanism, we'd be better off if most colleges were demolished, as they will be by internet education in the coming years. Yes, there are underlying problems with the US economy, the fact that there are two giant, mostly public sectors, health and education, that waste more and more money while doing less and less. Hilarious- or is it tragic?- that Obozo the clown is now using the recent downturn to dump more money into those failures, the perfect example of stupidity begeting stupidity.

CompEng

September 11, 2009 03:42 PM

Bw is correct, but so is David Merkel. Which effect is dominant in determining the current trend level? That's a quantitative point: but most of what posters are saying has some truth to it and only add up to what Mandel is saying: there are headwinds to *average* wages of those with degrees, which means *average* income is declining.
To some extent, it makes no difference whether this is a demographic effect when measuring the effective wealth of Americans.

Mike Mandel

September 11, 2009 03:50 PM

Jason writes:

>These writers could do us all a >service by reading "Basic Economics," >before attempting to interpreting >economic data.

Hi Jason,

Luckily I just wrote a textbook called "Economics:The Basics", so I'm quite familiar with the subject :).

The chart looks the same if you look at 25-64 as well.

Joe

September 11, 2009 03:52 PM

Do you want a real answer to the the
drop in income. Over the last eight years more of the USA economy profit went to the top 2% of earners and less to the
rest, both with college education and those without. So politics do matter.Who did you vote for the last eight years? Picking the right candidate
should be part of your education.
Joe

JS

September 11, 2009 04:16 PM

Yeah, a college education is relatively useless nowadays for the majority of people, as the percentage of people with a degree is higher now than ever before. And with the requirements for a degree laughable, it's like a high school degree. I do disagree with the liberal arts bashing though, as a philosophy degree is rather practical in today's workplace.

DaCheeze

September 11, 2009 04:20 PM

Don't forget to factor in the falling value of the dollar ! It bought alot more in 1991 than it does today.

This nation's companies need to stop giving away our technology, knowledge, and contracts to nations like India and China. It's only benefitting the top 2% of the people in this country.. the ones who are making the decisions that affect everyone else.

Concerned

September 11, 2009 04:24 PM

Joe, you hit the nail to the head.
Add the real cost of the world most expensive health care insurance to the company cost of employing you and I believe that you would see the wage projection to be upwards. Unfortunately, unless you benefit from the insurance companies record profits or bonuses there just is no money left for you and me.

Mike Reardon

September 11, 2009 04:43 PM

At the start of the decline you can add the change in Taxes that required corporations to declare employee stock options at there present stock price. The loss of these stock options over the next few years to employees removed an income support from the top value employees and that helped to under cut the other low wage employees value.

Some 3 year union contracts like Nurses and Teacher, have remained in place for 5 years without any resolution, constantly extended without new contracts. Courts have not supported labor actions over this timeline. Also over the last part of this time line, individual legal issues regarding labor, are settled almost exclusively under labor arbitration instead of the older court pressures.

Also job churn became a constant in this market. If you look at the numbers from 2007, affected by loss of health care, over a 2 year period go out from those without 47 million to 60 million separated at some time from health care. All employment was total without wage pressure for all of the last 8 years.

Globalization took mid-level tech wages into the world market and many business moved the employment entirely. And importing workers with skills would have value, except this is not how these employees were used by businesses over these last few year.

Lord

September 11, 2009 05:02 PM

No, it is not demographics. The boomers may be starting to retire but that does not mean falling salaries. The workforce is stabilizing, not falling. The population will continue to grow with growing numbers of retirees. There has been a large shift towards the top 1% of the income distribution, but that is not demographics.

Mike

September 11, 2009 07:56 PM

The costs associated with health insurance faced by employers is a contributing factor to falling wages. Outsourcing overseas and importing workers on H1/L1 Visas is another. If you support unrestrained capitalism and wonder why your wages are falling you might want to rethink who benefits the most from the Wall Street way (hint: it's the owners, not the workers).

Rick

September 11, 2009 08:22 PM

My wife and I have incomes that puts us in the bottom 50% of all wage earners....but our house and cars are paid for.....we have no debt.....and at age 52 we almost have enough savings to not work anymore unless we just want to. We have been saving 45% of our income each year for the past 30 years. Our net worth now puts us into the top 2% of all Americans which is a bit surprising. It is amazing to me that Americans don't save more of their income.

fools

September 11, 2009 08:59 PM

USA media is censored....they put out crap just to tease the public along. they thought of all the good ideas you people thought of but needed the cows back to the trough another day. it is the capitalist lever pullers ways feed the monkeys...u fools get me~

Joe Cushing

September 11, 2009 10:23 PM

The reason for this is simple. We don't need as many college educated people as our schools are producing. So today, you have to have a college degree to get jobs that would not have required one before. The degree does not needed to do the job, it is just a requirement to get the job. Many jobs just require literate people who understand basic math or have writing skills. That is what high school is for. The solution to this problem is simple. Stop federal government subsidies for education. We spend 13 years on school before we get to college for another 4. Society doesn't give those 13 years enough credit.

We have too many people with degrees but how do you tell someone not to get one? My advice to any individual, of course, is to go to school.

Vijay Menon

September 11, 2009 11:44 PM

Just goes to show that a bachelor's degree is simply not enough in the knowledge economy. Most technical, financial, medical, and management jobs today require a higher degree. Try this graph for employees with an MBA or a MS or PhD and you should see a different pattern. In fact, I would argue that too many bachleor degree holders are today in positions that call for better academic qualifications and the market is penalizing this trend.

John

September 12, 2009 12:11 AM

I think Mike and Dees have it right. Globalization is bringing down wages, period. This will be a 30 year process, and will happen despite the US continuing to lead the world in innovation... it's pure wage arbitration. Antonio has a good point though, it would be interesting to see math and science degrees as a percent of total added to this chart. I bet if you graphed high school dropout wages vs HS grad, vs BA vs MS vs Phd what you'd see is each trending down, but peaking about 5-10 years apart.. so you might see peaks in 1990, 1995, 2000, 2005.. phd's in 2010. Just a guess, but it appears to me that globalizaiton hit the relatively uneducated first, and is pushing in waves through the U.S., working up the education ladder.

Vivian Anderson

September 12, 2009 04:58 AM

Try

- peak oil
- fraudulent monetary policy
- debt bubbles
- technological unemployment

Frugal Marc

September 12, 2009 05:44 AM

I got off of the college education train numerous years ago and got into a skilled trades position and have never been more happy with the pay and job stability. I once worked in the IT field and when I started in that the push was that you had to have a college degree to get anywhere and once I got that it wasn't good enough or it was some other excuse from employers more or less so they could offshore. I said I was no longer wasting anymore of my money on chasing what's new in IT anymore. Now when I get a service call it's my turn to put the screws to those same very people who did it to me. Oh yeah you want that fixed well this is what it's going to cost you.

I encourage my children not to fall into this college degree trap. If you want a job for life then find a field where people need your skills. Corporations are nothing but slave factories by another name.

I laugh everytime I see people expending huge amounts of money for what I call yupee barn homes. Ha wait until you have to re-roof that barn or try to sell it when you retire. With the falling wage trend good luck on trying to sell that barn. You would have better luck burning it and collecting the insurance.

Tammy

September 12, 2009 08:42 AM

The quality of college grads has decreased greatly. So of course companies are unwilling to pay better wages. We need to tighten admissions requirements and improve coursework and ensure that at the end of 4 years, college grads can make a contribution to the growth of companies and industries. I'm in grad school with other colleagues who make me depressed because they are watering down the significance of my degree. Some who can't write or form a complete sentence and who are only in grad school to avoid having to pay back their student loans. I think that schools are partly to blame for this decline in wages because it seems these days that anyone can get a degree.

vicbee

September 12, 2009 09:32 AM

Discrediting a college education on the basis of its lowered correlation to income is the fundamental flaw of this analysis. Education is not just about making more money, it is about expanding intellect to be able to think through more complex problems, become more creative and hence more competitive. Today's reality is that (higher) education is a requirement to get a job.
The true problem is that US education is generally very expensive to individuals. Rightfuly so, people expect a return on their investment which is why college is seen as a means to an end rather than as life enhancement in itself.
If education is a basic requirement to get a basic job, isn't it fair to suggest that education ought be free or nearly free as in Europe?!?

john

September 12, 2009 10:47 AM

Absolutely agree with Vicbee. Also, people all over the world clamor at a chance to come to a US university, even to this day. The problem today lies with the American kids who think that they're parents have sent them off for 4 years to party, drink, and basically have fun. Oh and occasionally attend class.

Trust me, I am of this age myself. I don't know ANYONE that doesn't do this.

Randy

September 12, 2009 11:05 AM

Of course if you broke it down by major, the "real" degrees like engineering are doing just fine.

The "I just went to school to party" degrees like sociology are dragging the average down as they gain in popularity.

Irene

September 12, 2009 11:20 AM

I am 29 years old. I am a grad with bachelor's degree. I am a fully qualified CPA. I am from one of the countries in Asia. The cost of my employee hiring me: USD20,000 per year.

norman ravitch

September 12, 2009 12:35 PM

Most people who go to college have no reason to do so. They are not capable of higher learning and should learn plumbing or something else needed in society. Only a few should spend their time deciding whether Plato or Aristotle was more correct.

Mark

September 12, 2009 01:16 PM

I wonder if the gap between college educated and not is growing, narrowing or holding? This seems to me that it would further support your argument, or not.

Also, we must consider total cost of employment, taxes, benefits, etc. I have two small businesses, both predominately employing college grads.

Now, I'll express an opinion - you get paid exactly what you're worth. If you apply yourself, expect the best from yourself and likewise position yourself with a good employer and expect the best from them, earning power is unlimited. Otherwise, mediocrity begats mediocrity. Learn and earn, produce value with enlightened organization and name your price.

Jacob

September 12, 2009 01:21 PM

Your analysis completely ignores the fact that salaries from mid to late 90's were overly inflated by the dot com bubble, when graduates fresh out of college with no experience made $70k - $100k. When you factor in that bubble economy, the salaries today would make more sense.

norman ravitch

September 12, 2009 01:34 PM

I am sorry my comment got posted 4 times! Once would have been sufficient.

Having taught at a state university for almost 40 years I can say that a very small percentage of my students had any business being there. And that was mostly before all sorts of allegedly deprived minorities were bribed to go to college.

Sam Wilson

September 12, 2009 01:44 PM

Unfortunately, we have an economy based upon mere consumption, government bailouts, and paper pushing. The pyramid scheme is failing as the United States can no longer innovate due to the fact that we have outsourced technological work and rely on visa holders to innovate. I remember the days when the US lead in technology, now we are behind. Corporations are losing their consumer base, as developing countries are wise enough to put in protectionist measures to ensure their growth.

Frank

September 12, 2009 01:46 PM

Unfortunately, we have created a situation where stupidity is rewarded, such as the bank failures and intelligence is punished as we decided to destroy opportunity for our best and brightest in the mathematical sciences.

Amy

September 12, 2009 07:10 PM

This is one more indication of why when people (including o'bama) say education will reduce unemployment is one of the BIG LIES of America!

Henry

September 12, 2009 08:46 PM

I have both advanced engineering and Finance degrees.
I started my career as an engineer back in 1995 at $41k. I loved my job and contributed in a few years to quite a few innovations in my field. I ended up switching to Business Management as I hated the orders from morons in Marketing who had no understanding of anything: the product, the market, the end user, etc. And those marketers were making 2-3 times what engineers were making.
About 15 years into my career, I left engineering at 56k and am now at 320k in Finance. Had I stayed in engineering, and in the company I quit, I would have been laid off 10 years into my career ladder at around 75-80k (if I had kept up with inflation).
To get to the 320k, I have had to continue my education (at night with all the sacrifices it entails), change jobs (when I realized my boss was using me or my mercenary assignment was over). I slammed the door many times and have no regret about it. My father was shown the door about 30 years at the same company without any kind of recognition other than a secure exit to the parking lot.

My generation has been marked by the obnoxious, self centered, and amazing cruelty of the generation of managers that was born from 1940-1950. These are the bastards that taught my generation born in the late 60s and early 70s to be the most ruthless at the game of survival in corporate America.

Note that I graduated with zero loans to repay as I fought hard for scholarships, sponsorships, employer tuition help, working my rear off every week, etc. I just never attended a private school in my life as no private school can justify the premium they charge over good old american public schools ranking in the top 20.

What really dazzles me to this day are the armies of morons who are still employed in this crisis while much better qualified and educated folks are in limbo unemployed.

My international experience has shown me that many countries would love to get a curve like the above! If the US is hurting, the rest of the world is dying, except for very few exceptions that ironically will be our saviors as they will create the markets we so dearly need nowadays: China, Brazil.

The fact is guys, the system our fathers and we have built is unsustainable. That an American lives la vida loca while a German or Swedish with the exact same education has to do with far far less of MATERIAl things in life just can not go on forever unless that German and Swedish keep financing the American's AMEX bill. This had to stop. We now need to relieve the pressure on the American consumer and count on the creation of new consumers' markets in China so that the American starts producing again far more than he is consuming. When all is said and done, this is no nuclear physics. It is about basic equilibrium.

I hope no one concludes from the above that education is useless or too expensive. One can take everything away from us but can never rob us from our education.

What really begs the question is the need for a crash course on home economics for the 16-18 year olds: are you nuts paying $400k over 4-6 years to study psychology at some Women's private school in MA when your income potential, on average, will be in the low 20s to high 40s the first 15 years of your career if you have one!

ns

September 13, 2009 01:46 PM

Here's a new thought: the market will pay you what you are worth. Stop crying about entitlement and man up.
The time to make a productive contribution to society is now. Step away from the fantasy football, the Macy's, the Paris Hilton obsessions and rest of crap you have been force fed for the majority of your lives and do something to make a real increase in productivity.

DanTe

September 13, 2009 02:32 PM

I love the one here who spent 8 years learning how to be a secretary ("Business Administration" and "Public Administration") and whines about how little it makes. HA! And you folks want to play up with data curves that has no meaning what-so-ever once put into context.

FJ

September 13, 2009 03:18 PM

Fifty years ago a high school diploma meant something - the ability to read, write, follow written instructions, due basic math, think critically, etc. Also, people used to read books both for enjoyment and to further their education. Today, about 30%? of entering students drop out of high school and many that do graduate do not have the decent "three R" skills that a high school diploma used to represent. So, the college degree is the new credential for many routine non professional jobs. "College for everyone" means that many minimally qualified students attend college for a paper credential but do not get the education that a degree represented 50 years ago. The amount of money this country spends on education is staggering, and the results, except for the top echelon, are poor.

Sally in Chicago

September 13, 2009 07:50 PM

I agree with Mike in Fl. Globalization has made it possible for other countries, once thought of as 3rd world, to catch up educationally. Our kids are not #1 anymore. I work at a research university, and our enrollment is at least 1/2 Asian and/or outside the U.S. Or second generation child from an Asian parent who sent them to the best "private" schools and gave them tutoring.

But I can see where our children are also overburdened with school debt and they get to the point "why"? As a teacher I see it all the time.

Doug

September 13, 2009 09:46 PM

The most successful business people are not those who attended college. Just a few examples:

* Mary Kay Ash. The founder of Mary Kay Inc. started a cosmetics business. While she didn’t have a college education or any training, she successfully created a brand known throughout the world. To date, nearly half a million women have started Mary Kay businesses, selling cosmetics. Their appreciation for Mary Kay Ash is unwavering.
* Richard Branson. Richard Branson is best known for his thrill seeking spirit and outrageous business tactics. He dropped out at the age of 16 and started his first successful business venture, Student Magazine. He is the owner of the Virgin brand and its 360 companies. His companies include Virgin Megastore and Virgin Atlantic Airway.
* Coco Chanel. An orphan for many years, Gabrielle Coco Chanel trained as a seamstress. Determined to invent herself, she threw out the ideas that the fashion world deemed feminine, boldly using fabric and styles normally reserved for men. A perfume bearing her name, Chanel No. 5 kept her name famous.
* Simon Cowell. Simon Cowell started in a mailroom for a music publishing company. He has since become an Artist and Repertoire (A&R) executive for Sony BMG in the UK, and a television producer and judge for major television talent contests including American Idol.
* Michael Dell. With $1,000, dedication and desire, Michael Dell dropped out of college at age 19 to start PC’s Limited, later named Dell, Inc. Dell became the most profitable PC manufacturer in the world. In 1996, The Michael and Susan Dell Foundation offered a $50 million grant to The University of Texas at Austin to be used for children’s health and education in the city.
* Barry Diller. Fox Broadcasting Company was started by a college dropout, Barry Diller. Diller is now chairman of Expedia, and CEO of of IAC/InterActiveCorp which includes Home Shopping Network and Ticketmaster.
* Walt Disney. Having dropped out of high school at 16, Walt Disney’s career and accomplishments are astounding. The most influential animator, Disney holds the record for the most awards and nominations. Disney’s imagination included cartoons and theme parks. The Walt Disney Company now has annual revenue of $30 billion.
* Debbi Fields. As a young, 20 year old housewife with no business experience, Debbi Fields started Mrs. Fields Chocolate Chippery. With a recipe for chocolate chip cookies, this young woman became the most successful cookie company owner. She later renamed, franchised, then sold Mrs. Field’s Cookies.
* Henry Ford. At 16, Henry Ford left home to apprentice as a machinist. He later started Ford Motor Company to manufacture automobiles. Ford’s first major success, the Model T, allowed Ford to open a large factory and later start the assembly line production, revolutionalizing the auto-making industry.
* Bill Gates. Ranked as the world’s richest person from 1995-2006, Bill Gates was a college drop out. He started the largest computer software company, Microsoft Corporation. Gates and his wife are philanthropists, starting The Bill & Melinda Gates Foundation with a focus on global health and learning.
* Milton Hershey. With only a fourth grade education, Milton Hershey started his own chocolate company. Hershey’s Milk Chocolate became the first nationally marketed chocolate. Hershey also focused on building a wonderful community for his workers, known as Hershey, Pennsylvania.
* Steve Jobs. After attending one semester of college, Steve Jobs worked for Atari before co-founding Apple Computers. Now without the “Computers” in their name, Apple includes innovative products such as the iPod, iTunes, and most recently the iPhone. Steve Jobs was also the CEO and co-founder of Pixar before it merged with Walt Disney.
* Rachael Ray. Despite having no formal training in culinary arts, Rachel Ray has made a name for herself in the food industry. With numerous shows on the Food Network, a talk show and cookbooks, high-energy Rachael doesn’t slow down. She has also appeared in magazines as well has having her own magazine debut in 2006. She knew she was a success when a website dedicated to bashing her was created.
* Ty Warner. Sole owner, CEO, and Chairman of Ty, Inc., Ty Warner is a savvy, yet private business man. Ty, Inc., made $700 million in a single year with the Beanie Babies craze without spending money on advertising! He has since expanded to include Ty Girlz dolls, directly competing with Bratz dolls.
* Frank Lloyd Wright. Having never attended high school, Frank Lloyd Wright surpassed all odds when he became the most influential architect of the twentieth century. Wright designed more than 1,100 projects with about half actually being built. His designs have inspired numerous architects to look at the beauty around them and add to it.

Wingman

September 13, 2009 10:06 PM

You are a true goofball! Real wages going down? Only in America can you earn a B.S Degeree in any one of over 1500+ Bachelors Programs. 1500+ possible bachelors degrees??? (Google "online degrees"; that's what they're advertising!) Of course the statistics above show a decline in the real wages of a college degree - you have 1400+ B.S. Degrees that are poi9ntless, meaningless, and useless...admittedly worth less than the paper they're printed on. Only a few dozen degrees are really worthwhile, and have true real-wage increases that exceed the increasing cost of college and life. Sadly, there are too many dumb degrees out there with too many dumb American teenagers pursuing them. And that's what's bringing these statistics down.

Paul

September 14, 2009 12:46 AM

Dork! What di you expect from those young MBAs running US companies today. Welcome to the real world of job competition, outsourcing, and a tax code that favors/encourages the design and manufacture of goods in other lands. If you want to make real money, develop a skill that can NOT be outsourced or performed somewhere else; (e.g., electrician, plumber, auto repair). Just remember that a journeyman electrician makes over $35/hour before you add the benefits.

audiobookfitness

September 14, 2009 03:24 AM

I agree with Bw. This is more of a demographic issue. I finished a book on demographics called the Age Curve--very enlightening. Our Global Economy where engineers who come in from other countries make less than their American counterparts must also play a role, although I have no statistics.

Mark

September 14, 2009 12:15 PM

Author states: "Third—and this is my own pet hobby horse—college-educated wages were falling even before the mass introduction of subprime mortgages, and even before the housing market really ran amok."

Note the graph. The dot-com bubble burst, ergo the graph goes down. Do the graph again in five to ten years, with today's data, and you'll have a better picture of yet another fall. Coincindence? No. The dot-com bubble and the sup-prime fiasco have one thing in common: they're the product of an "imaginary economy". And we can't have an "imaginary economy". America must be able to make real things - something other than paper baloney. That's why China's economy is growing. They're making the things that we the stupid sheep voraciously consume. Rant over. Have a nice day!

Mahagwa

September 14, 2009 12:46 PM

Hmmm...Let us see here. I graduated college, and my first job (out the door) was $45K+. Within 1 year, I was at $120K+. Why? I was an Electrical Engineering grad (B.SC), in a field (data and voice communications), which was quickly evolving and had a severe shortage of capable talent. Today, the jobs in that field are vaporizing as is the compensation; so I switched to another line.
Two things: first, as someone else mentioned here, Liberal Arts degrees are essentially worthless, unless you get a Ph.D. Second, it is all about timing. Used to be that if you got a degree in engineering, you were guaranteed a good salary..not any more. You need to target a field which is in high demand, has future growth prospects, and demands some level of high intelligence. That way, your money will flow. Additionally, never become stagnant, continuously refine and improve your skillset.
Finally, lest anyone be fooled, you WILL NEVER get rich working for someone else. All who believe in the old fairy tale "Go to school, get a degree, fall in love, get married, have 2 1/4 babies and 1 1/2 cars in the suburbs and retire" are in for a shocking surprise!!!

Jeff

September 14, 2009 01:26 PM

Future economies will be driven by highly educated people who innovate. Our whole education system needs to be revamped. First, costwise, it is in a bubble of its own. Second, kids need to have a better idea of what to pursue when they get to college (no wonder why only 50% actually graduate). Third, college is an image of years gone by where going to college was equal to being scholarly. Carve out all the useless and expensive general education requirements and replace them with more advanced classes in each area of interest. Hence, in 4 years, a student will have the equivalent of a masters degree, and be more able to compete.

Squeezebox

September 14, 2009 02:16 PM

Gimme some credit, Dan Te. I'm an accounting clerk, not some airhead secretary!

Chad Clawson

September 14, 2009 02:23 PM

Your argument that falling wages take away the incentive to get a college education at a time we need more educated and capable people to compete is a flawed argument. Those two points are contradictory. People need to get a college education not to be better off than the prior class of graduates, but to be better off than they will be if they do not get an education. It is the difference between the wages of grads and non-grads and the prospects and stability of future employment that drives the decision, not the wages of grads in absolute terms. Framing the issue as you did misleads the non-critical thinkers into dropping their college plans or becoming frustrated at a time when they (and we) will be best served by them furthering their educations.

We are living in an increasingly global economy, where both products and information flow freely. This definitely has and will put downward pressure on wages at all levels, not just for college grads. After all, if a PhD in India will write software for $8/hour then it is unreasonable to assume that it is sustainable for a U.S. programmer to make 5 times that amount. Over time the difference in wages has to narrow unless protectionist measures are taken but that is true at all levels, and is why so many manufacturing jobs have gone overseas. (Protectionist measures have cost as well and also serve to lower our standard of living by increasing the cost of things we buy.) Despite the falling wages of college grads, there has never been a greater incentive to become educated, as well as entrepreneurial and innovative. You would better serve your readers (and the U.S. economy) by pointing this out, rather than by lamenting falling wages and claiming that they remove all incentive to make oneself competitive. Point out the virtues of an education relative to the alternative.

I believe our standard of living will indeed fall over time as large public and private debts overwhelm us and as we are increasingly forced to compete with foreigners who demand less real compensation for their efforts. This should be an incentive to be the best one can be. Rebuilding America starts at the ground level, and frankly we will not change until we experience some pain. Should we lament or roll up our sleeves and get to work?

Chad Clawson

September 14, 2009 03:06 PM

Doug,
As you correctly point out there are a number of very successful business people who did not go to college. However, such data is meaningless for the average person. It does not prove cause and effect. The average college grad makes much more than the average non-grad. The fact that Bill Gates did not finish college does not mean that dropping out of college will increase your odds of success or that you will start the next Microsoft. There are also some professional athletes who did not go to college but that are very successful at what they do, such as Kobe Bryant. Those people have something special that most of the rest of us do not have. For the vast majority of people, becoming more educated is a help, not a hindrance. Although there are a few high profile types like Steve Jobs that made it big, most of the highest paid people who work in their organizations are college educated. People can do well without college, but educating oneself is a positive, not a negative.

Kim Berry - Programmers Guild

September 15, 2009 01:46 AM

The chart can mean different things depending on whether wages are failing for HS grads as well.

In the tech sector Congress has used foreign worker visas to drive down wages. Corporate lobbyists demand more workers and oppose any meanful prevailing wage and U.S. worker reform.

I've just posted an analysis of how H-1b has impacted my daughter's job prospects: BS/MS 3.8 GPA from a top Engineering school - and cannot find a job:

www.programmersguild.org/docs/stephanie_job_11sept2009.html

Meh

September 17, 2009 11:58 PM

Cool Story Bro!

A-US-PhD-wasted

September 19, 2009 08:57 PM

Was there a graph like this one except showing education costs as well?

Barry

September 21, 2009 05:20 PM

Kim,

Why would a college grad from a "top" engineering school be looking at jobs that make less than 40K ?

I know the economy is tough. I was hit by the crisis too. But, as far as I can see, young people who can't find a job usually should take a good look at him/herself instead of bashing the H1B holders.

Plus, you should only go to grad school when you have a couple of years work experience. People who go to grad school right after college usually have two reasons, 1: They want to be professors...
2: They can't find a job with a bachelor degree.

Econguy

September 22, 2009 05:32 PM

Stepping back to look at the bigger picture, a similar graph of all workers in many less educated states topped out in the 1980s. The problem depicted in the chart in the article is indeed a symptom of a larger problem that goes beyond the financial crisis. It is fundamentally related to uncompetitiveness that was masked by high end tech sectors, health care, and financial services and then capped off by debt binge. The topping out of more educated population groups reflects that uncompetitive position in higher ranks of workers as well, from the wholesale hollowing out of a large number of industries and support sectors to constantly rising employer costs in policy attempts to prop up and enhance the unfunded benefit mandates from Congress. The icing on the cake to make this more obvious will be cap and trade energy taxes that will fast forward the uncompetitive slide. The U.S. is clearly uncompetitive on corp. tax rates and the trend is clearly going to get worse with unfunded mandates, debt reduction attempts, and govt. program expansions. Meanwhile the educated class of workers in the U.S. will see more effects of better educated workers at foreign competitors derived from more cost-effective educational systems and fueled by lower tax rates. In summary, uncompetitive trade positions are being made more uncompetitive at accelerating rates by policy choices and a reluctance to reform tax policy and educational systems. I'm afraid there will be no crisis wake up call to reform for these factors. It will only be a gradual decline of a lost generation or two.

CompEng

September 23, 2009 03:08 PM

Barry,

I don't think that's a good thing:
"People who go to grad school right after college usually have two reasons, 1: They want to be professors...
2: They can't find a job with a bachelor degree."

I got my BS in Electrical Engineering and then my Master's in Computer Engineering in one gulp, which allowed me to get a job working on CPUs. And btw, where I work, you're going to have a significantly harder time getting hired without a Master's degree (financially, you're probably a little better off if you don't get one and do get hired, but it does reduce your initial chance of getting hired and your job options).

X

October 2, 2009 12:08 PM

Maybe the supply of college graduates has outpaced the demand. Or perhaps in an ever competitive economy, more specialized or higher quality education, i.e. masters and beyond, is needed.
Could it be that more people are going to college but the pool of talented individuals has grown at a slower rate? What about the quality of college education? Perhaps average quality is trending down, which would explain why average pay is also falling.

Helen Warwick

October 22, 2009 05:08 AM

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NewsView

November 10, 2009 01:13 AM

There is a little-known October 2009 study out of the WorkforceAlliance on "The Forgotten Middle-Skill Jobs" that would seem to dispute your assumption that if college grads are doing worse so is everyone else.

Those least vulnerable to the downward pressure on wages from insourcing and outsourcing are those whose careers are least targeted by the process. That includes the non-replaceable, non-outsourceable "trade jobs" requiring some degree of education or licensing: childcare, hairdressing, sanitation, electrician, auto mechanic, plumber, firefighter and public safety, among others.

The majority of jobs in the U.S. are still middle-skill jobs, and national projections include these in the "service sector" category, which is the fastest growth area.

Louisiana's workforce commission director, Curt Eysink, recently made waves because he told a panel charged with reforming higher education that Louisiana is producing too many four-year graduates that "we cannot employ" and too few skilled trades (where there is apparently a lack of skilled applicants).

According to the WorkforceAlliance & Skills2Compete joint report, Eysink is correct. But Americans don't want to contemplate the reality that our lettuce pickers and foreign H1B visa recipients fresh out of grad school are lopping off the low and high-end jobs simultaneously.

Paul Orwell

February 15, 2010 06:36 PM

That's right the standard of living has
been steadily declining in spite of an increase the number of college degrees produced in the US. Although education
is one factor in the employment and wage
equation. It is not the only and most heavily weighted factor. It took a major recession for most people to figure this out. But the educated and unemployed people other countries knew this. Like
Russia, India, France, and England to name a few. This condition has now come to the US. Education is not a guarantee
of a specific job at a specific wage. There are many other factors. Many these are control by the government. One example:NAFTA. Simple supply and demand economics.

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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