Even if President Obama’s jobs plan were to be voted on and passed today, it will not overnight solve the problem that workers everywhere are suffering from the economic crisis and jobless “recovery.” Some, however, fare better than others.
Since the end of World War II with the advent of the G.I. Bill, higher education has been touted as the means by which working class people can push themselves ahead and into the fabled “middle class.” This has resulted in a dramatic increase in the enrollment of students in universities and colleges. These institutions have seen their numbers skyrocket since the recession began in 2008. After 60 years of this trend, one can test whether the hypothesis regarding the benefits of advanced education has proven true.
After World War II the truth of the theory was nearly self-evident. Workers who had bachelor’s degrees in 1975 had an unemployment rate of 2.9 percent and made an average wage of $15.91 in today’s dollars, well above the rate of their less educated counterparts. Likewise, in 1979, a male college graduate could expect wages around 20 percent higher than a male high school graduate, a gap that jumped to over 40 percent in 2000. For women, the advantage of a college degree in terms of real wages was significantly more.
Today, the trend seems to be declining. The average pay for those with bachelor’s degrees has fallen from an hourly rate of $22.75 in 2000 to $21.77 in 2010 and they struggle with an unemployment rate of 4.3 percent. As the Economic Policy Institute reports, the average starting salary of young college graduates, adjusted for inflation, has dropped by almost a dollar in the last 10 years.
Compare this to CEO pay. In real terms, the median pay for an American CEO was $2,436,000 (or $1,171.15 per hour!) in 1989 and $10,775,000 by 2010. While the average worker in 2010 made $21.77 per hour, the CEO made $5,180.29! In 1965, CEO pay was 26 times that of their average worker. In 1980, it was 40 times. In 1989, it was 72 times. In 1999 it had risen to 310 times, according to a survey from the accounting firm Towers Perrin. Today, CEO pay has reached 500 times that of their workers.
Several factors account for the downward trend in college graduates’ wages. First, high levels of unemployment mean that as more workers are looking for jobs, they become more willing to sell their labor to employers at discounted rates. When forced to choose between going to bed hungry and working for discounted wages, any reasonable worker will chose the latter. Employers have exploited this fact while simultaneously cutting or gutting benefits packages under the guise of “cost savings.”
Many recent graduates have trouble getting into the workforce as they lack adequate experience. The high levels of unemployment disproportionately affect these workers in that they have an advanced degree (which formerly meant higher wages – not a favorable quality to profit-seeking employers) but little experience. Since there are millions more job seekers than just a few years ago, there are also less educated workers who have been in the field longer applying for the same position as the college educated. This encourages employers to hire those with more experience in order to continue to pay menial wages.
The lethal combination of tens to hundreds of thousands of dollars of student loan debt and the higher rate of unemployment for many means a myriad of tough choices.
For many it means begin forced to default on student loans (which not even bankruptcy can get rid of). The national two-year student default rate rose to 8.8 percent last year, from 7 percent in fiscal 2008, according to figures released by the Department of Education. Others have had to choose to move back in with their parents. Others are still having to make ends meet at jobs which in no way relate to their degree or field of study.
House Resolution 365, a bill that seeks to provide student loan debt forgiveness as a means of economic stimulus, has been proposed by Congressman Hansen Clarke, D-Mich., but is sure to go nowhere in today’s austerity-happy Congress.
Despite all this, it is important to note that a college education still seems to be the right choice. As David Leonhardt of the New York Times shows:
Relative to everyone else, college graduates have never done better than they are doing right now. In absolute terms, of course, they too have been hurt by the deep recession that began in late 2007. But they have suffered much less, on average, than workers with less education. They have been less likely to lose their jobs, and their paychecks have survived the downturn much better.
The main lesson to take from all of this: Go to school, it is still worth it and it is loads of fun. But be prepared to join the struggle for jobs and for more support for students.