Wednesday, April 18, 2012

There’s been a lot of press lately about how young college grads are struggling.  And they are - especially younger grads who have seen their real earnings drop 15% over the last decade.
But that’s missing a big part of the story.  You see, when college grads struggle, that trickles down to all levels of educational attainment.  

While the economy has officially been in “recovery” for almost three years, we are still about six million jobs short of when the recession began in 2007.  But just because we’re short on jobs doesn’t mean the number of available workers decreased alongside it.  In fact, the opposite is true – with natural population growth, the number of available workers across all levels of educational attainment continued to rise, for workers aged 25 and older.

Now we all know someone with a college degree generally makes a more desirable job candidate than a non-degree holder – after all, that’s the selling point of going to college (and taking on $1 trillion in student debt).  So in the competition for the 2.2 million jobs that have been created since the recession officially ended, guess who loses?  Answer:  Those without education beyond high school. 

Certainly “winning” here is loosely defined: college grads nowadays are taking any job they can get even if it doesn’t pay well or use their degree, hence the downward pressure on their wages.  But non-college workers really get hammered; many drop out of the labor force entirely as they are squeezed out of the competition for the few available jobs.  In fact, government stats show that while the college graduate (and higher) labor force increased by 2.5 million since the recovery began, and the some college labor force increased by 0.7 million, the labor force of high school graduates shrank by 1.8 million.  And of course non-college grads make up the bulk of those who are unemployed.

The great squeeze on non-college workers is not completely new.  The labor participation rates of the youngest workers without advanced education (aged 16-19 especially) have been plummeting for some time.  But the recession exacerbated this trend, and it has only worsened in the recovery.  And the root of the problem goes deep: the economy has failed college grads and the effect ripples all the way through, down to the youngest and least educated workers.  

In our current low-innovation, consumption- driven economy, there simply aren’t enough middle skill jobs being created to absorb the increasing number of college grads.  And where robust innovation is happening, notably in the communications sector, too few college grads have the mathematical and technical skills needed.

In other words, while some of the problems in today's job market are cyclical, there is an underlying structural problem we will eventually have to face.  If we don’t generate more good jobs for American workers, more people will come to doubt the value of a college education, while those who don’t attend college will face even bleaker prospects for upward mobility. That means we should strive to encourage innovation, get those innovations to market quickly and effectively, and expand domestic production to promote more balanced economic growth. That would go a long way to alleviate the struggles of all workers, college degree or not.

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Wednesday, March 7, 2012

The Struggles of Kim Kardashian, Snooki, and Other Young People

Will young people ever get a break?  Lately, it seems like all we young people do is struggle – with money, with unfulfilling jobs – and it’s starting to take a toll on life.  All things considered, it should come as no surprise that we are spending more effort on becoming the next big reality star than on making it the old fashioned way.  Working a dead-end 9-5 job with little promotion potential that barely covers rent sounds awful compared to attending lavish parties and private island getaways.  It doesn’t take a genius to see why so many of us increasingly aspire to be like Kim K and Snooki, who seemingly live a glamorous life yet do very little. 

Sadly, we can’t all become the face of a new perfume or have our own line of designer headphones.  So, our best option is to figure out why the uphill battle to pay our bills is getting worse and fix it. 

Older Americans believe our struggles stem from a lack of ambition, that we have gotten lazy.  But it’s difficult to find motivation when it seems there is little reward for hard work.  And the shrinking reward is well documented – in the form of lower earnings (down 3% over the last decade for full-time workers aged 18-34, in constant dollars) and higher unemployment rates (16.8% for ages 16-24; 9.8% for ages 25-34), which has saddled us with a massive $1 trillion in student debt. 

But older Americans have it backwards.  We did not randomly decide to become lazy and accrue debt.  What they see as lost ambition is our discouragement from lost opportunities for success. Right as more of us are investing in higher education and going to college, the jobs being created for us to fill overwhelmingly require only a high school degree or less.  And it’s not getting better.  According to the Bureau of Labor Statistics, over the next decade almost 7 out of 10 new or replacement jobs in the economy will not need a college education, the same share as jobs in the economy today. 

That means we are all feeling the strain as more as us compete for a smaller share of middle- and high-skill jobs, the jobs that pay a decent salary. Even Kim K and Snooki feel the strain, struggling to compete.  We constantly see these reality stars forced to up the ante (or “work” in their terms) to stay relevant, with attention grabbing headlines like a 72 day marriage and a reported pregnancy.  After all, there are many Bachelorettes, Real Housewives, and Teen Moms vying for their jobs. Their antics make sense in this regard – what are their alternatives if they let the spotlight get away? They almost certainly would have to take a pay cut as their technical skills are questionable. It’s a tough world out there. Obtaining the skills our parents had won’t take the cake anymore, let alone guarantee a slice. 

Recent college grads are among the worst affected.  Sure, those of us with college degrees are more likely to find work than non-graduates. But too many of us are working jobs that do not use our degree or brain power.  Too many of us are accepting jobs that we could do with a high school diploma, and our salary shows. College grads aged 18-34 with full-time jobs saw a 14% drop in earnings since 2000 (in constant dollars).  And for the few high-skill jobs that are out there, those with standard issue liberal arts degrees need not apply.  That’s not encouraging for the 1.6 million college graduates in 2009, of which just 5 percent of had a degree in engineering.  More studied visual and performing arts. 

Indeed, too many of us feel like we might have more success making an explicit video or participating in a drunken escapade on the beach and getting arrested.  Just ask Judge Judy.  Or Maury.

But not going to college could be even worse. If college grads are taking the best of the non-degree jobs, then those of us without a college degree are essentially squeezed out to worse jobs (or no job), and almost certainly will take a pay cut to compete.  We are thus forced to choose between two evils, with college winning for the wrong reasons.

What happened to the mid-level job market?  Look no further than the economy.  The economy – more specifically, the value we contribute to the economy, has relied too heavily on spending and borrowing over the last decade.  The reality is we have an economy driven by debt fueled consumption instead of investment and innovation (brain power). As a result the majority of today’s jobs are in areas like retail and heavily subsidized healthcare. 

Should that mean we should surrender to our fate, live with our parents forever, and allow Judge Judy be the most intellectual time of the day?  Of course not.  It just means we have to take matters into our own hands instead of spending our time trying to become the next Kim K or Snooki. 

To increase the number of opportunities, the number of high-wage, high-skill jobs, we must make better use of our increasing education.  The fact is we can’t earn more than the value we create, and the only way to create more value is through innovation, through developing the next line of goods and services that will enhance our competitiveness. Higher education is the only way to sharpen our skills and develop our human capital; it has always led the way to lower unemployment and higher earnings. 

Instead of getting frustrated at the lack of opportunities, putting aside our ambitions and accepting a future where our quality of life is worse than our parents’, let’s step up to the challenge.  Let’s accept being globally competitive is a constant struggle: we will never stop having to work for it.  We have to throw away our false expectations that we are owed a good life without adding value to the economy. Singer Flo Rida talks of his ambition to be the next billionaire in “Good Feeling”, but his only qualification appears to be that his “mama knew he was a needle in a hay stack.” That’s not going to cut it. It never did.

Hopefully we can get excited at the prospect of earning enough to pay for rent and a private island getaway without winning American Idol, excited at the prospect of working at a job that uses our brains and skills.  We can get there, we have the potential. But, in the words of singer Ciara, we are going to have to “work, work, work, work.”  And there is some encouragement out there.  Already the labor market showed signs of thawing over the last few months, in sectors outside of retail. 

We may not be the next Kim K or Snooki.  But we need to be in a world where that’s still okay, where we know we can be successful with hard work, motivation, and good ideas.  Let’s recapture lost opportunities, make new ones, and make an act two that even Clint Eastwood can be proud of. 


Thursday, January 12, 2012

A Simple Misunderstanding

Happy New Year!  It’s only been less than 2 weeks but 2012 is already a very important year for Americans.  First, Beyonce and Jay-Z, a couple with influence matching the Pope, had a baby.   This will never stop being a news story.  Second, we realized that the presidential primary debate season may just be one of the best shows currently on TV.  This genius program runs like “Survivor” contestants are tested for being “Smarter Than a Fifth Grader” and voted off as if it were “Celebrity Apprentice.”  So far this year, Michelle Bachmann got voted off Republican Island in a cruel Iowan twist, and Ron Paul claims to read economic textbooks on Saturday nights.  Third, but no less important, we got to watch Kim K realize that if she can have fun without her husband then maybe she shouldn’t be married (sorry, this is considered a major news story).   At this rate, we can expect a banner year all around, maybe even complete with a Paris Hilton comeback on DWTS.  (You heard the big prediction here first.)

Americans have had a lot of time on their hands over the last few years to concoct such great TV ideas.  We’ve been out of work or underworked, and needed a break from our own realities.  We want to see other people who are bigger idiots than we are, or in a worse predicament than we are, because it makes us feel better.  We want to see people just like us, getting their problems with food, clothes, and hoarding solved so we can think about how to improve our lives.  And then we sprinkle in some motivational programming, like Keeping Up With the Kardashians, because it makes us think about getting off the couch to see if we can get in on that golden ticket.  Coupled with countless talent competitions where “anyone” can win fame overnight, and we are optimistic that we’ll find better fortunes in no time (we hope we win Deal or No Deal but a job will suffice too).  

This year we can expect more quality programming as we bide our time.  Just as many people (not as intellectual as ourselves) misunderstand our TV show preferences, so too do they misunderstand the most recent jobs numbers.  Last Friday’s jobs report claimed that the economy added 200,000 jobs, with the unemployment rate falling to 8.5%, the lowest in almost 3 years.  Of course this piece of information was received with a sigh of relief.  Job gains, until now barely having a pulse, are finally catching up with the rest of the ongoing economic recovery.  Finally we are out of the clear for a double-dip recession.

Not to be a party-pooper, but uncovering the numbers just one layer shows the story really hasn’t improved.  It turns out almost half of the new jobs added in December where seasonal.  These “jobs” were in retail and transportation (think Fed-Ex and UPS), are low-wage, and likely will not last through January.  Subtract those 90,000 seasonal jobs from the total and we are right back to where we’ve been for more or less the last 7 months, adding roughly 100,000 to 115,000 jobs.  This pops the party balloon: the number of new jobs is still not enough to sustain economic recovery.   Worse, the numbers show unemployment is lower partially because fewer people are entering the labor force.  The working age population grew by 0.8% in the last year while the labor force participation rate fell 0.3%; presumably they wanted to watch some good old American TV programming instead of bothering with jobs.

At least we’ll have plenty of time to live the “American Dream” in our dreams.  So get your foreign-made TV, sit on your foreign-made couch, wear your foreign-made clothes and relax.   Forget about understanding why we don’t have enough American jobs, and why real wages are falling, that makes our brains hurt.  Sit back and enjoy the show.

(Bureau of Labor Statistics)