Sunday, May 6, 2012

While Unemployment Stays High, Young Workers See Their Pay Shrink

Young Adults See Their Pay Decline reveals the growing problem many younger workers are having finding high paying jobs:

"Young people entering the job market are taking the brunt of the downward pressure on wages caused by high unemployment, according to a new analysis of pay trends. . . .

{T}he Economic Policy Institute, a center-left think tank in Washington, found that the average inflation-adjusted hourly wage for male college graduates aged 23 to 29 dropped 11% over the past decade to $21.68 in 2011. For female college graduates of the same age, the average wage is down 7.6% to $18.80.

"New college graduates have been losing ground for 10 years," said Lawrence Mishel, president of the institute, which derived the figures from regular government wage surveys. The drop in average wages for young adults is in contrast to U.S. government figures showing that average inflation-adjusted hourly wages for production and nonsupervisory workers of all ages and education levels are up 3% from a decade ago.

The EPI data are another sobering sign for college students and have implications for the economy. With wages falling for many young people and about flat for the nation as a whole, consumers have limited ability to pay down debts and revive the economy with more spending. . . .

But there are still nearly four unemployed people for every job opening, Mr. Mishel said. . . .

Downward pressure on wages is likely to persist as long as unemployment remains high. At the current rate of job growth, the U.S. is still at least four years away from "a normally functioning labor market". . .

For the entire working population, average hourly wages have risen modestly over the past 10 years. But that is partly because many of the lowest-paid workers have lost their jobs and are no longer included in the average. "People who normally make below-average wages are not working," said Bart Hobijn, an economist at the Federal Reserve Bank of San Francisco. "That raises the average wage.". . ."

Discussion and Analysis

The headline picture of high unemployment rates and inflation adjusted wage declines is bad enough.
But for many workers, including younger college graduates, the reality is often even worse than the lousy headlines suggest.

And on top of that, far too many lower paid members of the work force are out-of-work and have been for a long time.

To add insult to injury, the high prices of necessities such as fuel, food and other essentials are hurting consumers, too.

In the meantime, pay remains flattish for many of those who are working.

Unfortunately, there's no short term fix to all this.

It took our nation a long time to get into this economic mess, and it will take at least a few more years to get out of it.

But to be able to set things right in the next few years, politically we'll need to START DOING do the right things.

That means emphasizing private sector growth, energy independence and smaller government within the U.S., but  none of the foregoing is a political priority today.

Until those things change, we'll muddle through and keep adding burdensome debt to the issues for our future generations to solve. That's a shame.

Thanks. Bob.