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October 4, 2011

Pay falls, unemployment rises for college grads

Michael Mandel calculates and contemplates the declining compensation being made by fairly young college graduates. Real earnings (2010 dollars) for male holders of bachelor degrees have fallen from $73,000 in 2000 to $59,000 in 2010. (See Mandel's graph below.) For women it's worse, with real earnings falling from $56,000 to below $48,000.

This actually doesn't give the full, bleak picture facing young college grads -- those figures are for people who are actually employed full time. And they include employees as old as 34 -- folks who have been employed for a while. Many, many grads can't find a full-time job. Mandel asks:

no one has given me a good explanation yet of why young American college grads should have been hit so hard. Is there increased competition with young college grads around the world? Are new college grads lower quality than their predecessors? Has information technology reduced the need for young grads? I really would like to know.
How about this, which I wrote about a couple years ago? Slumping stocks and home values have prompted older worker to delay retirement, leaving fewer openings for young folks. From that column:
"People over the age of 55 are not dropping off the payrolls to retire early as they had been doing for years," says David Rosenberg, chief economist at Gluskin Sheff in Toronto and one of the first to identify the developing employment gap. "And then there are those who did drop out of the labor force who are coming back to secure work."
Meanwhile, he says, "we're creating massive pools of unemployment among 20-somethings."
 He's talking about all 20-somethings, but I don't see why the same dynamic shouldn't apply to college grads.
Posted by Jay Hancock at 8:43 AM | | Comments (1)
Categories: The Great Recession


As regards those 55+...
in a micro-economic sense the overall family security that allowed parents to retire early or at least cut back hours substantially in the past depended on far better investment returns from a far more stable market at the same time that their adult children were progressing far more customarily into their chosen field.

Aside from the intrinsic value of having your son or daughter enter and progress in that field... it's hard to justify substituting that $45,000 salary (with minimal benefits( for Dad's $100,000 salary (with far better benefits) at least in the short term "lets just get through this" sense.

The personal privacy allowances Parents need to make when accommodating an adult boarder moving (back) into their home rather than paying out another $1000 per month to have them live in another place is similarly an obvious choice; again in the short term.

The long term remains the question: Just how much longer will this go on?

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.

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