During the past decade, college graduates have experienced a decline in real wages.
According to the Economic Policy Institute, average inflation-adjusted hourly wages fell 11 percent to $21.68 for males. Females faced a 7.6 percent drop to $18.80.
Bart Hobijn, an economist at the Federal Reserve Bank of San Francisco, indicates the average hourly rate has risen modestly during the past 10 years, since more low wage individuals have become unemployed.
Harvard economics professor Lawrence Katz projects supply and demand for labor will not be in balance for 4 years: high levels of unemployment will further erode wage rates.
Since 1999, the potential labor supply swelled by 31.87 million, or 15.3 percent. Despite this rise, employment grew by only 6.38 million, 4.8 percent. The difference, 25.49 million, is comprised of 17.62 million not in the labor force (25.8 percent increase) and 7.87 million unemployed (133.8 percent increase).
Refer to the graphic below:
Potential Available Not in Participation
Year Labor Supply Labor Supply Labor Force1 Rate2 Employed Unemployed
1999 207,753 139,368 68,385 67.1% 133,486 5,880
2011 239,618 153,617 86,001 64.1 % 139,368 13,747
Change 31,865 14,249 17,616 (3.0%) 6,383 7,867
% Change 15.3% 10.2% 25.8% (4.5%) 4.8% 133.8%
Source: Bureau of Labor Statistics
1. Not in Labor Force = Potential Labor Supply - Available Labor Supply
2. Participation Rate = Available Labor Supply / Potential Labor Supply
While education may be abundant, marketable skills and knowledge are scarce.
This dynamic is the manifestation of misplaced values over many decades, where debt driven consumption eroded prudent investment, curiosity and learning.
Righting this ship of wisdom, I fear, may take decades to complete.
© 2015 Newsmax Finance. All rights reserved.