Amid “full
employment,” no recovery in US wages
The US jobs report for
November, released Friday, provides further evidence that the much vaunted
economic “recovery” in the United States has overwhelmingly benefited Wall
Street, whose stock bonanza is based above all on stagnant wages and the
destruction of working-class living standards.
The Labor Department
reported that nonfarm payrolls increased by 228,000 and the jobless rate
remained unchanged at 4.1 percent, the lowest level since January 2000 at the
height of the “dot.com” bubble. Manufacturing payrolls rose by 31,000;
construction in the aftermath of the hurricanes in Texas and Florida added
24,000 jobs. There was also a boost in the low-wage retail (18,700) and leisure
and hospitality (14,000) sectors.
Despite what economists,
the media and politicians are calling “full employment,” average hourly
earnings rose only 0.2 percent, or five cents, to $26.55 an hour, from a
downwardly revised 0.1 percent drop in wages in October. Year-to-year wage
increases in November were only 64 cents, or 2.5 percent. If wages rise by
another nickel in December, yearly salaries will be up a mere 2.4 percent in
2017, barely above the official projected inflation rate of 2.0 percent.
“President Trump’s bold
economic vision continues to pay off,” White House Press Secretary Sarah
Huckabee Sanders boasted on Friday. “The economy’s vital signs are stronger
than they have been in years,” the New York Times declared.
“Companies are posting jobs faster than they can find workers to fill them.
Incomes are rising. The stock market sets records seemingly every month.”
Economic analysts have
pointed to anemic wage growth, euphemistically called weak “inflationary
pressure,” as a major factor in the determination of the Federal Reserve to
continue pumping up the stock market with cheap credit. Although most
economists expect a modest interest rate hike at the Fed’s meeting Wednesday,
Jerome Powell, President Donald Trump’s nominee to head the Federal Reserve, made
clear last month at his Senate confirmation hearing that he would keep rates at
historically low levels. At the same time, he assured the senators that
there was little danger of a wages push because of continuing “slackness” in
the labor market, i.e., an ample supply of workers desperate for full-time
employment.
Other analysts agree.
“Wage growth has been muted thus far,” especially given the “very healthy pace
of job creation,” said Michelle Meyer, head of US economics at Bank of America.
“It’s been the story throughout the course of this year.”
Describing November’s
wage increase as “tepid,” Carl Riccadonna and Yelena Shulyatyeva of Bloomberg
Economics wrote: “Even though job gains are well in excess of the natural
growth rate for the labor market, labor scarcity is not yet driving wage
pressures higher. The moral of the story from this jobs report is that full
employment is indeed much lower in the current cycle relative to history.”
US employers are
exploiting a reserve of unemployed and underemployed workers to keep wages low.
At the same time, corporations are filling positions with young workers who are
paid far lower wages and benefits than the older workers they are replacing.
According to the
government, 6.6 million workers in the US remain unemployed, including 1.6
million, or nearly one out of four jobless people, who have been unemployed for
27 weeks or more. Another 4.8 million were forced to work part-time last month
although they want full-time work, and 1.8 million were “marginally attached”
to the labor force. The latter want to work but did not search for employment
in the four weeks preceding the survey and were therefore not counted as
“unemployed.”
The labor force
participation rate, or share of working-age people in the labor force, remained
at 62.7 percent in November. However, just 79 percent of the prime-age work
force, aged 25 to 54, is actually working—below the rate before the 2008
financial crash.
The situation facing the
young generation is particularly dire. According to the Class of 2017 report by the
Economic Policy Institute, the unemployment rate for young high school
graduates is 16.9 percent (compared with 15.9 percent in 2007 and 12.1 percent
in 2000). For young college graduates, the unemployment rate is currently 5.6
percent (compared with 5.5 percent in 2007 and 4.3 percent in 2000), and 7.1
percent for young male college graduates.
The figures are even
higher for “underemployment,” which includes young graduates who are
involuntary part-timers or are only marginally attached to the labor force. For
young high school graduates, the underemployment rate is 30.9 percent (compared
with 26.8 percent in 2007 and 20.8 percent in 2000). For young college graduates,
the underemployment rate is 11.9 percent (compared with 9.6 percent in 2007 and
7.1 percent in 2000).
The share of young
graduates who are “idled” by the economy—neither enrolled in further schooling
nor employed—remains higher in the wake of the Great Recession than in 2007 and
2000, the report noted. This includes 15.1 percent of young high school
graduates and 9.9 percent of young college graduates, many of whom are burdened
with unsustainable debts.
The stagnation of wages
is a long-term tendency. Since the early 1970s, hourly inflation-adjusted wages
have grown by only 0.2 percent annually, and labor’s share of national income
has fallen from nearly 65 percent in the mid-1970s to below 57 percent in 2017.
The deterioration in the
social position of the working class and accompanying explosion of social
inequality are not simply the result of objective economic laws. They are the
intended outcome of the policies of the American ruling class, implemented by
successive Democratic and Republican administrations alike. The transfer of
production to lower-wage countries, deindustrialization and mass layoffs in the
1980s and 1990s were used as a hammer to beat back the resistance of workers to
a historic lowering of their living standards.
This process was aided
and abetted by the trade unions, whose pro-capitalist and nationalist
orientation left workers without any progressive response to globalization. Far
from opposing wage and benefit cuts, the United Auto Workers and other unions
suppressed working-class opposition and collaborated with the corporations to
slash labor costs in the name of boosting competitiveness and “protecting
American jobs.”
This assault was
escalated in the aftermath of the global financial crisis of 2008. In the
course of the eight years of the Obama administration, the unions limited
strikes to the lowest levels since the Labor Department began recording work
stoppages in 1947. They collaborated with the Democratic president to crush a
potential wages push in 2015-16 as workers in auto, steel, oil, telecom,
airlines, rail, health care, retail and other industries, as well as teachers
and other public employees, were coming up for new labor agreements.
While workers were
determined to recoup lost income after corporate profits had fully recovered
from the crash, the unions signed deals that limited pay hikes to the rate of
inflation or barely above it while shifting health care and pension costs onto
the backs of workers. This was key to Obama’s “in-sourcing” strategy for
attracting investment on the basis of low wages, as well as his “quantitative
easing” interest rate policy, which fueled the massive rise in the stock market
that continues to this day. Virtually all of the net increase in new jobs
created under Obama’s “gig economy” were part-time, contingent or
temporary OR ILLEGALS!
Trump claims his $1.5
trillion tax cut—including the slashing of the corporate tax rate from 35
percent to 20 percent—will create more jobs and increase wages. As in the Obama
years, however, this massive windfall for big business and the rich will not be
used to expand production, let alone increase the wages and living standards of
workers. It will go for stock buybacks and dividend increases, which benefit
the richest investors.
Wages are so low now that
7.6 million Americans are forced to work multiple jobs, a number not seen in 20
years. In a recent article titled “China-Like Wages Now Part of US Employment
Boom,” Forbes noted that a forklift operator hired at $12.75
an hour at Amazon’s Fall River, Massachusetts fulfillment center makes $382 for
a 30-hour week, “not much more than the average guy in Beijing,” where the
median weekly wage is $329.53. At 40 hours a week, a higher paid, full-time
Amazon worker in Fall River earns $28,800 a year before taxes, roughly what
Amazon’s billionaire CEO Jeff Bezos pockets every minute.
Fixing America’s
Unemployment Crisis
Trump was elected in part on the promise of creating jobs, but
how about those who stopped looking for work?
Nicholas Eberstadt, the
Henry Wendt Chair in political economy at the American Enterprise Institute,
estimates there are 10 million men who are jobless and no longer looking for
work. According to calculations using 2014 data, an estimated 3.6 million women
are in the same situation.
President-elect Donald Trump
has announced a raft of policies meant to spur economic growth and create jobs,
but thought needs to be given to what specific measures might help this urgent
situation.
How to address this crisis
depends on what one understands the problem to be. A graph showing the
prime-age employment rate for men provides a kind of Rorschach test for
possible responses.
Jared Bernstein, senior
fellow at the Center on Budget and Policy Priorities, former economic adviser
to Vice President Joe Biden, and author of, most recently, “The Reconnection
Agenda: Reuniting Growth and Prosperity,” focuses on the cyclical upturns in
the jagged line, on those periods of prosperity when workers regain jobs that
had been lost.
Eberstadt focuses on the
straight trend line, which has been going inexorably and disastrously downward
for decades.
Bernstein and Eberstadt
represent two typical and contrasting approaches to the unemployment
problem.
*
If you look at the employment rate for prime-age workers,
they have actually clawed back two-thirds of their losses since the great
recession.
— JARED BERNSTEIN
Bernstein published the
graph in a chapter he contributed to Eberstadt’s book “Men Without Work,” in
which he critiques Eberstadt’s diagnosis of the employment crisis.
For Bernstein, the key is a
missing demand for labor.
“If you look at the
employment rate for prime-age workers, they have actually clawed back
two-thirds of their losses since the Great Recession,” Bernstein said in an
interview. “That doesn’t sound to me like a group that has given up. It sounds
to me like a group that is not facing ample opportunity.”
For Eberstadt, the problem
is a detachment from work.
Using various government
databases, Eberstadt gives a composite portrait of those men who are out of the
workforce and not looking for work.
They don’t read newspapers,
seem to have few familial responsibilities, and tend not to be involved in a
church or their communities. They spend most of their time entertaining
themselves with TV or hand-held devices; 31 percent admitted to survey takers
that they used illegal drugs.
Bernstein counters this
portrait by noting that the causal connection may go from a lack of employment
opportunities to suffering from depression, which then leads to these men
planting themselves on the couch.
As to the individual motives
of the non-working, Bernstein said, “We just don’t know.” His advice to Trump
is to aggressively pursue full employment, which involves the federal
government using a number of different tools.
An officer waits to escort Harvey Lesser, an unemployed
software developer, from his apartment after serving him with a court order for
eviction in Boulder, Colo., on Dec. 11, 2009.
Stimulus and Subsidies
Bernstein believes the key
to the downward trend his graph shows is the disappearance of manufacturing
jobs. He favors trade policies that will reduce America’s chronic trade
imbalances, which will create more demand for domestic manufacturing.
Bernstein also favors an
infrastructure program, with the caveat that “you have to do it right,” he
said.
He would like to see the
federal government get involved in communities that “don’t have enough
businesses, child care slots, supermarkets, and stores—these are a classic
market failure.”
The federal government could
subsidize private employers in these neighborhoods, giving them an incentive to
move their businesses there.
Bernstein also favors
special efforts to help those with a criminal record, and Eberstadt agrees
finding ways to help this population is key to addressing the problem of non-working
adults. He estimates that, by the end of 2016, there will be 20 million with a
felony conviction in their past.
Source: Jared Bernstein’s analysis of Bureau of Labor
statistics in “Men Without Work” by Nicholas Eberstadt
Bernstein supports the Ban the
Box initiative, which calls for removing the box on employment applications
that must be ticked by anyone with a criminal record.
He also would like to see
direct job creation. The federal government would offer a heavily subsidized
wage, and at the local level there would be training for specific jobs that
would be available in that area.
He would also like to see
the federal government fund an apprenticeship program, which would involve
recruiting local businesses.
Finally, Bernstein wants to
see the federal government get the macro economic policies right to support
full employment. This means using monetary policy—primarily interest rates set
by the Federal Reserve—and fiscal policy to stimulate the economy. In
Bernstein’s view, we took our foot off the pedal of fiscal stimulus too
soon—the United States should have carried larger deficits in the years
following the Great Recession.
Eric Gilliam, an unemployed coal miner, in his garage at
his home in Lynch, Ky., on Oct. 18, 2014. (AP Photo/David Goldman)
Small Business
Eberstadt said it is “small
not big business that employs most Americans.” Over the last eight years, he
said, there has been only marginally more small business births compared to
small business deaths. A healthy labor market will be one with “many, many new
businesses being formed,” he said. Part of the solution? Undo regulatory
strangulation and rationalize the tax code.
While Eberstadt agrees that
manufacturing jobs are important, he would urge the Trump administration not to
“fetishize” manufacturing jobs. The percentage of manufacturing jobs in
developed economies around the world has steadily dropped. “Jobs that employ
people are good,” Eberstadt said, “whether they have the word manufacturing in
them or not.”
In order to protect the
manufacturing jobs we do have, Eberstadt urges that we not get into a trade war
with China, Mexico, or other countries, saying that trade wars lose jobs, they
don’t create jobs.
*
Clearly there has been a change in the way most people
think about what is decent and appropriate for able-bodied, working-age men to
do with their lives
— NICHOLAS EBERSTADT , economist, American Enterprise Institute
Because our entitlement
programs are administered locally, they tether people to the states in which
they are receiving benefits. Finding a way to cut that tie will give people
mobility, which will open up more job opportunities.
Eberstadt’s book is meant to
initiate “a broad conversation on our ‘men without work’ problem, a
conversation of many voices and differing perspectives.” One important solution
is to bring this mostly invisible problem “into the public spotlight.”
Shortcomings in the data we
have limit the kinds of conversations we have. The Bureau of Labor Statistics
does not count the 13.6 million people who have stopped looking for work as
unemployed. When the American public is given an unemployment rate of 4.9
percent, the crisis of the non-working is hidden from them.
The government surveys that
are conducted do not reveal the mindsets of those men who are disconnected
from work—vital information for anyone who wants to understand this crisis. The
Social Security Disability Insurance program does not have an effective audit
that would tell us whether it is being used as a substitute for employment
insurance.
Butch Youshaw, an unemployed card dealer, with his
girlfriend in Henderson, Nev., in 2008. (AP Photo/Jae C. Hong)
Stigma
Eberstadt notes that
relevant context for the crisis of the non-working is a change in our society’s
“mores, and viewpoints, and motivations.”
“Clearly there has been a
change in the way most people think about what is decent and appropriate for
able-bodied, working-age men to do with their lives in their prime working
ages,” Eberstadt said.
Over half of non-working men
in their prime years are getting money from at least one government disability
program, according to Eberstadt. These funds, Eberstadt writes, finance the
non-working’s decision not to work.
He would like to see these
programs have a work requirement, as was done 20 years ago with single mothers
on welfare. Requiring work stigmatizes non-work and so provides a moral
incentive for individuals to move off the couch and back into the workaday
world.
Bernstein writes he
sees “no good for making these programs less generous or further conditioning
them on work.”
Stigma, Eberstadt said, “is
often a kinder and gentler way of achieving social objectives than police
power.”
///
HIS
CRAP ON BORDERS AND HIS PRETEND WALL IS ONLY ONE MORE TRUMP HOAX! Only a
complete fool would believe that Trump is any more for American Legal workers
than the Democrat Party for Billionaires and Banksters!
“Trump
Administration Betrays Low-Skilled American Workers.”
The
latest ad from the Federation for American Immigration Reform (FAIR) asks Trump
to reject the mass illegal and legal immigration policies supported by Wall
Street, corporate executives, and most specifically, the GOP mega-donor Koch
brothers.
*
Efforts by the big business
lobby, Chamber of Commerce, Koch brothers, and George W. Bush Center include
increasing employment-based legal immigration that would likely crush the historic wage gains that Trump has delivered
for America’s blue collar and working class citizens.
*
Mark
Zuckerberg’s Silicon Valley investors are uniting with the Koch network’s
consumer and industrial investors to demand a huge DACA amnesty
*
A handful of
Republican and Democrat lawmakers are continuing to tout a plan that gives
amnesty to nearly a million illegal aliens in exchange for some amount of
funding for President Trump’s proposed border wall along the U.S.-Mexico
border.
///
Does Trump Really Want
“Comprehensive Immigration Reform”? What Does That Mean?
In his fiery Grand Rapids MI rally tonight
(March 28), President Donald J. Trump dwelt at length on the collapse of the
southern border, perhaps in response to repeated chants of “ Build The Wall !”—and, hopefully significantly, came up to but did not actually
again repeat his recent calls for increased legal immigration because of the
economic boom.
Trump should get out and do more rallies.
His Washington entourage obviously want him to cave on immigration. But on
tonight’s evidence, his base is telling him NO!
Thus, Trump’s lawyer Jay Sekulow, in
multiple interviews this week, said Congress should focus on comprehensive
immigration reform in the wake of the Mueller investigation.
Sekulow, a long-time Beltway immigration
enthusiast, claims the president is all for this idea:
“Let’s focus on things for
the American people. The president said he is in favor of comprehensive
immigration reform—let’s get it,” Sekulow told Fox & Friends
But what could he mean by “comprehensive
immigration reform” now? Pre-Trump, it meant Amnesty for all illegal immigrants
plus a massive increase in legal immigration. Trump became the Republican
nominee campaigning against that idea and has always insisted on his opposition
to Amnesty. While Trump has occasionally suggested Amnesty for illegal aliens
who came to the U.S. as minors—the so-called Dreamers—in exchange for patriotic
immigration reform, he has never proposed legalization for the majority of
illegals.
According to some Trump World figures,
“comprehensive immigration reform” now means increasing legal immigration without Amnesty.
That’s the impression left by a recent op-ed from David Bossie, who was (for a
while) a top aide on the Trump 2016 campaign. [ An ‘America First’ immigration policy looks like this , Fox News , March 24, 2019]
Bossie asserts that an America First policy
should “end the flood of illegal immigration”—while handing out more visas to
high-skilled workers. Bossie defends his position by claiming mass immigration
benefits the economy. But all of the studies Bossie relies on come from
long-time immigration boosters, such as Trump’s chief economist Kevin Hassett :
As President Trump’s
Chairman of the Council of Economic Advisors Kevin Hassett pointed out in a
2013 paper for the American Enterprise Institute, the United States could add
half a percentage point to economic growth by doubling the number of immigrants [emphasis
added] it lets into the country, especially if they come on employer-sponsored
visas. President Trump’s chief economist continues to make the case that
"for a country that has long thought of itself as a nation of immigrants,
the U.S. falls far behind almost all the other countries in the number of
immigrants it admitted relative to its population size.”
These comments by Sekulow and Bossie must
disturb immigration patriots. But they should not be treated as the final word
on Trump immigration plans. Neither of these men work in the administration,
much less handle immigration policy. Bossie was an important figure in the
Trump campaign in 2016, but sources tell The Watcher that the 2020 campaign has
kept him at a distance. But Bossie’s column certainly reflects the President’s
recent rhetoric on the issue.
Trump continues to lament the negative
effects of illegal immigration and vows to curtail it. On Thursday, he actually
tweeted that he may shut down the borde r due to the migrant
surge:
Trump repeated this threat in his Grand
Rapids speech. But he has made this threat numerous times before without action—making
his “all talk and no action” ding at the Central American
governments particularly
ironic.
Still, it is good Trump shows that he wants
to curb illegal immigration and not allow all of Latin America in. Trump’s
Homeland Security Kirstjen Nielsen is now finally set to ask Congress for the
authority to deport unaccompanied minors detained at the border, detain illegal
alien families, and make those requesting asylum to do so from their home
countries in response to the border crisis. [ DHS to ask Congress for sweeping authority to deport
unaccompanied migrant children , by Julia Ainsley, NBC
News , March 28, 2019]
The Trump administration is still fighting
in court to enforce immigration law. His executive orders will bring billions
of dollars for the wall. And, fortunately, the president appears to have forgotten
about the Dreamers and shows no sign of wanting to legalize illegal aliens.
Nevertheless, at the same time, Trump
seemed to be making a call to increase skilled immigration a part of his
typical stump speech (which is why Grand Rapids was such a relief). His
son-in-law Jared Kushner is still in talks
with business interests and pro-Amnesty Conservatism Inc. groups to craft
immigration legislation. That proposal will reportedly increase guest worker
visas. What else it will do is unknown. It is set to be revealed in early
summer. [ Trump befuddles his allies with ambitious legislative
agenda ,
by Andrew Restuccia, Heather Caygle and Anita Kumar, Politico , March 28, 2019]
While Trump waits to unveil his proposal,
two terrible ideas have emerged from the Democrat-controlled House.
House
Democrats released their new Dream Act earlier this month. It would give a
pathway to citizenship to Dreamers and aliens covered by Temporary
Protected Status and Deferred Enforced Departure--legalizing millions of
foreign nationals.
Long-time
immigration squish GOP New York Rep. Peter King ( NumbersUSA rating F ) and Democratic Rep. Tom Suozzi
( NumbersUSA rating
F- ), have
drafted a “compromise” that would permanently legalize the same groups as
the Democrats’ Dream Act. as well as relatives of Dreamers. In exchange
for this mass Amnesty, Rep. King’s proposal asks for a mere $4.3 billion
for wall infrastructure. But this sum would come from fees paid by the
Amnestied illegals, which means America wouldn’t get this money for
years.[ A Grand Compromise on Immigration , by Peter King and Tom
Suozzi, The New
York Times , March 25, 2019]
It’s unlikely King’s bill will go anywhere,
but it does show that some Republicans are still interested in Amnesty.
There is a possibility Trump will include
Amnesty for Dreamers in his proposal, but it’s unclear at the moment. If he was
considering this move, we would surely see him hint at it in his stump
speeches. Trump hasn’t done so this far.
Which brings us to the good news. Trump and
his Republican allies are apparently preparing to use the political capital
from the Mueller Report to try their hand at healthcare again. Their attempt
to repeal Obamacare in 2017 was a
disaster and resulted in plummeting poll numbers. [ Trump’s biggest midterm blunder: embracing Obamacare
repeal ,
by Dylan Scott, Vox ,
November 7, 2018] There is no way Republicans can pass their own healthcare
plan—a thing they don’t even really have—in a Democratic-controlled House. It’s
incredibly stupid for Trump’s 2020 chances and will be a waste of his political
capital.
But it may be a paradoxical gift to
immigration patriots. If Trump and Republicans bog down in a fruitless fight
over healthcare, it means they can’t push an immigration increase. Their
political capital will be dissipated, and they will have to settle for
gridlock.
It’s not ideal. But it’s better than a
massive immigration increase.
Current events could also influence Trump
to back off his comprehensive immigration reform and return to immigration
patriotism. All it would take is one massive caravan to show up on Fox. Or
another terrorist atrocity.
Trump may seem to have lost sight of his
America First agenda at the moment. But no-one can say—not VDARE.com, not the
immigration enthusiasts—that (especially if he does more rallies like Grand
Rapids) he won’t rediscover it again.
Washington Watcher [ email him ] is an anonymous source
Inside The Beltway.
Ivanka
Trump Wants America to Kick Addiction to Four-Year College, Massive Student
Debt
SAUL LOEB/AFP/Getty Images
21 Mar 20192,911
6:02
America’s ever-deepening college debt problem is really a
symptom of a worse malady: our societal addiction to college itself.
Any sober assessment of the facts would indicate that too many
Americans are going to college. As a result, college costs—and debt—have
skyrocketed while the rewards for college have plunged.
Yet this is something that has escaped the attention of our
political elites. And, as it turns out, our financial and cultural elites—as
the recent college admissions scandal indicates. Many Democrats want to
double-down, promising “free college” to young people—a euphemism for college
funded by taxpayers.
Perhaps surprisingly, Ivy-league educated Ivanka Trump has
recently come out as a skeptic about America’s love affair with college. The
first daughter has taken up a leadership role in the Trump administration’s
workforce development efforts—and shown a remarkable candidness when it comes
to our college problem.
“I think culturally, for a long time we have created and
perpetuated the narrative that there is one pathway to achieving the American
dream and its four-year university,” Ms. Trump said in a recent interview.
Trump goes on:
That has been instilled into American students, it’s often
American parents that feel that is the only viable path. So you have kids going
into school racking up enormous amounts of student debt that they’ll often take
decades if there ever able to pay it off without a skill, if they ultimately
graduate. So I think opening up the prism and saying there are many different
pathways. It depends what you want in your life and taking the stigma away from
those who choose alternative pathways who choose technical schools, vocational
education. At the end of the day, it’s about connecting workers with their passion,
with their jobs. There’s very little opportunity for somebody who wants to the
vocational route, the technical route because all the money pushes you into a
four-year college system.
Just as her father drew attention to the incredibly bad hand
American industrial workers had been dealt by decades of anti-American trade
deals, Ms. Trump is drawing attention to the bad hand the U.S. has dealt our
young people.
The facts are stark. Over the past
40 years, the U.S. has doubled the share of
high school graduates who go on to get college degrees. Forty-six percent of
high school graduates receive degrees from four-year colleges, and another 24
percent get degrees from two-year colleges.
This increase in college education, however, has come at a steep
cost. The relative benefits of a college degree have been declining for nearly
two decades, while costs have been escalating. College graduates still
earn more than high school graduates and are less likely to be unemployed—but
the gap has been contracting.
And the income and employment
benefits may overstate the lifetime effects of college degrees. The college
wealth premium—the amount of extra wealth college graduates have accumulate the
course of their lifetime—has declined even more rapidly than the income and
employment premium, according to a recent study by the
Federal Reserve. And among blacks, Hispanics, Asians—that is, everyone except
whites—there is no wealth premium at all, the study found.
After ten years, nearly one-third of
college graduates wind up in a job that does not require a college degree,
the Wall Street Journal reports .
That should not be surprising. It demonstrates that the supply
of college graduates has outpaced demand, which is exactly what you would
expect would happen when ample subsidies and societal pressure are applied to
increase college attendance. When, as Ms. Trump put it, “all the money pushes
you into a four-year college system.”
The average sticker-price of a
four-year college, including room and board, is now $50,000 per year. As Barron’s Jack Hough
recently pointed out , $200,000
in cash invested in the name of a 22 year old would produce a $3 million
retirement nest egg by the age of 68, if the money is invested at about a 6%
year return.
This high price is being financed by
debt. On average, a college graduate owes twice as much debt as she did twenty
years ago, according to the Wall
Street Journal . Educational loans now amount to more than
$1.5 trillion. More than one out of ten student loan borrowers will default on
their loans.
Federal Reserve economists
recently studied the impact
all that debt is having on those aged 24 to 32. They found that while it plays
a significant role in keeping young people from buying homes, although other
factors—including the high price of homes—were more important.
“In surveys, young adults commonly report that their student
loan debts are preventing them from buying a home,” Fed researchers Alvaro
Mezza, Daniel Ringo, and Kamila Sommer found. “Our estimates suggest that
increases in student loan debt are an important factor in explaining their
lowered homeownership rates, but not the central cause of the decline.”
This is having a profound effect on American society. People are
getting married later, which reduces the number of children they have. Women,
in particular, delay marriage when they bear lots of student debt. And a
significant number of people who say they do not want children cited student
debt as the reason.
Twenty-two percent of college
graduates were delayed by at least two years in moving out of a family member’s
home due to their student loans, a survey of millennials by the National Association of Realtors found. More than
half of respondents said they were delayed in continuing their education or
starting a family due to student loan debt.
Bernie Sanders and others who have endorsed the idea of
relieving students of the burden of paying for college address the debt side of
the problem only. And it’s not clear that this is really much progress at all
since professors will still have to be paid, buildings maintained, textbooks
purchased. So while a student might not have to foot the bill, that debt will
need to be borne by workers—which is really just a transformation of individual
debt into higher taxes. And if history is any experience, the government will
not effectively be able to contain the burgeoning costs. If anything, quite the
opposite: cost increases will accelerate once individuals no longer see the
bills.
There’s no such thing as a free lunch, even if in a college
cafeteria.
The first step to recovery is admitting you have a problem. We
have a problem, as Ms. Trump has indicated. Others in Washington, DC, should
take note.
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