February 08, 2014
The NYT noted that wages have been growing slowly in the recovery, which it argues also explains slow consumption growth. It then blamed weak wage growth on an uneducated workforce;
“The problem for economic growth in general, and wage growth in particular, is that only one-third of the American work force — 50.4 million out of 155 million — have a college degree or more. By contrast, there are approximately 73 million workers who have a high school diploma or some college, and 11 million workers who did not finish high school.
“With many less educated workers chasing a limited number of new jobs, employers have little reason to increase wages. ‘It’s just an extremely competitive environment for workers, where people have little negotiating power,’ Mr. Harris said.” [Mr. Harris is identified as a Bank of America Merrill Lynch economist.]
This story doesn’t fit the data. In the last year the average hourly wage of production and non-supervisory workers rose by 2.2 percent. This group, which accounts for just over 80 percent of the workforce, is overwhelmingly composed of people without college degrees. The average hourly wage for all workers, which includes supervisory workers who mostly do have college degrees, rose by just 1.9 percent in the last year. This means that wages for supervisory workers actually rose somewhat more slowly on average than did wages for non-supervisory workers, the exact opposite of what the article claims.
In fact there is no evidence that businesses are having a hard time finding college educated workers. While the piece notes that the unemployment rate for college educated workers is just over 3.0 percent, it was 2.0 percent before the recession in 2006-2007 and just 1.7 percent in 2000. In fact, the current unemployment rate among college grads is as high as at any point it hit following the 2001 recession. There is simply no evidence to support the claim that we are facing a shortage of college educated workers or that these workers are seeing a healthy pace of wage growth.
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