Generation Me not the only loser in this recession
- Article by: ERIC WIEFFERING
- Star Tribune
- October 12, 2011 - 9:39 PM
The effort to crown the Great Recession's biggest losers seems to have settled, momentarily, on the least likely of candidates: young people with college degrees.
A recent Associated Press story about their trials and tribulations included a quote from the Harvard economist Richard Freeman, who branded this demographic group a "lost generation." Suddenly, Generation Me, widely observed as the most fussed-over of generations, had another reason to feel like its experience is unique.
Look around. The workplace is filled with people who entered the labor force during earlier recessions. Sure, landing a high-paying job may be the toughest it's been in recent decades, but that challenge pales next to the experience endured by legions of workers who've lost their jobs and any semblance of economic security in recent years.
I'm not trying to diminish or wave away the anxiety young people feel. Graduating into a recession is a scary prospect, and the fear over diminished job prospects and high student loan debt has found a voice in the Occupy Wall Street demonstrations around the country, as well as in the collection of 1,000 or so individual stories found on the Tumblr site, We Are The 99 Percent (wearethe99percent.tumblr.com).
The economic prospects for young people competing for the least-skilled and lowest-paying jobs are especially grim. Almost 25 percent of 16- to 19-year-olds are out of work, and given what's happened to the nation's manufacturing and construction sectors, it's hard to imagine how these numbers get better anytime soon.
But it's a different story for college graduates. Their unemployment rate is 4.2 percent, less than half the national average.
Are some of them working dead-end jobs? Undoubtedly. Are they paid less than they think they deserve? Who isn't? Still, according to the Census Bureau, the median annual earnings of a 25- to 34-year-old worker with a bachelor's degree was $40,875 in 2010, almost 40 percent higher than the national median for all workers in that age group.
True, the unemployment rate for recent college graduates under the age of 25 is a more daunting 9 percent. While higher than it's been in the last 20 years, it's not disproportionately so. Historically, the joblessness rate for college grads under 25 is double the rate for graduates 25 and older.
Still, the anxiety new grads face is not misplaced or unjustified. A typical college senior is entering this weak job market with more than $24,000 in student loan debt. If she goes a year without landing a job in her field, she finds herself competing with another batch of freshly minted graduates.
Jeanne Boeh, an economist who teaches at Augsburg College, says some research suggests that every percentage point increase in the unemployment rate lowers wages for new hires by 6 or 7 percent. "This effect can linger for a very long time," Boeh said.
One study sponsored by the National Bureau of Economic Research found that people hired during a typical recession are paid about 9 percent less than those hired when the economy is strong, and that it can take up to 10 years to close that wage gap.
Tough luck, but not tragic. Lower wages are inevitable when a large number of people are competing for fewer jobs, just as higher wages result when labor markets tighten. It's how a free-market economy naturally rights itself. It's happened before, and it will happen again.
In my mind, the loss of potential income -- what you might earn if you graduated when the unemployment rate was 5 percent instead of 9 percent -- is not nearly as grave as the real losses suffered by millions of workers since 2007.
In the past four years, real median household income has fallen by almost 10 percent, according to an analysis by two former Census Bureau economists. For households headed by someone laid off and looking for work, the drop was 18.4 percent.
"A decline of this magnitude represents a significant reduction in the American standard of living," note the paper's authors, Gordon Green and John Coder.
Many of these households will never recover these losses. Not because they've given up hope, but because they lack the one thing young college graduates have in abundance: time.
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