High-Degree Professionals Show Power
Workers with professional degrees, such as doctors and lawyers, were the only educational group to see their inflation-adjusted earnings increase over the most recent economic expansion, adding to the concern that the economy has benefited higher-earning Americans at the expense of others.
Workers in every other educational group -- including Ph.D.s as well as high school dropouts -- earned less in 2007 than they did in 2000, adjusted for inflation, according to data from the Census Bureau. Data don't include 2008 earnings.
The recent data are the latest reminder of how college degrees, long seen as a path to the middle class, no longer guarantees fatter paychecks every year. The statistics also indicate how deeply economic divisions have grown despite the economic expansion that started in 2001. Both presidential candidates have proposed policies to address this inequality.
Economists cite a number of reasons for falling wages for people with a bachelor's degree. Open borders resulted in blue- and white-collar jobs being sent abroad -- and skilled immigrants competing for jobs in the U.S. Job growth during the 2001 to 2007 expansion was weak compared to the late 1990s boom, thus putting less pressure on employers to dole out pay increases. Rising health-care costs are also a bigger part of total compensation than they were in the past. The Census data measure income, which doesn't include the health-care bills employers pick up for workers.
Falling wages are a big reason why so many Americans have cited economic issues among their biggest concerns going into the presidential election. 'Americans are pretty sophisticated pocketbook voters and lots of individuals and their families understand that real earnings growth has been waning for many years,' said Matthew J. Slaughter, an economics professor at the Tuck School of Business at Dartmouth College, who was a Bush White House economist.
Many Democrats have blamed foreign trade for a big part of the rise in income inequality and have turned increasingly against new trade pacts. On the presidential level, Democratic nominee Sen. Barack Obama is pushing a number of proposals that would raise taxes for those who earn more than $250,000 to fund tax cuts for those of more modest means.
His Republican opponent, Sen. John McCain, remains a committed free trader. But Sen. McCain is pushing an overhaul of unemployment insurance and retraining as a way to help those who have fallen behind. He also argues that cutting corporate income taxes will boost economic growth and jobs.
The inflation-adjusted median salary for people with professional degrees was $89,602 in 2007, up about 3% from 2000, when the median salary was $87,158, according to the Census.
Every other group, including those with college and doctorate degrees, saw income declines. The inflation-adjusted median salary for a person with a bachelor's degree fell about 3%, adjusted for inflation, to $47,240 last year from 2000. Median master's-degree salaries fell about 4%, to $56,707. Salaries for high school graduates fell about 3%, to $28,290.
Given the faltering economy, it is unlikely that lower-earning Americans have made up ground this year. In 2007, the last year for which the Census income data are available, wages grew and unemployment averaged a low 4.6%. Since then, the country has lost about 600,000 jobs and the unemployment rate has risen to 6.1%.
Despite the downbeat numbers, the Census data still show the value of education. In 2007 the median income for people with a bachelor's degree was about two-thirds more than for those with only a high-school diploma; people with a master's made 20% more than those with a college degree only.
But the relative gain to education is diminishing. In 1975, for instance, workers with college degrees earned 60% more per year on average than workers with high-school diplomas only, according to the 2006 Economic Report of the President.
Workers with a college degree saw their earnings premium grow steadily over the next quarter century, and by 2000 their average earnings were roughly double what workers with a high-school diploma made. Over the next four years the trend reversed: By 2004, workers with a college diploma only were earning about 80% more than high-school grads, on average.
'A college degree still provides an important security blanket,' says Mr. Slaughter. 'But because of the falling mean-B.A. earnings in recent years, just how warm this blanket is is now less clear.'
Conor Dougherty
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