The current economic malaise will be remembered as one of the most widespread in our nation’s modern history. The recession and sluggish recovery have left nowhere to hide. They’ve wreaked havoc on the Sun Belt as well as the Rust Belt. White collar workers and blue collar workers have suffered alike. Even some of the best-protected people in society have felt the squeeze.
Those over age 65, for instance, benefit from Social Security, Medicare and in some cases generous pensions they earned during their working lives. But just ask Grandma about life on a fixed income when the interest rate for her savings is measured in decimal points.
Consider another segment of the population with some notable advantages: College graduates.
Usually, Americans with college diplomas make substantially more money than those without a degree. The grads have a lower unemployment rate. They even have a higher life expectancy. By almost every measure, as a group, they’re better off than those who don’t finish college.
These days, however, it’s getting harder to see the advantage. A fresh sheepskin makes a flimsy shield in a terrible job market. There’s reason to believe the cost of starting a career in such a difficult economy will persist for a lifetime.
Some of the most telling research about what to expect from the current economy comes from a close study of the equally brutal recession in the early 1980s.
The hard lesson: Those who get knocked down never get all the way back up.
People who lost stable jobs in 1982 suffered an immediate 30 percent drop in their earnings, according to a study of Social Security and other government records. A decade later, their earnings were down 20 percent compared to workers with similar profiles who had avoided a layoff. Even two decades later, those who lost jobs hadn’t caught up. Fewer than 1 tin 10 who lost a job in a layoff came out ahead in the end, from an earnings standpoint.
Another study, of white males who finished college during the recession of the early 1980s, showed a similar pattern. On average, those who graduated in the fortunate class of 1989 earned $100,000 more over 17 years than those who graduated in the hard-times class of 1982.
The recession-era grads were less likely to find a good first job out of school. They received less training from strapped employers. Presumably grateful to hold any job, they moved less often to new employment with better pay and opportunities. “The labor market consequences of graduating from college in a bad economy are large, negative and persistent,” concludes Lisa Kahn, a Yale University economist who studied the phenomenon. She recently wrapped up a stint with President Barack Obama’s Council of Economic Advisers.
Today’s grads face other daunting obstacles. The cost of college has soared far beyond inflation since the early 1980s, and the average student loan debt exceeds $20,000. The economy has become more of a winner-take-all proposition, with great jobs at the top but a steep decline in earnings thereafter.
America needs to get its job engine going again. At 9.1 percent, unemployment remains stubbornly, frustratingly high. The cost to everyday people is steep — steeper, as the research shows, than commonly recognized. There is no easy, fast-acting prescription for fixing what ails the U.S. But every American should remember that we’re in this mess together — Rust Belt and Sun Belt, white collar and blue and, yes, college graduates and everybody else.
