Raises Harder to Come by, College Graduates Find

Salaries among the ranks of college-educated, white-collar American workers are eroding for the first time since the 1970s, as globalization adds a new twist to the U.S. economy.


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Wages for employees with four-year degrees fell 5.2 percent from 2000 to 2004, when adjusted for inflation, the Los Angeles Times reported Monday, citing White House economists.

The decline in this sector has not been measured in a time of overall economic growth in roughly 30 years, the Times reported. The impact on the workforce is significant. About 30 million Americans, age 20 to 59, have a four-year degree and no advanced degree, according to the National Center for Education Statistics.

The White House did not report trends regarding people with advanced degrees, but similar studies have described salaries in this sector as essentially flat (inflation adjusted) between 2000 and 2004, the Times reported, while confirming a decline for people with four-year degrees.

However, some college graduates—namely accounting graduates—are faring well. Starting salaries for accounting majors rose 5.5 percent this year from 2005, according to the National Association of Colleges and Employers. Starting salaries for humanities majors, by contrast, declined 4.1 percent over the same period.

The U.S. is now in its fifth year of growth since the last recession, according to the Times report. However, median weekly earnings have fallen by 3.2 percent in real terms since the start of the recovery in October 2001.

The trend is getting political attention. Larry Summers and Robert Rubin, Treasury secretaries during the Clinton administration, took part in a forum at the Brookings Institute Tuesday, challenging the current administration’s contention that all Americans have benefited from the growing U.S. economy.

On the other hand, many economists argue that the white-collar wage slump is part of the fallout of the Clinton policy of globalization, which has led to offshoring many manufacturing and call-center jobs to such countries as India, FT.com reported.

Meanwhile, employers have continued the trend of replacing salaried positions with lower-paid, non-salaried personnel, including part-time and freelance hires. Such contingent positions account for almost half of the 6.5 million jobs created since 2001, Paul Harrington, a labor economist at Northeastern University in Boston, told the Times.

Ed Lazear, chairman of the president's Council of Economic Advisors, told FT.com that focus on wage stagnation is misguided. First, he said, there are signs that hourly earnings growth is accelerating following a long lag. And second, the theory fails to capture broader growth in worker compensation, which includes pensions and health care provided by employers.

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