Who Got the Wage Gains, 2000-2009

This weekend I’m writing a draft of my new paper, “Biosciences and the Long-Run Economic Recovery.” Along the way I came up with three charts that I thought I’d share with you. I’m not going to put much gloss on these, because they are pretty much self-explanatory, and because I need to get back to the paper.

This first chart shows the change in wage and salary payments by major industry from 2000-2009, adjusted for inflation, using BEA data. We see that healthcare and social assistance generated $210 billion in real wage gains from 2000 to 2009 (all in 2009 dollars). Next biggest was state and local government, which generated $151 billion in real wage gains. (The exact numbers change a lot if I change the end dates, but the pattern stays the same).

On the other hand, the big losers were manufacturing (-$245 billion), information (-$56 billion), retail trade (-$24 billion), and transportation and warehousing (-$6 billion). It’s interesting that the industries in the global supply chain were the big losers in real wages, but I’m not sure quite what to make of it.

Now I’m going to take the same data and cut it by federal govt, state and local govt, and private sector. The short answer is that the public sector accounted for 55% of real wage gains between 2000 and 2009, while the private sector only accounted for 45%. Once again, this is not necessarily a surprise, but it’s still interesting.

Now we get to the third chart (having fun with 3D pie charts–like it?). What we see is that health and education (public and private) accounted for an amazing 75% of real wage and salary gains between 2000 and 2009. The rest of the economy–only 25%.  Make that what you will.

Recession Hits Harder at College Grads Without an Advanced Degree

I’m sure many of you read the  NYT article about the 26-year-old college grad with almost $100,000 in student loans.  The article was fascinating and horrifying, but it didn’t mention a key factor–since the girl in the article graduated in 2005, the  real wages of college grads without an advanced degree have fallen substantially.

 Take a look at this chart.

I’ve plotted median usual weekly earnings of fulltime workers, adjusted for inflation, and indexed to 2001Q1 =1. The dark blue line shows the weekly wages of workers with an advanced degree, while the lighter line shows weekly wages of workers with a bachelor’s degree only.

The real wages for college grads with a bachelor’s have  been in a downswing since 2004.  That offers at least a partial explanation of her problems…she got caught by a weakening labor market for bachelor’s degrees.  

To put it another way–college grads who are clothed with the protection of an advanced degree have on average managed to hold their own during the financial crisis, and even gain ground. Since mid-2007, their usual weekly wages are up by 3.7% in real terms, putting them at their highest level for the past ten years.

‘Naked’ college grads–that is, those without advanced degrees–have not fared nearly so well during the recession. Their real weekly earnings are down 0.7% since mid-2007, and they are well below their 2004 level.

Is this simply supply and demand,  a function of which industries were hit, or is there something else going on?

Some Higher Education Facts, Good and Bad

I was thinking about human capital and growth, and the importance of  having workers with advanced degrees to drive innovation forward.  So I asked myself the question: What percentage of U.S. college graduates have an advanced degree? (Masters, professional, doctorate)

It turns out that  35% of college graduates have an advanced degree. (You didn’t know that, did you? I didn’t). That’s up from 32.7% in 1999 (these figures are for workers 25 and over).

That seems pretty good, doesn’t it?  More and more of our college grads are getting advanced degrees, which is exactly what we would want to help foster innovation.

But then I asked a second question: What percentage of  U.S. college grads have a doctoral degree?  That is, what percentage of them have a research-oriented education? The answer was not so pleasant.

In fact, the share of college grads with a doctorate has fallen over the past decade. Not by much, for sure—but there’s no sense of a PhD being a desirable degree.  Americans are not flocking to spend 4-6 years writing a dissertation and going on to research.

And why not? This chart, which shows the change in real pay since 1999 for higher ed graduates,  may help explain the relative undesirability of the PhD.

Yowza! The real earnings for full-time workers with a doctoral degree has dropped by 10% since 1999.

That’s not what you would expect in an innovation-driven economy.