After a dozen or so paragraphs of throat-clearing John Cassidy finally gets to the point:
During the past decade or so, however, a number of things have happened that don’t easily mesh with that theory. If college graduates remain in short supply, their wages should still be rising. But they aren’t. In 2001, according to the Economic Policy Institute*, a liberal think tank in Washington, workers with undergraduate degrees (but not graduate degrees) earned, on average, $30.05 an hour; last year, they earned $29.55 an hour. Other sources show even more dramatic falls. “Between 2001 and 2013, the average wage of workers with a bachelor’s degree declined 10.3 percent, and the average wage of those with an associate’s degree declined 11.1 percent,†the New York Fed reported in its study. Wages have been falling most steeply of all among newly minted college graduates. And jobless rates have been rising. In 2007, 5.5 per cent of college graduates under the age of twenty-five were out of work. Today, the figure is close to nine per cent. If getting a bachelor’s degree is meant to guarantee entry to an arena in which jobs are plentiful and wages rise steadily, the education system has been failing for some time.
And, while college graduates are still doing a lot better than nongraduates, some studies show that the earnings gap has stopped growing. The figures need careful parsing. If you lump college graduates in with people with advanced degrees, the picture looks brighter. But almost all the recent gains have gone to folks with graduate degrees. “The four-year-degree premium has remained flat over the past decade,†the Federal Reserve Bank of Cleveland reported. And one of the main reasons it went up in the first place wasn’t that college graduates were enjoying significantly higher wages. It was that the earnings of nongraduates were falling.
My view, as should be clear by now, is that the signalling effect of a college degree has been the most important factor in the college pay differential and the influx of so many college graduates over the period of the last thirty years has resulted in that effect becoming increasingly attenuated. Now it’s on to post-graduate degrees and when that no longer serves a signalling function it will be post docs. As Mr. Cassidy points out, in an arms race the only ones who really benefit are the arms dealers.
