Michael Mandel presents an arresting chart on the decline in real earnings of young male college graduates over the last decade, and writes,
no one has given me a good explanation yet of why young American college grads should have been hit so hard. Is there increased competition with young college grads around the world? Are new college grads lower quality than their predecessors? Has information technology reduced the need for young grads? I really would like to know.
1. My daughters attended college during this period, and what I saw among them and their friends was a strong resistance to business. My lament is that I would like just one of my daughters to want to work for a profit.
I don't know whether the anti-business ideology at colleges became stronger in the last decade--it's something that has been there for decades. But it's possible that it had a stronger effect. Steven Jobs' Stanford graduation speech struck a chord in part because it plays to this "I don't have to sell out and work for The Man" mindset.
2. I wonder how much earnings of recent college grads can be skewed by some unusually lucrative opportunities. I am thinking of the Internet sector in the late 1990s and the financial sector until 2008. Remember when just about any Ivy League grad could get a job on Wall Street if he or she wanted it? If those opportunities were unusual, then what we are seeing is in part a reversion of the mean to the median.
3. Some college graduates are starting to lose the race against the machine and to be affected by the Great Factor-Price Equalization.
4. There is some effect from the changing gender mix at colleges. Off-hand, I cannot think of a reason that the decline in the relative supply of male college graduates should reduce their wages, but there must be some plausible just-so stories one can contrive.
5. The rising cost of health insurance, which makes health insurance the most important cost component in hiring. It could be that with employer-provided health insurance, young single workers tend to subsidize older workers with families. The result is that younger workers are bearing the brunt of higher health insurance costs, and so they are absorbing the largest decline in earnings.