The Economics of Despair Essay

This essay has a total of 826 words and 4 pages.

The Economics of Despair

Since the late 1970s, social science researchers, the media, private foundations, and
policymakers have directed considerable attention to the labor market problems of young
adults and their families. Most of this attention has focused on high school dropouts, the
poor, minorities, and inner-city youth. But an equally troubling—and broader—problem
has received comparatively less notice: the steep and sustained decline since 1973 in the
real (inflation-adjusted) earnings of young men and women generally. Even adjusting for
demographic and socioeconomic characteristics, the labor market problems of young workers
are disproportionately severe—they include higher than average unemployment and
relatively low earnings when employed. This sustained drop in earnings has been especially
dramatic for young adults with no postsecondary school education.

Most proposed remedies have emphasized the quality of the labor supply. But improving
education and training, while often worthwhile and necessary, is not by itself sufficient
to raise earnings. If this downward trend, which has persisted through recession and
recovery alike, is to be reversed, then policymakers and educators must address the demand
side as well as the supply side. Raising young adult wages will require not only better
academic performance, training, apprenticeships, and school-to-work programs, but also
full-employment policies, changes in the configuration of jobs and careers, and larger
young adult union membership. Prior to 1973, the annual and weekly earnings of both young
adults and older workers had been improving markedly. Between 1967 (the year the Bureau of
Labor Statistics began tracking weekly earnings of wage and salary workers) and 1973, the
real median weekly earnings of 16- to 24-year-olds rose by approx i mately 8 percent.
Since 1973, however, the earnings of young adults have fallen almost continuously. Between
1973 and 1979, the weekly earnings of young men working full time fell by 7 percent. Young
men experienced a 19 percent decline in earnings (a real value of $72 per week) between
1979 and 1989. This decline cannot be attributed solely to business cycle contractions.
About half of the 19 percent decline did take place during the recessionary period of
1979-1982. But between 1982 and 1989, a period of strong overall job growth, the weekly
earnings of young men fell by another $33, or 9 percent. Earnings declined still more
between 1989 and 1994, dropping yet another 9 percent. The result of all this decline? A
young man under 25 years of age employed full time in 1994 earned 31 percent less per week
than what his same-aged counterpart earned in 1973.

Annual earnings trends display the same pattern. Using findings from the U.S. Census
Bureau's annual work experience surveys, we estimate that between 1973 and 1993 the median
real annual earnings of young males employed on a full-time basis for at least 27 weeks
fell from $18,600 to $13,700, a decline of 26 percent. Young male high school dropouts
experienced a 32 percent decline in real annual earnings, while high school graduates with
no college education experienced a 29 percent decline. In 1993 a young male high school
graduate earned in real terms only what a comparably aged high school dropout was earning
in 1973. And a four-year-college graduate in 1993 earned only slightly more than a high
school graduate earned 20 years earlier.
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