Monday, March 03, 2014

Understanding the Causes of Stagnant Wages for College Graduates

The New York Times Editorial Board has written an unsigned piece about flat wages for college graduates.   While I do not believe that a single Ph.D. economist serves on their board, they offer various hypotheses and cures.   They report the fact that between the years 2001 and 2013 that the average male college graduate's wage has been $33 while for the average female college graduate her wage has stayed flat at $25 over the last 12 years.   

The NY Times offers some "subtle" analysis and offers a series of policy solutions.  Here is a direct quote;

"While economic recovery and more college education are generally believed to lift wages, that didn’t happen in the 2000s and hasn’t since the end of the last recession. What’s needed to raise pay are policies like a higher minimum wage; trade pacts that foster high labor and regulatory standards; and more support for union organizing. Increasing the number of high-paying jobs also depends on strategies like enhancing public spending to fix roads and bridges and to hire more teachers, as well as developing new energy and technology industries through government-financed research. "

My thoughts?

A labor economist might ask the following questions;

1.  Over the years 2001 to 2013, has there been a composition shift in who is entering college?  As more and more people enter college, is the marginal person the same as the incumbents in terms of pre-college preparation, cognitive skills and non-cognitive skills?    The WSJ today reports that some people are going to college to defer paying their existing debts.  Is this a positive selection effect?

2. Have there been shifts in what people are majoring in?  The NY Times fact would be more of a puzzle if a larger % of college students are majoring in quantitative analytic majors such as engineering, math, stats, economics, the sciences.  In this age of "big data", there is huge demand for the ability to use the newly available data.

3.  What about the "treatment" itself?  Are colleges doing a worse job teaching now than in the past due to being squeezed with respect to resources and strange allocative decisions?