In one chart: we have a demand problem, not a skills problem
The large increase since 2007 in the unemployment and underemployment rate of young college grads, along with the large increase in the share of employed young college graduates working in jobs that do not require a college degree, underscores that today’s unemployment crisis did not arise because workers lack the right education or skills. Rather, it stems from weak demand for goods and services, which makes it unnecessary for employers to significantly ramp up hiring.
The figure below, from this report on the labor market prospects of the Class of 2013, gives unemployment and underemployment rates for college graduates under age 25 who are not enrolled in further schooling. The unemployment rate of this group over the last year averaged 8.8 percent, but the underemployment rate was more than twice that, at 18.3 percent. In other words, in addition to the substantial share who are officially unemployed, a large swath of these young, highly educated workers either have a job but cannot attain the hours they need, or want a job but have given up looking for work.
Unemployment and underemployment rates of young college graduates, 1994–2013*
| Underemployment | Unemployment | |
|---|---|---|
| 1994 | 10.7% | 5.5% |
| 1995 | 11.5% | 6.1% |
| 1996 | 10.2% | 5.8% |
| 1997 | 8.0% | 4.0% |
| 1998 | 7.8% | 4.5% |
| 1999 | 7.8% | 5.1% |
| 2000 | 7.1% | 4.4% |
| 2001 | 9.7% | 6.1% |
| 2002 | 9.5% | 5.9% |
| 2003 | 11.9% | 6.7% |
| 2004 | 11.2% | 6.2% |
| 2005 | 10.5% | 5.7% |
| 2006 | 9.2% | 5.2% |
| 2007 | 9.9% | 5.7% |
| 2008 | 11.2% | 6.2% |
| 2009 | 18.7% | 9.8% |
| 2010 | 19.8% | 10.4% |
| 2011 | 19.5% | 10.1% |
| 2012 | 18.4% | 8.7% |
| 2013 | 18.3% | 8.8% |
* Latest 12-month average: March 2012–February 2013
Note: Underemployment data are only available beginning in 1994. Data are for college graduates age 21–24 who do not have an advanced degree and are not enrolled in further schooling. Shaded areas denote recessions.
Source: Authors' analysis of basic monthly Current Population Survey microdata
Apple’s advice on corporate tax reform: more tax breaks, please!
Yesterday it was revealed that Apple has shifted roughly $74 billion in profits out of the reach of the IRS in the last three years, mostly by holding this cash offshore. Amazingly, Tim Cook’s response to the congressional investigation that documented this is to call for corporate tax “reform” that will provide further benefits to both his firm and corporations in general. In his testimony (pdf) in front of the Senate Permanent Subcommittee on Investigations today, Cook bulleted his preferred corporate tax reform:
“….comprehensive [corporate tax] reform should:
- Be revenue neutral;
- Eliminate all corporate tax expenditures;
- Lower corporate income tax rates; and
- Implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.”
So, the first and third prongs of this reform agenda are to raise no additional revenue and to lower corporate tax rates. The second prong (eliminate corporate tax expenditures) has some merit, for sure.
What we read today
An oped from Wilma Liebman, former chairwoman of the NLRB, tops our list of what we read today:
- Clearing NLRB nominees is a clear step forward (Politico)
- The 1 Percent Are Only Half the Problem (New York Times)
- Do Extended Unemployment Benefits Lengthen Unemployment Spells? (pdf, Federal Reserve Bank of San Francisco)
Nostalgic for the Gatsby era? (Surprise! You’re living in it.)
It’s fitting that director Baz Luhrmann chose contemporary artists like Jay-Z to provide the soundtrack in his new take on The Great Gatsby, because in many ways, the Gatsby story could easily be set in current times. (No, we don’t mean hipsters bringing back vests or flapper hairstyles.) Unfortunately, today’s economy shares many of the same sad qualities of the 1920s highlighted in the Gatsby story: increasing financialization, low socioeconomic mobility, and gross wealth and income inequality such that a privileged few live astonishingly well while a large portion of Americans are struggling just to get by.
EPI has been describing these trends for years. In fact, you might consider our flagship publication, The State of Working America, as a sort of modern-day Gatsby, in charts. The prose may not be as artful as Fitzgerald’s, but the economic descriptions are equally alarming.
The Great Gatsby’s protagonist, Nick Carroway, is drawn to New York by the promise of riches to be made on Wall Street. Indeed, the premium to working in the financial sector at that time was better than ever… until recently. As Figure A shows, at the beginning of the Great Depression, earnings per worker in the financial industry peaked at nearly 1.8 times the earnings per worker of all other private sector workers. After the Depression and the regulation that followed, earnings per worker in finance fell back roughly into line with the rest of the private sector. Beginning in the late 1970s, however, earnings per worker in finance again began to take off. By the onset of the Great Recession, they exceeded 1.8 times the earnings per worker of all other private sector workers. With such striking disparities in compensation, who wouldn’t be attracted to the green light of finance?
What we read today
Happy Friday! Here are a few stories our experts read today:
- How the Case for Austerity Has Crumbled (New York Review of Books)
- My Two (Per)cents: How Are American Workers Dealing with the Payroll Tax Hike? (Liberty Street Economics)
- Poverty as a Childhood Disease (New York Times)
Sequestration, detailed
Though it didn’t get much attention, Democrats on the House Committee on Appropriations recently released a report on the effects of sequestration (pdf) and efforts to mitigate its impact. The report is a comprehensive look at sequestration cuts specific to the following areas: public safety, health, education and science, national security, judiciary and legal representation, commerce, housing, seniors, and foreign assistance. Some highlights in the report on the impacts of sequestration:
- NIH funding for research is cut by more than $1.5 billion, which the report estimates eliminates more than 20,000 jobs at universities, labs, and other research institutions.
- Funding for the Center for Disease Control and Prevention is cut by $285 million due to sequestration, inhibiting the CDC’s ability to—among other things—facilitate immunization, combat disease outbreaks, and manage and prevent both chronic and infectious diseases.
- The National Science Foundation loses $365 million due to sequestration, resulting in approximately 1,000 fewer research grants.
What we read today
Happy Monday. Here’s what we’re reading today:
- Why Washington Saved the Economy, Then Permanently Destroyed the Labor Market (The Atlantic)
- Student Debt and the Crushing of the American Dream (New York Times)
- How Austerity Kills (New York Times)
- Who Can Take Republicans Seriously? (New York Times)
- Major Retailers Join Bangladesh Safety Plan (New York Times)
Senate immigration bill’s key innovations for high-skilled workers are in jeopardy
Various sources have reported on the intense lobbying efforts by industry representatives of the high-tech sector, who seek to influence the outcome of the Senate’s proposed comprehensive immigration reform legislation. The initial version of the Senate bill already grants the industry two of its key demands: an increased number of H-1B visas for university-educated temporary foreign workers (almost tripling the quota), most of whom work in the IT sector, as well as an unlimited amount of permanent resident visas (green cards) for recent foreign graduates of U.S. universities in STEM fields (and a fast track to receive them). So what is the industry hoping to achieve now? The industry is lobbying to remove the few improvements to the H-1B program that Senator Durbin (D-IL) managed to persuade the other seven members of the Gang of Eight to include in the bill. This week, a number of proposed amendments could make that happen.
Here are the simple, common sense rules and innovations included in the Senate bill that relate to the H-1B program:
Brookings H-1B Report’s Flawed Analysis & Flawed Process
The Brookings Institution issued a new report on Friday about the H-1B program—a temporary foreign worker program for “skilled” occupations, meaning those that require a college degree—and then issued corrections to it almost immediately afterwards.
The report claims to include a wage analysis on “new data” that, “suggests that the H-1B program helps to fill a shortage of workers in STEM [science, technology, engineering and math] occupations.”
There are two critical problems with the report’s analysis of these data:
First, the data are proprietary, meaning the data are exclusively held by the authors, thus no one can critique or review the study’s presentation of the data or its findings. (The authors obtained the data from two other researchers, who first obtained it through a Freedom of Information Act request.) This kind of approach, where researchers use data that are not available publicly, means that the data and subsequent analysis can never be checked, leaving out a critical step in the scientific process.
The best thing for mom this Mother’s Day: a raise
Take a quick survey of any major florist’s website and you’ll find that having flowers delivered for Mother’s Day can be a non-trivial expense. With a middle-of-the-road arrangement, service and delivery fee, you can expect to pay upwards of $70. That may be a pittance compared with the gratitude owed to mom, but here’s another way to consider it: for millions of mothers in low-wage jobs, those flowers would cost more than an entire day’s earnings.
Earlier this year, Senator Tom Harkin (D-IA) and Representative George Miller (D-CA) introduced legislation that would raise the minimum wage to $10.10 per hour by 2015. The number of mothers that would be affected by increasing the minimum wage is staggering. As shown in the table below, there are over 22 million mothers with children under the age of 18 working in the United States today.1 If the federal minimum wage were raised to $10.10 per hour, 5.5 million working moms with children under the age of 18—roughly 25 percent of all these working mothers—would see a pay increase.