Making Do When Things Are Worse Than Ever

Yes, a Masters from Duke University in Eighteenth Century British Literature, and the PhD work, are pretty useless – at least they were in the mid-seventies. That led to a Dead Poet’s Society gig at a northeastern prep school, but without the drama, and half the garbage collectors (sanitation technicians) in town made a lot more money. Still, perhaps, there’s much to be said for doing what you love, or at least what you find interesting, or once found interesting – and sometimes there’s no choice.

This happens to many people, not just English majors. No one wants what they’ve been trained to do, or few do. Jobs in your chosen field, whatever that is, are scarce. Take what you can find, because the alternative is flipping burgers or being a barista at Starbucks, or waiting tables at Café Boeuf, the only French restaurant in Lake Wobegon, that very snooty (fake) establishment that occasionally advertises on A Prairie Home Companion – that odd Garrison Keillor radio variety show on public radio. Other advertisers include Earl’s Academy of Accents – useful for would-be waiters at Café Boeuf – and the Federation of Associated Organizations, the American Duct Tape Council, and of course and the Professional Organization of English Majors (POEM) – a group that will provide useful and startling metaphors for any occasion. The joke is that there’s not much demand for that sort of thing. There ought to be, but there isn’t.

Garrison Keillor was, in his gentle way, onto something here, and now the joke isn’t that funny, because everyone is the English major now – in 2010, only sixty-two percent of college graduates had a job that even required a college degree, and only twenty-seven percent of them had a job that was closely related to their major. College graduates, if they are lucky, are now hired in spite of their major. On the other hand, the odds of finding a match between college degree and job are about six percentage points higher in a major city. Graduate and move to Manhattan, if you can afford it. In Lake Wobegon you’ll be waiting tables. The report of this is from the Federal Reserve Bank of New York – so maybe they’re biased – but things are only getting worse. There’s the friend’s son, with a newly-minted graduate degree in international relations, from a fine British university, who can’t even land a job as a bag-boy at the local supermarket – overqualified – he might cause trouble. There are hundreds of thousands like him now.

Most of them will find some sort of work sooner or later, because they have to, but there’s a price to pay for that:

College grads tend to get higher wages and have lower unemployment rates than non-grads. But especially during this economic downturn, lots of young college grads are taking low-wage, low-skill jobs because they can’t find anything else. And as if that weren’t bad enough, there’s more bad news: the negative economic impact of being overqualified for your job can last for a decade or more.

In a new paper, economists from Duke University and the University of North Carolina-Chapel Hill, find that even temporarily working as a bartender after college can be a drag on wages for years to come.

Ah, someone at Duke ended up doing something useful, but this is disheartening:

People were most likely to be overeducated when they first entered the labor force, but that fell over time. Over the first 12 years of work, the share of overeducated workers fell from 62.3 percent to just over half. In addition, women are slightly more likely than men to be overeducated, though researchers wrote that this might be because women chose flexible work arrangements more often and therefore were willing to compromise with jobs that require fewer skills.

It’s also tough to get out of this trap. After one year of being overeducated, 66 percent of these workers remained overeducated.

There’s a price to pay for that:

Even when researchers controlled for a variety of factors, wage effects still could last for years after a worker left a position in which she was overeducated. If one worker was overeducated four years ago but is in a good position today, she’d currently have wages 2.6 to 4.2 percent lower than if she had never been in that bad job.

It’s hard to know what to do about this. Take the crap job? Keep looking, if you can? There may not be a choice now, and that’s bad for everyone:

These results also imply one way the economy will continue to underperform, even as the recession continues to recede in the rearview mirror. If all of those overeducated people persistently earn well below what they could have otherwise earned, it means less spending and less growth as well, in addition to the fact that all of those overeducated people are underutilized human capital.

And they’re pretty damned depressed too. The Professional Organization of English Majors (POEM) will have to open sister chapters for other majors. That was just a joke on the radio, but no one’s laughing now:

The American Dream is impossible to achieve in this country – so say nearly 6 in 10 people who responded to CNNMoney’s American Dream Poll, conducted by ORC International. They feel the dream – however they define it – is out of reach.

Young adults, age 18 to 34, are most likely to feel the dream is unattainable, with 63% saying it’s impossible. This age group has suffered in the wake of the Great Recession, finding it hard to get good jobs.

Younger Americans are a cause of great concern. Many respondents said they are worried about the next generation’s ability to prosper.

Some 63% of all Americans said most children in the U.S. won’t be better off than their parents. This dour view comes despite most respondents, 54%, feeling they are better off than their own parents.

Economic mobility may be a joke no one’s gotten yet, but they’re starting to get it:

“The pessimism is reflective of the financial realities a lot of families are facing,” said Erin Currier, the director of the Economic Mobility Project at Pew Charitable Trusts. “They are treading water, but their income is not translating into solid financial security.”

The vast majority of Americans have higher incomes than their parents, but that’s in large part because most families have two earners now, she said. Only half have more wealth, she said. Meanwhile, the savings rate is low and unemployment is high. College costs are rising faster than inflation and student loan debt is exploding.

People also tend to be more pessimistic about the next generation’s fortunes in general than their own children’s prospects, Currier said. In Pew’s polls and focus groups, parents say that it will be tougher for their children to succeed, but they still believe it’s possible.

Perceptions, however, aren’t supported by the facts, experts said.

Yes, here are those two major studies that concluded that economic mobility is worse in the United States than in other developed countries, which we all knew unless we’re Republicans, who don’t believe a word of it. People are just lazy, or have no work ethic, or no family values, or no sense of personal responsibility, or haven’t found Jesus, or something. Everyone can rise.

Sure, but Stephanie Mencimer in this item discusses the results of a thirty-year study showing that most poor kids end up as poor adults:

Of the nearly 800 school kids [Johns Hopkins sociologist Karl Alexander has] been following for 30 years, those who got a better start – because their parents were working or married – tended to stay better off, while the more disadvantaged stayed poor.

Out of the original 800 public school children he started with, 33 moved from low-income birth family to a high-income bracket by the time they neared 30. Alexander found that education, rather than giving kids a fighting chance at a better life, simply preserved privilege across generations. Only 4 percent of the low-income kids he met in 1982 had college degrees when he interviewed them at age 28, whereas 45 percent of the kids from higher-income backgrounds did.

Perhaps more striking in his findings was the role of race in upward mobility. Alexander found that among men who drop out of high school, the employment differences between white and black men was truly staggering. At age 22, 89 percent of the white subjects who’d dropped of high school were working, compared with 40 percent of the black dropouts.

Things really are pretty fixed, and in the New York Times, Neil Irwin, setting race aside, examines the link between economic growth and poverty reduction, and says it all fell apart in the seventies:

If you adjust for the higher number of hours worked, over the 1979 to 2007 period (selected to avoid the effects of the steep recession that began in 2008), hourly pay for the bottom 20 percent of households rose only 3.2 percent. Total, not per year. In other words, in nearly three decades, these lower-income workers saw no meaningful gain in what they were paid for an hour of labor. Their overall inflation-adjusted income rose a bit, but mainly because they put in more hours of work.

Recent college graduates simply have it worse now, but the value of a good education and the right job started to mean nothing much long ago, and way back in 1992, in a long and detailed and wonkish essay, Paul Krugman had discussed what had been happening:

During the mid-1980s, economists became aware that something unexpected was happening to the distribution of income in the United States. After three decades during which the income distribution had remained relatively stable, wages and incomes rapidly became more unequal. Academic researchers soon began arguing vigorously about the causes of the growth in inequality: was it global competition, government policy, changing technology, or some other factor? What nobody, whatever his or her political stripe, questioned was the fact that there had been a dramatic change in income distribution.

During 1992 this genteel academic discussion gave way to a public debate, carried out in the pages of the New York Times, the Wall Street Journal, and assorted popular magazines. This public debate was remarkable in two ways. First, the conservative side displayed great ferocity in presenting its case and attacking its opponents. Second, conservatives chose to take an odd, and ultimately indefensible, position. They could legitimately have challenged those who have called attention to the growing dispersion of income on the grounds that nothing can, or at any rate should, be done about it. But with only a few exceptions they chose instead to make their stand on the facts to deny that the massive increase in inequality had happened. Since the facts were not on their side, they were forced into an extraordinary series of attempts at statistical distortion.

Krugman covers that with gusto, which is fascinating if you’re a data enthusiast, but his general comments should be remembered:

Even if you would prefer to have a flatter distribution, other things equal (and not everyone even shares that goal) what should we do about it? Few people in America would currently support a policy of wage and salary controls (although Claudia Goldin has noted that World War II wage controls seem to have produced a long-term narrowing of wage differentials). One might use growing inequality as an argument for restoring some of the progressivity of the tax system; but most of the growth in inequality has come from changes in pre-tax income, not from regressive tax policies. An honest conservative like Herbert Stein is willing to say “Yes, inequality has increased, but I don’t think that calls for any policy response.” …

America is not a static society. People who have high incomes one year may have lower incomes the next, and vice versa. … And economic welfare depends more on the average income you earn over a long period than on your income in any given year. So there are some risks in drawing too many conclusions about the distribution of economic welfare from statistics on the distribution of income in any one year.

There are two ways in which income mobility the shuffling of the economic deck that takes place as families move up or down the income ranking could offset the proposition that inequality has increased sharply. First, if income mobility were very high, the degree of inequality in any given year would be unimportant, because the distribution of lifetime income would be very even. I think of this as the blender model: whatever the current position of the bubbles in your Mixmaster, over the course of a few minutes each bubble will on average be halfway up.

Second, if income mobility had increased over time, this could offset the increased inequality at each point in time. An increase in income mobility tends to make the distribution of lifetime income more equal, since those who are rich have nowhere to go but down, while those who are poor have nowhere to go but up.

Unfortunately, neither of these possibilities actually characterizes the U.S. economy.

Now, in 2014, Krugman says this:

Not only do the usual suspects continue to deny the obvious, but they keep rolling out the same discredited arguments: Inequality isn’t really rising; okay, it’s rising, but it doesn’t matter because we have so much social mobility; anyway, it’s a good thing, and anyone who suggests that it’s a problem is a Marxist.

Twenty-two years changed nothing:

So here’s what you need to know: Yes, the concentration of both income and wealth in the hands of a few people has increased greatly over the past few decades. No, the people receiving that income and owning that wealth aren’t an ever-shifting group: People move fairly often from the bottom of the 1 percent to the top of the next percentile and vice versa, but both rags to riches and riches to rags stories are rare – inequality in average incomes over multiple years isn’t much less than inequality in a given year. No, taxes and benefits don’t greatly change the picture – in fact, since the 1970s big tax cuts at the top have caused after-tax inequality to rise faster than inequality before taxes.

This picture makes some people uncomfortable, because it plays into populist demands for higher taxes on the rich. But good ideas don’t need to be sold on false pretenses. If the argument against populism rests on bogus claims about inequality, you should consider the possibility that the populists are right.

Okay, grant that the populists are right. That’s not going to help this month’s new college grad, who can’t even get a job waiting tables at Café Boeuf, that French restaurant in Lake Wobegon, because, among other things, that’s imaginary. Forget joining the Professional Organization of English Majors (POEM) too – that’s also imaginary. The rest is real. But Krugman may be too glum. His colleague at the New York Times, Thomas Edsall, thinks things are changing:

After the 2012 presidential election, key Republicans began to criticize their party’s opposition to immigration reform and gay rights. But now party reformers are questioning something much more central: free-market orthodoxy.

In an article in the May 26 edition of The Week – “What conservatives don’t understand about the modern U.S. economy” – James Pethokoukis of the American Enterprise Institute has issued an economic challenge to the right from the right.

Pethokoukis’ piece is an assault on the economic manifesto that was put out on May 16 by a conservative group that included three icons of the right: Ted Cruz and Mike Lee, senators from Texas and Utah, respectively, and Ed Meese, who served as attorney general under Ronald Reagan.

“This tired GOP sequel stumbles in its macroeconomic analysis,” Pethokoukis writes, noting that the manifesto contains “no suggestion the economy faces longer-term problems that predate Obamanomics.” Pethokoukis argues that the manifesto’s anti-tax rhetoric fails to grasp that “coping with America’s rising elderly population will require a higher national tax burden in coming decades even with a reformed entitlement system.” The conservative call for a balanced budget ignores the fact that “there is no evidence that markets fear a U.S. debt crisis.”

Pethokoukis is one of a number of conservative analysts who over the past three years have undergone something of an intellectual conversion.

Edsall goes on to cite those others, and discuss how they seem to sense their party has been making no sense:

They cite the liabilities of an economic worldview that doesn’t recognize the need for government “to help those who cannot individually do for themselves, to advance justice in an unjust world, and to lift up the weakest members of society.” They go on to make the case that “many conservatives fail to see the extent to which equal opportunity itself, a central principle of our national self-understanding, is becoming harder to achieve. It is a well-documented fact that, in recent years, economic mobility has stalled for many poorer Americans, resulting in persistent intergenerational inequality.”

That’s the underlying disaster here, but Edsall also cites Jonathan Chait:

The reformers are massively understating the obstacles before them. There are reasons Republicans have fought so hard to claw back subsidies for the least fortunate. Active philosophical opposition to redistribution is one. A general detachment from the poor is another. The unforgiving zero-sum math of budgets, which means a dollar spent on helping a Walmart mom is a dollar in higher taxes or lower defense or politically painful cuts in retirement benefits, is a third. I do think the Republican reformers can nudge their party to a better, or at least less terrible, place. But I don’t think they’re being very straight about it.

The problem is that these Republican reformers are dealing with a political party that believes America is just like Lake Wobegon, where all the women are strong, all the men are good looking, and all the children are above average. That too is imaginary. And Edsall sees that may get them in trouble:

In a prescient article published in November of 2011, Henry Olsen, a senior fellow at the Ethics and Public Policy Center, wrote that “the differences between white working-class independents and the GOP’s conservative base are becoming too substantial to ignore. The GOP base voter believes the deficit is as large a problem as the economy; the white working-class independent does not. The GOP base voter believes cutting entitlements is necessary to cut the deficit and that taxes on the rich should not be raised; the white working-class independent disagrees.”

In other words, the conservative coalition, already facing demographic challenges from the rise of minority voters, is likely to lose core white support if it maintains its dominant anti-government ideology.

That is a problem. The recent college graduates who cannot find work, or who end up collecting the shopping carts in the parking lot at the local 99-Cent Store for a few years, or forever, are a problem. Their parents, worried sick about them, are a problem. Those who are told that they are part of that forty-seven percent who just want to take from others and should just suck it up or die, are a problem. There is no end of problems here. That’s the hopeless underlying disaster that rolls on and on.

Should we repeal Obamacare, every single bit of it, to save America from something or other? Should Hillary Clinton be sent to jail, for gleefully ordering the death our ambassador and three others in Benghazi? Should Obama be impeached for arranging the return of one of our prisoners of war, because the guy was a confused goofball and once studied ballet? Should we ban all forms of birth control and arm every man woman and child in America with an assault rifle? Should we require that all cars and trucks and motorcycles from now on run on coal and only coal? There are all sorts of questions, all of which seem a way to avoid thinking about the ongoing underlying disaster, the economy that simply stopped working.

Ah well, at least those of us who are charter members of the Professional Organization of English Majors (POEM) are used to this. The economy never worked for us in the first place. We’ll just have lots of company now.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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