This isn’t your parents’ economy

Welcome to adulthood. Don't expect any favors.

67

“Stop being so lazy, when I was your age I had a house and a pension already lined up.”
“What do you mean you can’t find a job? Everyone has a job!” “Why did you go to college anyway?”

The growing United States economy might seem like more of a burden than a benefit to graduating college students who no longer have the convenient excuse of global economic recession when responding to comments like these from nosy relatives. Things may look pretty good from the perspective of a baby boomer looking to enjoy a few decades of pension-funded margaritas, but for young people fresh out of college there are a few signs to keep an eye on.

According to a press release from the U.S. Bureau of Labor Statistics, the national unemployment rate sunk to 3.9 percent in April 2018, its lowest since December 2000. This means that most recent graduates should be able to find a job, but it doesn’t guarantee that job will be in the field they studied or that it will pay a living wage.

Much of the recent expansion in the job market has come by way of low-skilled work that doesn’t require a college education. An economic forecast published by Portland State’s Northwest Economic Research Center reported in February 2018, 37 percent of new jobs in Oregon were in the construction sector, hardly surprising given Portland’s booming real estate market.

That said, let’s talk about that real estate market. Is the dream of homeownership swelling within you? Do you feel your achievement of the American Dream—complete with white picket fence and golden retriever—is just around the corner? Probably not, considering the median sale price of a home in Portland is $420,900, according to Zillow. Of course, things are cheaper in other parts of the country—I hear Detroit is nice this time of year—but most college grads can look forward to several more years of renting before they even think about buying a home, and that’s only if the field they enter offers substantial wage growth over the course of their career.

And about that wage growth: It’s not looking so great either. Theoretically, when everyone can find a job, they should have more opportunities to negotiate for a higher wage, right? Apparently not.

The New York Times reported in October 2017 that while historical patterns show a correlation between low unemployment and faster wage growth, this trend has not held in recent years. Although unemployment dropped significantly between 2010 and 2016, wages grew by only 1.9 percent, no faster than they did when unemployment was at its highest.

As discussed in the NYT article, economists have proposed many reasons for stagnant wage growth including declining union membership and automation taking over jobs. Whatever the reason, new college grads will have to deal with the fact that their paychecks probably aren’t going to be growing for a while.

Still, some continue to tell new college grads not to worry so much—as if we learned anything else in four years of exams. President Donald Trump has regularly taken credit for recent economic growth, and pointed to the recently passed Tax Cuts and Jobs Act of 2017. The bill slashed corporate taxes and made substantial changes to the individual tax code that reduced federal taxes for most Americans, though some people in high-tax states ended up paying more due to a decreased deduction for state and local taxes.

The president and other prominent Republican politicians have claimed reducing taxes for corporations will result in increased wages, according to an article by Economic Policy Institute Research Director Scott Bivens published by The Washington Post.  Bivens called these claims bunk, writing, “Corporate tax cuts aren’t just useless as a wage-booster, they’re likely even worse at spurring business investment than measures to boost typical workers’ leverage and bargaining power.”

It’s too early to judge the effects Trump’s tax plan will have on the economy. The plan changed countless economic variables instantaneously, and matching each of those changes with real-world effects borders on the impossible.

One thing’s for certain: The economy may look good from the outside, but it has substantial flaws hidden beneath the glowing job numbers. College grads can expect to find work when they depart from the university, but whether that work will be fulfilling personally and financially is another question.

LEAVE A REPLY

Please enter your comment!
Please enter your name here