Cutting social security during wage stagnation is madness
by David Atkins
Since cutting Social Security, a retirement program directly tied to wage earnings, appears to be a bipartisan thing now (sigh), it’s worth noting that wages are stagnant even for college graduates. Heidi Shierholz at the Economic Policy Institute explains:
The wages of young college graduates have fared poorly during the Great Recession and its aftermath. Between 2007 and 2012, the wages of young college graduates dropped 7.6 percent (9.4 percent for men and 6.6 percent for women). As the figure shows, however, the wages of young graduates fared poorly even before the Great Recession began; they saw no growth over the entire period of general wage stagnation that began during the business cycle of 2000–2007. Between 2000 and 2012, the wages of young college graduates decreased 8.5 percent (6.1 percent for men and 10.9 percent for women). These drops translate into substantial amounts of money; for full-time, full-year workers, the hourly wage declines from 2000 to 2012 represent a roughly $3,200 decline.
The wage declines since 2000 stand in sharp contrast to the strong wage growth for these groups from 1995 to 2000. During that period of low unemployment and overall strong wage growth, wages rose 19.1 percent for young college graduates. The stark difference between these two economic periods illustrates how the outcomes of young graduates vary considerably depending on whether the overall economy is experiencing low unemployment and strong wage growth or high unemployment and wage stagnation. Young graduates who enter the labor market during periods of strength (e.g., 1995–2000) face much stronger wage prospects than young graduates who enter the labor market during periods of weakness (e.g., 2001 to the present).
There’s even a handy chart:
Keep in mind that this is college graduates we’re talking about. Those with less education are faring even worse in this economy. Nor is it a secret that the boom of the late 1990s isn’t likely to be replicated any time soon.
But it’s not that everyone is hurting. The wealthy are doing great:
Workers’ wages are stagnant. The 401K system is a disaster. Unemployment is high. We have record income inequality and record corporate profits that aren’t translating in a trickle down of jobs. We face multiple emergent crises, not least of which is climate, that require a major jobs program to solve.
Cutting government jobs and wage-based social insurance programs at a time like this isn’t just bad policy. It’s madness.
.