The Economic Prospects of Recent College Graduates in the 1990's

GAUGING THE PROSPECTS OF TODAY'S COLLEGE GRADUATES

Many economists attribute rising income inequality to technological changes in the workplace that undermine demand for less-educated workers and boost demand for workers with a college diploma. Throughout the 1980s, college graduates saw their earnings rise faster than high school graduates, despite the rapid rise in college enrollment and the abundance of college graduates in the labor market. But does this pattern still hold? According to John Schmitt of the Economic Policy Institute, the most recent data on earnings suggest that the economic prospects of recent college graduates have flattened out over the 1990s, casting doubt on the belief that education will assume ever greater importance in the workplace of the future. He will test these observations by estimating trends in the wages of recent college graduates, comparing them to high school graduates and to older workers who graduated from college twenty to thirty years ago. He will look for other negative signs, such as the number of graduates who are unemployed, working part time, or filling "high school" jobs that do not require a college degree.

Schmitt will investigate both supply and demand-side explanations for the wage trends he identifies. The increasing supply of college graduates may have dampened their wages, or alternatively, stagnant wages may reflect a decline in the quality of recent college graduates, as measured by GPA scores and college admission criteria. Turning to the demand-side, Schmitt suspects that demand for college-educated workers is leveling off. He will test the popular belief that technical skills are in particularly high demand by examining whether math and science majors, and others who use computers extensively in their jobs, are doing better than their contemporaries. Schmitt's results may identify the limits of the skill premium, providing an important counterpoint to conventional assumptions about the overriding importance of education.