Why are there so many underemployed college graduates in the
US?
"About 48 percent of employed U.S. college graduates
are in jobs that the Bureau of Labor Statistics (BLS) suggests requires less
than a four-year college education. Eleven percent of employed college
graduates are in occupations requiring more than a high-school diploma but less
than a bachelor’s, and 37 percent are in occupations requiring no more than a
high-school diploma;" http://centerforcollegeaffordability.org/research/studies/underemployment-of-college-graduates
The surplus of college graduates is not because labor is overcapitalized. College graduates require more capital to
justify their employment, (as college graduates, vs. eg. as hamburger helpers.) It is because
capital, that is, the economy, is undercapitalized.
Of course, this is actually a relative thing. If the
increase in human capital was greater than the increase in physical capital,
then there would be a surplus of college graduates. If the increase in physical capital was
greater than the increase in human capital, there would be a shortage. And in some fields, noticeably medicine,
there are. In medicine, demand has increased due to the affordable care act,
while the supply of doctors has been restricted by the AMA. The result is that
doctors, at least in some specialties, command very high fees. In some of the sciences, on the other hand, where
the economy has been losing capital, that is, contracting rather than growing, labor
is relatively overcapitalized. The
supply of scientists has outpaced the
demand, as the government and industry have cut back on research. This has led to an increase in credentialism,
that is, an increase in the requirements to obtain a position, and a pool of
underpaid research assistants with increasingly bleak prospects.
There are, however, some general causes for the
undercapitalization of the economy.
One is unequal trade. A country which runs a trade deficit
has an increase in the consumer surplus, since things are cheaper, but a
decrease in the producer surplus, since domestic companies are unable to make
as much profit. But investment in
capital comes out of the producer surplus, and since that is less, capital
investment is less. The (real) economy
grows slower.
Undercapitalized
infrastructure is a second. Inadequate infrastructure increases costs, reducing
producer surplus and making industry less productive. In fact, a reduction in the capitalization of
infrastructure is to be expected in a mature economy under siege, since all capitalization is out of the producer
surplus. This is also a vicious cycle:
Decaying infrastructure reducing producer surplus reducing ability to
maintain infrastructure, etc.
A third cause of the undercapitalization of the economy is
the burden of health care. With the
costs of health care approaching 17% of the economy, fewer resources are left
for the rest of the economy. Of course,
capitalization of the health care sector increases employment opportunities
there, as we mentioned above.
And excessively large and costly financial sector is a fourth: The financial sector is overhead on a
nation's industry. It does not in itself
produce. Its burden, the resources it
consumes, is proportionate to its size,
and subtracts from t he resources available to the real economy. It is also relatively immune to foreign
competition, with results similar to healthcare.
A fifth cause is the inefficient use of what capital already
exists: Consider energy. Underpriced
energy makes labor relatively overpriced, reducing its use. This
increases the ratio of capital to labor in dependent industries. Both capital and labor are thus used
inefficiently. A greater burden is placed on a smaller portion, but a larger
portion is left idle, of both capital and labor. It also reduces capitalization of the infrastructure
required for extracting and delivering energy, and thus harms basic industry. Meanwhile,
the labor burden is concentrated on fewer workers, often past the point of
diminishing returns. (That labor expelled from production is forced into the
inferior market, ie underemployed.) Producers that are less efficient energy
users are excluded at the margins, even though they may have used labor more
efficiently. They must compete against the(subsidized) more efficient energy
users. While at the same time underpriced
energy is put to inefficient uses.
A sixth and perhaps most important cause of an
undercapitalized economy is government. On the one hand, it is overhead. On the other, in the modern economy its
policies help determine the direction of societal growth, and thus those
sectors where the economy is invested in and capitalized. For instance, by overcapitalizing the
military and the security state, it detracts from the investment in basic
industry required for real growth. Government
has also pursued policies that favored the growth of oligopoly and oligopsony. Oligopoly,
while it increases the producer surplus, reduces the market and thus the need
to invest in productive capital. A
consequence is money hoards in the hands of a few, while the rest of the
economy is starved. Oligopsony in labor markets will result in
depressed wages in needed sectors, thus shortages in those sectors while at the
same time discouraging entry. Graduates
look for work elsewhere in the economy, where growth is depressed.
Seventh, increasing complexity means an increase in
structural unemployment, as there will be greater mismatch of training to
skills needed by the economy.
Finally, as we have detailed previously here at http://anamecon.blogspot.com/2011/09/unemployment-average-wage-and.html the the rich pay themselves too well. If the mean wage was lower, more people would be able to be employed, although whether they would have jobs appropriate to their skills is another matter.
