That pay raise might have to wait until 2021. At least that is the word of economists in the latest WSJ forecasting survey:
From 2000 to 2010, median income in the U.S. declined 7% after adjusting for inflation, according to Census data. That marks the worst 10-year performance in records going back to 1967. On average, the economists expect inflation-adjusted incomes to rise over the next decade, but the 5% projected gain isn’t enough to reach prerecession levels.
While the recession has had a larger impact upon Americans without college degrees, but the forecasting survey has bad news for everyone:
Though the majority of the 50 economists surveyed-not all of whom answer every question-say the current generation of college graduates will have a higher standard of living than their parents, a third of respondents think it will be lower. College graduates have generally fared better in the U.S., and they currently have a 4.2% unemployment rate compared to 9.1% for the entire work force. But a college degree hasn’t been enough to ensure wage gains from 2000 through 2010. According to Census Bureau data, only advanced degree holders managed to record increases in earnings over that period.
This spells bad news for incumbents in 2012. Working people lose jobs during a recession, and incumbents often join them. Ten years of low wage growth will not enhance the public mood.This is not a conventional recession; we are at an economic turning point. The blue social model, which worked pretty well in its day, can no longer provide steady growth and rising wages. We need to find ways to compete in a high tech world where the old advantages advanced countries used to have over developed ones aren’t as impressive as they used to be.I remain convinced that the best way to do this is to strip out the friction in the US economy: unnecessary costs in systems like health care, education, government and law. This drives blue model fans crazy because these are the systems where the something like the old blue model still seems to work. To the economic nostalgist, thinking that the route to the future lies through the 1950s social system, the Post Office, the public school system, and the local hospital are the only places where the world hasn’t gone disastrously wrong. What feels like an “attack” on the last bastions of a more communal, gentle and high wage America in the name of efficiency and competitiveness sounds like more of the crazy talk that, again from the standpoint of the nostalgist, is how we got into this pickle.But the reality is clear: for this economy to improve, we have to compete, and cost has to be part of the package. There must be some way in which it is cheaper to do business in America than in other places. We don’t want it to be labor; we don’t want it to be pollution. That really leaves only efficiency: we have to find better, cheaper, faster ways of performing all the social maintenance functions that right now chew up so much of our GDP.By making it easier and cheaper for both foreigners and Americans to buy, build and create here, we can change our trajectory and move back to a more rapid growth path. There has been a lot of talk about infrastructure recently as a way to spur job growth in the short term and faster economic growth further on. That makes some sense, but there is an invisible infrastructure that is even more out of date and doing a lot more harm. Our social infrastructure — the schools, medical system, legal system, government processes and so forth — is antiquated, inefficient and expensive.It’s time for this country to move toward deep reform.