Further evidence that it’s not just about wage stickiness

by on May 20, 2011 at 7:18 am in Economics, Education | Permalink

Employment rates for new college graduates have fallen sharply in the last two years, as have starting salaries for those who can find work. What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all.

That is from Catherine Rampell.  As I like to say, wage stickiness is for the workers you’ve already hired, not for the new ones.  And yet employment for the new workers is not running smoothly, so how can it all be about wage stickiness?  That said, this is also circumstantial evidence that low employment rates are in part about wage stickiness.  If wages are falling for new hires, it is probably the case that for many currently employed workers real wages need to fall as well, and that often happens only with some resistance.

What else is driving lower employment for recent college graduates?  Some of them are quite willing to simply not work for a while.  Others fear that low-track jobs will hurt their future careers and so they wait rather than starting as a garbageman.  What else?

1 MikeDC May 20, 2011 at 7:48 am

What else is driving lower employment for recent college graduates?

Wages for new hires can’t fall that much because Obamacare is raising the real wage that must be paid to new workers.

Also, by requiring coverage of dependent “children” up to the age of 25, it has increased the reservation wage of new workers. That is there’s an economic rationale beyond them being “quite willing to simply not work”.

What’s so hard about this to figure out? We’ve made it much more expensive to hire new workers and simultaneously removed an incentive and made working less beneficial.

2 Dean Sayers May 20, 2011 at 9:31 am

I think you mean total compensation. Real wage is still just the nominal wage adjusted for inflation. And if anything, expanded compensation from the healthcare act should cause the expected wage-rate to fall even more.

It’s important to note that worker productivity has consistently increased, while the wage rate has remained stagnant. Government disincentives can’t tell the whole story by a long shot: to whatever extent, expansion of education across liberalized markets have had a significant effect too, for instance. And the government practices provide a piecemeal handout to medical and insurance firms at whatever rate that worker compensation expands – while performing some price adjusting to combat medical industry inflation.

3 Tom May 20, 2011 at 9:34 am

Compensation has not remained stagnant, though. Medical benefits has doubled in the last ten years, which is a 5-6k raise. While productivity has risen, it’s mostly through technology that the employer has purchased. Why would the worker capture the surplus?

4 Dean Sayers May 20, 2011 at 9:43 am

“Compensation has not remained stagnant, though. Medical benefits has doubled in the last ten years, which is a 5-6k raise.”
Right, and to be fair, I think a powerful medical industry is a big part of this. It’s not for nothing that our healthcare costs much more than other industrialized nations. But I fail to see how this has any bearing on my argument above…

“While productivity has risen, it’s mostly through technology that the employer has purchased. Why would the worker capture the surplus?”
Cool it Marx. Are you saying that it is has no bearing on our economic trajectory that the surplus rate on labor expands in capital-intensive firms? Since when was this a normative argument, for that matter?

5 lena May 20, 2011 at 11:23 pm

how have medical benefits doubled when employ contribution to premiums have doubled and deductibles have gone up double or my case tripled.

6 Komori May 21, 2011 at 1:05 pm

Employer contributions have gone up more? No idea if this is the case, since employers don’t like saying how much they pay, but it’s a perfectly valid scenario that fits the answer.

7 Floccina May 20, 2011 at 10:41 am

Wages for new hires can’t fall that much because Obamacare is raising the real wage that must be paid to new workers.

For new hires that is only true if they are already offering minimum wage. If they are offering above minimum wage they can still lower the offering wage.

8 MikeDC May 23, 2011 at 8:57 am

In theory this might be true, but in practice my sense is there’s more going on.
1. Employers typically look at the full stream of compensation they’ll have to pay over the course of a longer term association with an employee. We’re talking about hiring professionals here, not easily exchangeable drones. Those “hidden” compensation factors we don’t see in our paychecks are high and getting higher. Most obviously, there’s the expectation of that massive excise tax down the road. You can’t cut benefits to some or offer lesser, or cheaper plans to new employees now and expect to dodge that. It’s a big incentive to only hire professionals you absolutely need to, and not take a chance on anyone else.

In short, we’ve recreated one of the worst features of the incentive system prevalent in much of Western Europe.

2. As I said, the reservation wage has gone up. In many cases, when we’re talking about young professionals, we’re talking about people 22-26. What are the incentives for them and for companies? Pre-Obamacare, suppose their choices were

A: $28k job + $4k health benefits (get a job with traditional health care plan)
B: $31k job + $1k health benefits (get a job and decline health care plan, or pay out of pocket, get catastrophic coverage, etc)
C: 24k job + $1k or $0 health care benefits (become a waiter)

Now suppose they are
A: $24k job + $7k health benefits (get a job with traditional health care plan which is now more expensive)
B: $24k job + $7k health benefits from parent’s plan (become a decent waiter and stay a “dependent” to your parents)
C: $24k job + $0k health benefits (become a decent waiter but now you’re 26)

Even if companies lower the offering wage, there are still practical limits beyond the min wage that force employers to offer more.

9 JonF May 20, 2011 at 6:14 pm

The ACA only affects jobs that do not come with health insurance nowadays, and only at larger firms.
The vast majority of middle and upper income jobs already include health benefits so the ACA is meaningless there. And strangely enough to the extent that jobs are being created now they are disproportionately low wage jobs, the exact sort the ACA will force to include benefits in a couple years. So it’s pretty obvious the ACA has nothing to do with this.

10 MikeDC May 23, 2011 at 8:58 am

Their are all sorts of additional taxes, restrictions and requirements placed on existing health benefit plans

11 AndrewL May 20, 2011 at 7:54 am

in NYC you have the “know” someone to get a job as a garbage man, I don’t think people are passing up work in the department of sanitation here.

12 dnb May 20, 2011 at 8:12 am

College graduates don’t stop from the bottom and work up, they start at the top.

13 dnb May 20, 2011 at 8:12 am

start*

14 Cheesehusker May 20, 2011 at 8:30 am

Anecdotally speaking, perhaps some of the low employment rate is due to decisions being made by the students themselves, as you note – ranging from the types of positions they seek to how they present themselves for employment.

My company, a top 5 grain handling business with facilities all around the Midwest as well as a strong global presence, has had a very difficult time filling slots in our management trainee program. We simply haven’t been able to find enough recruits who are willing to live in smaller towns, move around a few times and do an honest day’s work which includes not checking Facebook every 30 seconds. After all, who goes to college for 4 years to start their first job at a grain elevator, right?

Of course, ours isn’t exactly a sexy business like high tech or banking – yet – but we offer a great ladder loaded with opportunities for those willing to see and seize them (Thank God for veterans!). Perhaps this is the crux of the issue – so many recent grads I’ve been in contact with seem all about instant gratification and aren’t aware of/keen on the idea of building a career.

Then again, I’m a crusty old fart, so what the hell do I know?

15 meter May 20, 2011 at 8:35 am

+1.

“What else is driving lower employment for recent college graduates?”

A sense of overwhelming entitlement justified by nothing?

16 Jesse May 20, 2011 at 8:40 am

Or maybe the same prospects the last 2 generations of college graduates had

17 dave May 20, 2011 at 9:13 am

Why would they need to go to college to do the job your describing?

18 Jamie_NYC May 20, 2011 at 11:00 am

To learn how to spell?

19 Cheesehusker May 20, 2011 at 4:26 pm

For the same reasons as with pretty much any job/career path. Economics, communications, mathematics, management, etc – much less an understanding of ag issues and technological change.

20 Dean Sayers May 20, 2011 at 9:35 am

Perhaps it is conservative firms like your own that can’t keep pace with changing cultural standards and the diminishment of the value that jobs provide people. I can tell you that at the wage-rate I’m typically offered these days, I wouldn’t dream of traveling. However, at the 13-20/hr wage-rate that an IBEW-repped job offers in my region, I’d easily commute 80 miles (as I used to) or move around to regional cities, as many of the employees do.

21 Cheesehusker May 20, 2011 at 4:29 pm

Perhaps. On the other hand, the reason we move people around is to expose them to different aspects of our business – both in terms of facilities as well as geographical. Somehow I doubt we’re the only company which still does this.

22 Dan Dostal May 20, 2011 at 2:31 pm

I’m sorry to say that you are. I’m an engineer, the one area of study that I was told lends itself to being a company man. I’ve not had a serious raise in the five years I’ve been with my company. Come to find out the standard method of getting more money is not to do a better job, or to take a job with greater responsibility, but to move around between companies.

Basically, we don’t believe you.

23 Cheesehusker May 20, 2011 at 4:37 pm

Sounds more like an issue with your company. We always promote from within and today’s trainee is next year’s manager – with commensurate pay increases and bonuses along the way.

24 Steve May 25, 2011 at 8:22 pm

No, it’s just how the engineering field works. Management hasn’t caught up with reality. Many companies hire a young engineer with no thought of pay raise over the life of that employee. I’m also an engineer, and even before the economic collapse wage increases were nominal, if they existed at all. Management does not realize the service you provide until your gone and they have to fill your shoes. What they find is no one at the experience level they now need to fill will take the job at the below-market rate of the employee they just lost. The end result is, as an engineer, to increase your wage you have to go to a different company that knows it needs the skills you can provide and must now begrudgingly pay it. I can think of at least 20 friends in the last 5 years that have lived through this process.

25 Robert Olson May 20, 2011 at 6:27 pm

Where is the application? I know plenty of unemployed and marginally employed recent grads, maybe they’ll be interested.

26 Scott Sumner May 20, 2011 at 8:32 am

Tyler said:

“That said, this is also circumstantial evidence that low employment rates are in part about wage stickiness. If wages are falling for new hires, it is probably the case that for many currently employed workers real wages need to fall as well, and that often happens only with some resistance.”

Exactly!

27 E. Barandiaran May 20, 2011 at 9:07 am

Do you know what has been happening with faculty employment in Econ departments of state universities? Have salaries –including all sorts of present and future benefits– declined in California and other states that face severe fiscal deficits? Have hiring and firing practices –including all sorts of legal and contract conditions and terms– changed across states? I have not been able to find any study through AEA.

28 Alex Godofsky May 20, 2011 at 9:09 am

Isn’t the other half of this that an AD shortfall can hurt even those who are willing to accept flexible wages, as long as other parts of the economy remain sticky? You made that point a number of times on your blog.

29 OR May 20, 2011 at 8:48 am

“If wages are falling for new hires, it is probably the case that for many currently employed workers real wages need to fall as well, and that often happens only with some resistance.”

And this is good, why?

30 Andrew' May 20, 2011 at 8:58 am

Low living expenses made even lower from a 4 year education in how to extract utility from the internet.

31 Jim May 20, 2011 at 9:16 am

Lack of computer skills.
We need to come to terms with the new reality: from this point in human history on, nearly everyone needs to be able to program. (prior milestones like this were “able to speak” and “able to read”)
The hedge fund I work for is hiring every qualified java developer we can find who has: BS in CS from a top 100 university, 3.2 GPA, and the ability to independently solve problems with code.
Yet the number of CS grads is shrinking every year.

32 meter May 20, 2011 at 10:13 am

False. Programmers are a dime a dozen. Code is nothing without an underlying understanding what business and/or purpose is supposed to be driving it, and programmers are notoriously bad at that.

33 Ben Hughes May 20, 2011 at 11:21 am

I’m not really even sure where to start on the ignorance of this statement, and anyone who makes austere categorical assertions like these deserves a healthy suspicious of credibility, but let’s just say most SV entrepreneurs would laugh in your face upon saying, “programmers are a dime a dozen”. The enormous talent squeeze in the industry now is making it difficult to throw $120k/yr at even mediocre programmers with the right backgrounds in the bay area. If you believe what you say, sounds like you have a huge profit opportunity solely from recruiting referrals.

That being said, I totally disagree with Jim’s original claim that “nearly everyone needs to be able to program”.

34 meter May 20, 2011 at 12:16 pm

If your claim is that “there are relatively few Americans with good code chops” I would agree with you. However, there are oodles of programmers in India (and elsewhere) who can code pretty much anything asked of them.

And yes, I was responding more to the claim that everyone needs to be able to write code.

35 dave May 20, 2011 at 1:50 pm

What I hear from programmers is that unless you get a job at a top company or get lucky with a startup your basically heading to a Dilbert lifestyle where you get fired at 40 because your obsolete.

36 dave May 20, 2011 at 9:18 am

If you are healthy and young, i.e. you don’t need health insurance, and you have a decent enough parental relationship that you can live rent free, there is literally no reason for people to settle for a bad job or wage on graduation. Honestly many would be better off developing skills on their own and maybe building a portfolio or doing freelance work rather then taking a low status job which actually hurts employment prospects.

37 lena May 20, 2011 at 11:27 pm

I guess living at home with mom and dad doing freelance work doesn’t hurt your employment prospects

38 Dan H. May 20, 2011 at 9:19 am

According to the article, the effect is primarily seen with students graduating with degrees in the humanities or area studies.

My guess is that the signaling value of these kinds of degrees has fallen. In the past, a degree in any subject was valuable because it signaled higher intelligence, exposure to broad subject matter, and an ability to stick with a program for four years. That had value even if the subject matter wasn’t related to the job.

Today, I think there are many employers who believe that degrees are watered down, and that there’s so much groupthink and political correctness in the humanities that graduates are likely to be more dogmatic rather than being more willing to look at new ideas or think outside of the box.

I recently read a related article which said that more students are ignoring ‘difficult’ minor subjects. For example, more students are graduating without an ability to write well because they are avoiding minors in language arts, choosing instead to minor in subjects like women’s studies or fine arts. Maybe that has something to do with it.

39 Bill May 20, 2011 at 9:24 am

I think you are going to see the adjustment from the college student supply side, not the demand side.

With increasing tuition costs at public universities and reports of college students not finding jobs (other than in Teaching for America, Americorp, Peace Corp, etc.), I think you’ll see a drop off in college applications and a reassessment of the value of college by students with limited means and risk aversion.

40 Blunt Instrument May 20, 2011 at 2:07 pm

I think you’ll see a drop off in college applications and a reassessment of the value of college

I don’t think so. Ever since Duke Power, a college education has been the primary intelligence signalling mechanism for employers. We are seeing the fall of the value of a college education in absolute terms. The relative value will likely not diminish.

41 Bill May 20, 2011 at 2:51 pm

I’ll give you relative value, now that high school educated students earnings are dropping as well.

But, tell me, what is the direction is college tuition going in?

42 Blunt Instrument May 20, 2011 at 5:04 pm

College tuition, like tulips, internet startup stock prices, and house values before it, will continue rising until it stops. Anything that is unsustainable will end eventually. Tuition rising at annual rates 8+ points higher than inflation will end, eventually. I expect that the federal government will intervene to postpone and mitigate the collapse. for better and worse…

43 Fadam May 20, 2011 at 9:43 am

I don’t think that necessarily shows that wage stickiness is not the problem. If firms want to cut real wages for existing employees but can’t, their only option from a budgetary perspective is to reduce salaries for new hires. This is really the only way that we ever get average nominal wage decreases. Insofar as it is industry wide, it does not hurt a company’s competitiveness, but as you mention it may lead to recent graduates pursuing other opportunities or waiting to enter the workforce.

44 Richard A. May 20, 2011 at 9:47 am

Here is more from NACE’s website–
http://www.naceweb.org/Press/Releases/Computer_Science_Overtakes_Accounting_as_Major_With_Top_Offer_Rate_for_the_Class_of_2011.aspx?referal=pressroom&menuid=273

Let me add that under Bush there was a large decline in computer science enrollment as a result of this major being artificially glutted.

45 Dan Carroll May 20, 2011 at 9:47 am

Unwillingness to accept low status jobs or entry level jobs = wage stickiness

Ability to live at home rent free and wait for a better offer = wage stickiness

During the boom, employers are willing to bid up wages and benefits to compete for new hires, and people don’t forget that easily. During the bust, employers lay off rather than cut wages (for legal and morale reasons), and implicit in laying off is not hiring. And, yes, the higher health care costs are also an impediment to hiring full time.

46 Ironman May 20, 2011 at 10:36 am

Tyler asked:

What else is driving lower employment for recent college graduates? Some of them are quite willing to simply not work for a while. Others fear that low-track jobs will hurt their future careers and so they wait rather than starting as a garbageman. What else?

Today’s college graduates are more often leaving college with less work experience today than ever before, which puts them at a competitive disadvantage relative to individuals who do have real world work experience.

Here’s why that is, and here’s that job loss in the context of the overall change in jobs since 2006.

Always remember that the stickiest wage of all is the minimum wage, which prevents employers from being able to hire the least skilled, least educated and least experienced workers at the wages that correspond to their extremely low level of productivity as they enter the work force.

47 dearieme May 20, 2011 at 10:44 am

Something’s gone horribly wrong with the formatting of this comments page.
Have you bee employing cheap labour?

48 liberalarts May 20, 2011 at 11:02 am

“With increasing tuition costs at public universities and reports of college students not finding jobs (other than in Teaching for America, Americorp, Peace Corp, etc.), I think you’ll see a drop off in college applications and a reassessment of the value of college by students with limited means and risk aversion.”

The other half of the question is: has the opportunity cost of attending 4 or 5 years of college gone up or down? A high school graduate who skips college has very few options to get a decent job or to cultivate a career. If many college grads are taking jobs that don’t require college, I have to believe that many high school grads are taking jobs that don’t require high school diplomas. Ten years from now today’s college grads will continue to out earn today’s high school grads.

49 Bill May 20, 2011 at 12:01 pm

College education is not costless. College grads are taking the jobs of high school grads, yes, that’s true, but that also means the college grad has taken a step down. So, now the college grad has the tuition cost. Who’s then ahead?

Maybe we’ll be lucky and we’ll find a way to reduce the costs of college education.

Or, maybe we’ll increase the qualifications of some professions.

It used to be that you didn’t need to be a college graduate to be a policeman.

50 Bill May 20, 2011 at 12:05 pm

I would also add that today’s college grad who takes a low paying, high school qualified position not only competes with high school grads, but, after two years, will find it difficult to compete with recently graduated high school grads.

Two years as a waitress or one year looking for a job doesn’t necessarily place you in a good competitive position with a new college graduate.

Frankly I think college students are the ones who will suffer the most with forced austerity programs. The government sector used to pick up some of the college slack.

51 Bill May 20, 2011 at 12:09 pm

Last line of first sentence should read: “compete with recently graduated college grads.”

52 dave May 20, 2011 at 1:48 pm

Yes, spending 4 years as a waiter is worthless. But if you spent four years learning to program, or doing quality art, or starting some kind of business they maybe you’ll have something to show for it.

53 Bill May 20, 2011 at 1:57 pm

Agree with you on practical courses like programming.

Art, well, and theatre arts, well, and journalism, or womens studies or history….now, life sciences, math.

I look on my neighbors on block which had a number of graduating college students these last two years. One graduated from a very good school in econ, and couldn’t find a job…off he is, now, after a year, going to law school. Another kid is in Americorp. Another is in Teaching for America. Basically, government service.

I talked to one of them, the econ major, about his friends. Bleak, unless you want to be glorified bank teller or loan officer.

Perhaps one should consider graduating at a time when the business cycle is hiring…step out of school for a year, and graduate when job prospects are better, rather than graduate and get a poor or no job, and have to compete with fresh kids out of college two years from now.

I feel sorry for the younger generation. I teach lawyers and MBAs, and I’m even beginning, just beginning, to feel sorry for them, but not much.

54 dnb May 20, 2011 at 3:49 pm

what type of jobs were they looking for? also do these programs such as americorp, pay back college loans. Ten years within a government job your student loans are forgiven.

55 Bill May 20, 2011 at 5:06 pm

dnb,

Alas, the two other kids suffered from the disease of the upper middle class: give your kids a high price education in what they want: Women’s studies for one, graphics and journalism for the other. I believe Americorp pays back a year or two of college while you receive subsistence wages.

Both looked and could not find a job (teaching for one, communications for the other)–but, they were able to take their cappucino maker with them to the Americorp and Teach for America jobs.

56 Benny Lava May 20, 2011 at 11:17 am

Didn’t Keynes say that during a depression wages couldn’t sink low enough for full employment and the work to actually pay enough for people to eat?

57 bruce cleaver May 20, 2011 at 11:57 am

@dearieme:

I noticed this too. If you are on Windows Explorer, refresh (F5) usually clears it up.

58 Greg Ransom May 20, 2011 at 12:23 pm

In Costa Mesa, the median income is about $60,00 a year — the median income of government workers in the city with a union contract is about $170,000. Most of these jobs have no skills having anything to do with college, although often college becomes part of the hiring or promotion process for no sound reason.

Cost Mesa is cutting back on government workers with union contracts.

Imagine how may people could be cleaning streets, policing streets, improving parks, etc. it the city could hire 3 people at the median civilian salary instead of one at the union government rate …

California could easily triple the government workforce in the state overnight — at the median income.

59 Bill May 20, 2011 at 2:48 pm

Greg,

I don’t believe you.

Please give me a cite to your claim that the medium income for government workers with a union contract is about $170k in Costa Mesa.

For your information, the medium income for Costa Mesa workers is:

“According to government data, the average salary for jobs in Costa Mesa, California is $39,538, and the median income of households in Costa Mesa was $53,361.”

Here is the source:http://www.simplyhired.com/a/local-jobs/city/l-Costa+Mesa,+CA

60 Greg Ransom May 20, 2011 at 4:10 pm

Median firefighter salary is $110,000 plus unfunded pension and other benefits. Median firefighter retired at well above the median salary at age 55 — bringing total compensation well above $170,000.

Lifeguard support staff in Newport Beach make well more than this.

Starting CA prison guards make more than average Harvard grad upon graduation.

It costs over $50,000 a year to house a criminal in CA, less then $17,000 in TX.

Many city workers in CA retire at age 50 at 100% of final salary plis holiday and sick pay.

If teachers in CA took a 20% pay cut, they’d still be the 2nd highest paid in America.

Yes, the facts are unbelievable.

61 Bill May 20, 2011 at 5:24 pm

Greg,

Some facts may be unbelievable because they are not true:

a. Here from the Costa Mesa website are the salaries of current positions:

Instructor Guard

PART-TIME

$10.06 – $13.47 Hourly

Intern (Volunteer) – Various Assignments

VOLUNTEER

$0.00/Hour

Lifeguard

PART-TIME

$8.71 – $11.68 Hourly

Police Aide

FULL-TIME

$9.28 – $12.44 Hourly

Recreation Leader I/II/III/IV (Various P…

PART-TIME

$8.00 – $16.95 Hourly

Here is the link: http://agency.governmentjobs.com/costamesa/default.cfm

b. I was going to lure you out to say more because I had earlier found an Orange Country Register Article saying that the average government salary was $61 k, but now I can’t find it. Too bad, you’ll have to take my word unless you want to challenge me and make a bet.

c. One other thing, sometimes people have added pensions into this, including the employee contribution to the total. I hope you are not doing this. Also, I don’t know if SS is paid by the city or not, but when it isn’t some people also don’t include what would have been the employer SS contribution in comparing to a private business. (ie, if you took a private sector employer contribution to SS as a contribution to a pension, then the private sector contribution would be higher too).

62 Greg Ransom May 20, 2011 at 10:39 pm

You are a dishonest guy, Bill.

Here’s the article on $200,000+ annual salaries + bebefits for Newport Beach full time life year round guard support staff:

http://www.foxnews.com/us/2011/05/20/lifeguard-pay-200g-riles-california-beach-city/

You are giving me seasonal work hourly wages for Costa Mesa.

Apple vs yoyos — not comparable at all & not relevant to what I said.

63 Bill May 21, 2011 at 9:39 am

Greg,

You should be careful in relying on Fox News for your data, and rather go to the city website for pay information.

But, since you did rely on Fox, why not reprint the rest of the article, rather than imply that all lifeguards make this and disclose that these were full time supervisors and included overtime. Here is more information from the Fox News piece you cited, and I will discuss later how this is slanted as well, but for now read this:

From the Fox Article:

“Those whose salaries are in question point out that they hold management roles, have decades of service and are considered public safety employees under the fire department, the same as fire captains and battalion chiefs. The fulltime guards train more than 200 seasonal lifeguards who make between $16 and $22 an hour, run a junior lifeguard program that brings in $1 million a year and oversee safety on nearly seven miles of sand.

Many began as seasonal guards and worked their way into management roles and must stay certified as instructors in an array of advanced emergency, scuba and rescue techniques, said Brent Jacobsen, president of the Lifeguard Management Association, the lifeguards’ union.

“Unfortunately, there’s a lot of disinformation out there. People get this idea that we’re talking about 17-year-old kids in lifeguard towers making $200,000 and that’s not correct,” he said. “We’re professional level. Lifeguarding here is different than any other place in the entire world.”

Base salaries for Newport Beach lifeguards range from $58,000 for the lowest-paid officer to $108,492 for the top-paid battalion chief, according to a 2010 city report on lifeguard pay. Adding in overtime, special compensation, pension, medical benefits, life insurance and other pay, two battalion chiefs cleared more than $200,000 in 2010, while the lowest-paid officer made more than $98,000.

All lifeguards received $400 in sunscreen allowance and two cleared $28,000 apiece in overtime and night duty pay.

Newport Beach’s lifeguards can also retire at 50 with 90 percent of their salary with 30 years of service, according to state data.

“Because of the compensation, lifeguarding has evolved from a brief and youthful interlude into a career and that’s probably what’s most shocking,” said Councilwoman Leslie Daigle, who added that in the winter the fulltime lifeguards stayed busy answering phones and painting guard towers. “I think people are looking for elected officials to be more fiscally conservative. We love lifeguards, but that’s not the issue.”

Read more: http://www.foxnews.com/us/2011/05/20/lifeguard-pay-200g-riles-california-beach-city/#ixzz1MzdYQlEN

Now, to go into more detail on the comp issues, because this is interesting too.

1. The comp levels include overtime. I don’t know about you, but I have worked greater than 40 hours in a basic salary job in my youth, and I was compensated for giving up time beyond 40 hours as a laborer. In fact, I remember working 14 hour days and on weekends, and doing it for time where it got to be a sacrifice (Truth be told, however, as a lawyer I worked even more hours, and made mucho multiples of income from this effort)
2. The comp levels include the employee contributions to their retirement. (So, when you talk about retirement income, what this includes is the employee contribution from current pay).
3. I do not know if this is the case here, but when people make statements of public employee retirement contributions, they include the employer’s contribution of what would be the equivalent of the employers contribution to social security–in other words, when you see a private sector salary of $100k, you don’t say to yourself, thats a $106k salary because of the employer contribution to SS). But, when Fox does it, they do
4. The Fox statement and yours are deceptive because what they are reporting is not the salary of the workers, but retiring end of career salaries of a supervisor.

64 Bill May 21, 2011 at 1:42 pm

Greg,

Here is the seasonal lifeguard application for you and your Friends at Fox to apply for a job paying $8.61-$11.68; you must be available: “As a condition of summer employment, a lifeguard must be available for all in-service training and the entire summer season, 06/27/11 – 08/27/11.” http://governmentjobs.com/view_job.cfm?JobID=319086&hit_count=Yes You can also look for lifeguard jobs at Disney and some resorts for the same pay in the area. Just google lifeguard jobs costa mesa.

65 Greg Ransom May 21, 2011 at 2:18 pm

Bill — the story is from the AP. WAKE UP.

“You should be careful in relying on Fox News for your data”

66 Bill May 21, 2011 at 4:26 pm

Greg, I guess it was the selections you made as well as the fact that it was on the Fox News website that led me to this. Stand corrected as to origin but not as to your editing of the story.

Also, Greg, you too can search and find all of the Costa Mesa employees salaries and confirm my statements. But, even the AP article states some of them, except that it lists only the full time lifeguard supervisor, and not all the others who are part time or lower paid.

You still have not provided evidence to support your claim that the median compensation of union employees is $170k.

67 Greg Ransom May 21, 2011 at 2:21 pm

Bill, you keep making my point, again and again.

Thanks.

Costa Mesa is planning to eliminate 1/2 of these outrageous union jobs, and replace them with folks happy do exactly the same work for far, far less.

Again, you come across as a dishonest guy. True?

68 Bill May 21, 2011 at 6:21 pm

The story is that Costa Mesa is bargaining with the unions, that it is planning to contract with another jurisdiction for fire (saving $2 million), and that in 1999, at the height of the dot.com boom, they made some overgenerous decisions on pensions, have not funded them, and are trying to wiggle out.

By the way, any evidence you can cite for the proposition that the median union workers salary is $170k?
Any evidence you can point me to showing the number of full time lifeguards relative to partime life guards?

Finally, I’ll rely on other peoples reading of the post and evidence to support what I’ve backed up to support my assertions and challenges.
It’s all out there for people to read and form their own opinion….based on facts.

69 Bill May 20, 2011 at 3:07 pm

Greg,

To save you some trouble, you might want to go to the BLS statistics on wage classifications for California. http://www.bls.gov/oes/current/oes_ca.htm#00-0000

Just look in the traditional government occupation jobs. They appear below the median of the non-government jobs.

Costa Mesa must be some outlier.

70 Blunt Instrument May 20, 2011 at 12:57 pm

What else is driving lower employment for recent college graduates?

Unemployment-based student load deferments. A recent grad who takes a low-paying job will have to start making payments after the standard deferment ends. An unemployed recent grad can defer payments for an additional year or two while he/she searches for a job that can support the payments.

71 Adam May 20, 2011 at 2:09 pm

Clearly all of these grads are zero marginal product works, right? How could it be anything other than structural?

72 Ed May 20, 2011 at 2:16 pm

Some people here, and in other places where this is being discussed, have made an argument on the lines that while an increasing number of graduates have to take jobs that used to require only a high school diploma, if they are going to get any employment at all, people entering the workforce without college can’t even get employed at the jobs that only require a high school diploma.

If this is true (we don’t have much more than anecdotal evidence right now), its a sign that the total number of jobs are shrinking relative to the population. In this case, jobs are getting scarcer, and the smaller number of jobs relative to the labor force are being assigned according to how many hoops the job seekers are able to or willing to jump through. And if this is true, it still makes sense to go to college.

But if a college degree becomes a prerequisite for any job for someone entering the labor market, this doesn’t mean that the bottom won’t fall out of the higher education industry at some point. There may be a point where tuition winds up so high that even exclusion from the salaried wage economy becomes a better option than paying the tuition. This will especially be true if employers take advantage of the shortage of jobs to reduce salaries and worsen working conditions.

It will be interesting to see, as the baby boomers retire, whether employers find replacements for these workers or simply eliminate their positions.

73 ThermalEconomics May 20, 2011 at 2:19 pm

Sticky Signaling:
Maybe with the overall increase in college enrollment in the last few decades people are starting to realize what a poor signal a college diploma really is.

74 Ed May 20, 2011 at 3:50 pm

To respond to Bill’s comments, it is conceivable that we could get into a situation where a college diploma hurts you in the job market (we are not there yet). This would happen if employers are more aggressively in screening out people who are “overqualifed”, preferring, for example, to higher someone who graduated high school last year for a high-school grad appropriate position, instead of someone who graduated from high school four years ago and then completed college.

75 Blunt Instrument May 20, 2011 at 5:25 pm

This won’t happen as long as college continues to be oversubscribed. 20 year ago you could find a bright, conscientious young person right out of high school who didn’t consider themselves to be ‘college material’. They became key personnel in almost every manufacturing facility in this country. Today, however, we have pushed and dragged that same person into a 4 year degree. They have priced themselves out of the market.

The people who are left are nearly all unemployable as anything but unskilled labor. Ask anyone who has tried to fill a position in the last year or so that doesn’t require a BS.

76 Bill May 21, 2011 at 8:01 pm

Blunt, How about the kid who leaves college after two years for financial reason. Does he beat out the high school and the college graduate?

77 Clive May 20, 2011 at 4:20 pm

At his speech in Texas earlier this month Obama made a big point about having foreign students REMAIN in US after graduation and getting jobs here. I.E. granting them citizenship.

Just as with Stimulus Jobs, Whites need not apply:
Robert Reich, Obama’s economic adviser, and Charles Rangel, House Ways & Means Committee
http://www.youtube.com/watch?v=nT1TkLgfinE

I really don’t think people know what is happening to them, but they will, oh they will…

78 dirk May 20, 2011 at 4:39 pm

Makes me wonder if new houses are selling for less than older, comparable houses. Would that not be a good test for house price stickiness?

79 Octahedron May 20, 2011 at 5:10 pm

Does anyone know how college grads doing when you break it down by major?

80 Larry May 20, 2011 at 11:22 pm

I thought almost all the net new jobs were in government and health care, now that finance and construction are out of it. How many grads have degrees that match those fields?

81 Tyre May 21, 2011 at 1:38 am

As a recent graduate (2010) in this awful job market, I can tell you the main issue is the absurdly unrealistic demand of employers for work experience in “entry level” positions.

Internships only go so far. I suppose I’ve accumulated about 3-4 mo. of relevant experience for accounting at university, yet hiring firms demand 1-3 years experience to be a *billing clerk*, a role that only requires high school graduation. Want a position as a junior staff accountant? Better have 3-5 years behind your degree.

Wage stickiness doesn’t help either, of course, since this means less-experienced new hires can’t differentiate themselves from laid-off older workers in the labor pool. Until the excess of formerly employed workers is absorbed and buyers of labor realize this as advertised positions go unfilled, the problem of graduate un/underemployment will remain unresolved.

82 meter May 21, 2011 at 6:42 pm

While I can feel your pain, let me reassure you that the practice of hitting new hires with the Catch-22 of needing experience for what is essentially an entry-level job is the same as it ever was.

Enterprising people learn how to render that “requirement” meaningless. Build your network.

83 Bill May 22, 2011 at 8:13 pm

Build your network with other 20 somethings who also do not have a job.

84 meter May 23, 2011 at 12:06 pm

I guess that would be your approach, but it wasn’t mine when I was in my 20s.

I hit up friends/business contacts of my parents, their friends and business contacts, mentors at college’s friends and business contacts, prior employers, parents of my friends, and so on.

85 Late to the Party May 25, 2011 at 11:05 am

Could a part of it be that older, more experienced workers are willing to do the same jobs as recent college grads, for close to the same wages? And that given the choice between a recent grad at $50k and an experienced professional (also with a degree) at $60k, many companies will choose the pro?

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