Record-setting growth in the stock market, escalating corporate profits, and a strengthening housing market all suggest that a rebound in our nation’s economy is in full swing. Simultaneously, however, student debt has reached an all-time high, job growth has advanced at an uncharacteristically-sluggish pace, and wages have stagnated.
Looking closer at this situation, it is clear that the wealthy and the established have reaped most of the benefits of the economic recovery. Compare these facts: in 1980, the top 1 percent of earners made 10 percent of the overall income in the United States. Today, their share has doubled to 20 percent. The top 10 percent of earners have gained a whopping 98 percent of the capital growth over the past several years.
One of the reasons for this phenomenon is that during the recession, corporations were compelled to do more with less. Many companies increased their reliance on technology and automation, thereby reducing or even eliminating lower-end jobs. Consequently, workers who have merely a high school diploma are now twice as likely to be unemployed as are workers with a college degree. Furthermore, a worker with a high school diploma who is employed earns barely half what the average college graduate earns. The employment situation for high school drop-outs is significantly more dire.
Recent college graduates face their own set of challenges in this economy. According to the Wall Street Journal, nearly half of recent college grads acquire jobs that have not traditionally required a college degree. We now have a generation earning low wages, strapped with student debt. According to the Consumer Finance Protection Bureau, student debt in the United States is roughly one trillion dollars, and the 2013 graduating class is expected to face the highest level of student debt on record.
In addressing these challenges, we must not fall back on short-term, unsustainable solutions that have the potential to stifle innovation, halt productivity gains, or inefficiently compel redistribution of wealth. Rather, we should turn to both education and policy solutions that focus on equipping the next generation of Americans with capability to fulfill the demands of our evolving economy.
First, our educational system must retain students through high school graduation, and prepare those who are not planning to attend college with high-demand, skills-based certifications. Further, the educational system should incentivize students to focus on high-need fields such as science, technology, engineering, and mathematics. Graduates who are also equipped with critical thinking skills and complex problem solving abilities will be able to contribute meaningfully in the changing labor market.
Finally, since start-ups and small businesses drive the majority of new job growth in America, policymakers need to foster political and economic conditions that encourage growth, limit cumbersome regulation, and provide credit when needed.
When the benefits of economic recovery all slide to one end of the table, adjustment is in order. These adjustment strategies— like investing in the upcoming generation and empowering small businesses —will help America narrow the growing wealth disparity between the ‘two economies’ by promoting economic growth for all.