Less-Educated People Are Hurting Economically

STAY in school! It pays. That's the advice of Harvard University economist Richard Freeman to young males. Those who don't go to college face the danger of a rough life economically, he warns. The real earnings of male laborers, service workers, factory operatives, grade school graduates, and high school dropouts and graduates have deteriorated badly in the past 16 years.

``We are really seeing a movement toward a bifurcation of income distribution in the United States,'' he says.

In other words, well-educated males - those with some years of college or with special skills - are doing well financially. Those with less education and fewer skills are suffering.

``We are not talking about drug addicts, homeless people, kids who are part of groups in the ghetto,'' says Professor Freeman. ``These are hardworking people.''

From the 1900s through the 1960s, real earnings of less-skilled and less-educated American workers rose decidedly. National productivity and average real earnings (after inflation) increased by 2 percent or so a year. In some periods, these workers enjoyed not only absolute wage increases but also gains relative to the earnings of more-skilled and more-educated workers.

But according to a draft research paper Freeman has been working on with McKinley Blackburn of the University of South Carolina and David Bloom of Columbia University, the 1970s and '80s mark a ``striking break'' with this historical pattern. Earnings of less-educated American men (not women) began dropping in real terms after 1973 and fell sharply in the '80s. They lost ground relative to their college graduate peers.

All male high school dropouts aged 25 to 64, working full time year round, saw their real incomes decline on average about 15 percent by 1987; those in the 25-to-34 age bracket experienced a 26 percent drop. For example, the average dropout making $22,134 in 1973 made only $19,169 in constant dollars in 1987.

Men in the lowest-paid occupational categories have also been hard hit. For instance, handlers and service workers have seen their real earnings fall 11 percent.

High school graduates have also suffered financially, though not so badly.

Mr. Freeman blames the earnings drop on six factors:

1.A relatively smaller proportion of American workers are represented by trade unions.

2.The industrial mix in the US has changed. There has been a decline in the number of workers employed in high-wage, blue-collar, goods-producing industries.

3.Within industries, the proportion of less-skilled workers has often shrunk. In manufacturing, for example, the proportion of college graduates employed is about the same as 15 years ago; the proportion employed with high school graduation only is way down.

4.The relative supply of college graduates leveled off in the 1970s and declined in the '80s. Their scarcity has enabled them to demand higher earnings.

5.The minimum wage has eroded over 30 percent in purchasing power since it was last raised in 1981.

6.Increased imports from low-wage developing countries have hit those producing competitive products in the US. These are often blue-collar workers.

Freeman sees nothing on the horizon that would reverse this wage trend.

So the Harvard economist calls for a resurrection of unions. He advocates expansion of the income tax credit, a device for providing federal money to the working poor. The US should further encourage higher wages overseas in such nations as South Korea and Taiwan.

He worries that today's low incomes for many blue-collar or service jobs will send a signal to young men that they are not valued by society, tempting some to seek higher incomes in the underground economy, which often involves crime.

``This is not a happy thing for our country,'' he says.