College Graduates and Employment Prospects

As thousands of college students graduate this month, including our students here at Roosevelt, many are concerned how they will fare in the current job market. And that market continues to be challenging as we slowly recover from the Great Recession of 2008-2010.

Recent news, however, show that the economy is adding new jobs (albeit not quite at the rate one would like to see this far into the economic recovery; and this 5 May 2013 report from the New York Times illustrates how much better off college graduates are in terms of employment levels than those who have some college but no degree, or no college at all. For workers without a high school diploma, employment prospects are very tough indeed, unlike in decades past when the US economy sported an abundance of unskilled labor positions. As the news article notes:

The unemployment rate for college graduates in April was a mere 3.9 percent, compared with 7.5 percent for the work force as a whole, according to a Labor Department report released Friday. Even when the jobless rate for college graduates was at its very worst in this business cycle, in November 2010, it was still just 5.1 percent. That is close to the jobless rate the rest of the work force experiences when the economy is good.

Among all segments of workers sorted by educational attainment, college graduates are the only group that has more people employed today than when the recession started.

The number of college-educated workers with jobs has risen by 9.1 percent since the beginning of the recession. Those with a high school diploma and no further education are practically a mirror image, with employment down 9 percent on net. For workers without even a high school diploma, employment levels have fallen 14.1 percent.

The news is not all good here, as the article raises an important point about what sort of jobs college grads have been taking.

But just because college graduates have jobs does not mean they all have “good” jobs.

There is ample evidence that employers are hiring college-educated workers for jobs that do not actually require college-level skills — positions like receptionists, file clerks, waitresses, car rental agents and so on.

“High-skilled people can take the jobs of middle-skilled people, and middle-skilled people can take jobs of low-skilled people,” said Justin Wolfers, a professor of public policy and economics at the University of Michigan. “And low-skilled people are out of luck.”

In some cases, employers are specifically requiring four-year degrees for jobs that previously did not need them, since companies realize that in a relatively poor job market college graduates will be willing to take whatever they can find.

Does this mean that the cost a four-year college degree is not a good investment anymore? Decidedly not, whether one takes the short-view (immediate employment prospects in a difficult job market) or the long-view (return on investment over one’s lifetime). College grads have a marked advantage either way. As the article continues to note:

The median weekly earnings of college-educated, full-time workers — like those for their counterparts with less education — have dipped in recent years. In 2012, the weekly median was $1,141, compared with $1,163 in 2007, after adjusting for inflation. The premium they earn for having that college degree is still high, though.

In 2012, the typical full-time worker with a bachelor’s degree earned 79 percent more than a similar full-time worker with no more than a high school diploma. For comparison, 20 years earlier the premium was 73 percent, and 30 years earlier it was 48 percent.

And since a higher percentage of college graduates than high school graduates are employed in full-time work, these figures actually understate the increase in the total earnings premium from college completion, said Gary Burtless, a senior fellow at the Brookings Institution, an independent research organization.

So, despite the painful upfront cost, the return on investment on a college degree remains high. An analysis from the Hamilton Project at the Brookings Institution in Washington estimated that the benefits of a four-year college degree were equivalent to an investment that returns 15.2 percent a year, even after factoring in the earnings students forgo while in school.

Today’s graduates will need to aggressively and strategically seek employment opportunities, to be sure; and they may have to settle for a less-than-optimal job or internship the first time around. But they’re still in a far better position than their less-educated peers to get gainful employment in their area of expertise, especially as the economy continues to recover.

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