New college grads: could be worse
It’s become an article of faith lately that there’s little point in going to college—you just end up deep in debt and unemployed. That’s not really true, at least the unemployed part.
The Federal Reserve Bank of New York—which has shown an unusual interest in the state of the youth lately, having also developed its own data on student debt—is just out with a presentation on how recent college grads have been faring in the job market. (It’s part of a longer presentation that begins on p. 11 of this PDF.) The soundbite is: they’re not thriving, but things could be a lot worse.
• Recent college grads have an unemployment rate about 2 points below the national average.
• The youngest grads have the highest unemployment rate, but things improve markedly by the age of 25 or so.
• The underemployment rate (the share of college grads holding jobs for which bachelor’s degrees are not required) is high, but—surprisingly—below early 1990s levels and comparable to early 2000s levels. In other words, there’s no unprecedented surge of the college educated young into the latte-serving and pants-folding job categories.
• Earnings for recent grads are higher than those without bachelor’s degrees. This is especially true of those who majored in technical fields like engineering and computer science, but it’s even true for liberal arts majors.
So while it’s not a pretty picture for recent college grads, they’re still better off on average than the un-degreed.
but what does it mean politically to be a “college educated” worker?
Unfortunately this report elides salient details and structural problems.
Many more recent (and not so recent) grads are moving back to their parent’s homes than a decade ago – and we don’t know if this trend is getting worse or better. This means parents are literally paying for their education – and the costs of said education continue to skyrocket with no end in site. Unless that trend is slowed and wages adjusted for inflation begin to rise, the trend of recent grads living at home will most likely increase.
I would argue there are relatively few defaults on student loans at the moment precisely because many grads are living with their parents. In other words, parents are subsidizing a large part of the student loan industry. What’s wrong with that? Well, they money the students would be spending on rent and food is not going into the economy (excepting bank profits) and the scarier fact is that grads who cannot move in with their parents are thrust into the precariat with a huge debt burden and very few options, to say nothing of the multitudes who incur debt and never graduate – many who attended “universities” like Phoenix, but many state schools as well.
Most importantly, grads moving back in with their parents often present a massive strain on parent’s budgets who have found their place in the middle-class already diminished. For example, the grad may be living in a room they would be renting out or they are paying other costs like food, school loans (because they are so high, living at home doesn’t cover the costs), car payments, phones, etc…This is a burden that is almost totally hidden in this society.
Yes, if you are wealthy, none of this applies, and you don’t have to think about it. That also brings to mind the culture and economic impact of interns. Rich kids can work for free for extended periods of time with no impact on their families. If a middle-class family sacrificed to enable their child to get into the “right” school, and make the “right” connections, and that child gets a low-paid or most likely no-paid internship, they also find themselves subsidizing the corporations offering the internships.
Recent college grads may have an unemployment rate about 2 points below the national average, but the jobs they are getting may not resemble the quality jobs of the past (with enough pay, retirement, healthcare, etc.) and as we all know, some of the jobs they could have gotten a generation ago may be fewer, may be in another country, or simply don’t exist anymore.
It has always been true that earnings for college grads have been higher than earnings for non-grads, so that is neither here nor there. It might be more interesting to look at the gap that has formed between liberal arts and STEM majors over time. Also the gaps within STEM.
While college graduates may do better in the job market than non-graduates, I wonder if ‘better’ takes into account the opportunity costs of time, energy, and money sunk to obtain the degree.
Just an issue to consider. CEPR has found that the wage dispersion (inequality) along college educated men is quite large. In his words:
“In fact, there was a substantial overlap between the distribution of wages of men without college degrees and men with college degrees.
This means that while on average men will have higher earnings with a college degree than without one, for a substantial portion of men this is not true. Presumably the marginal college student (the one who is deliberating over going to college versus starting their career) is more likely to be in this group of losers among college grads than the typical college student who never contemplated not attending college.”
I have read that ‘success’ in school (high school and college) correlates only weakly with ‘success’ in later life. If so one should not assume the ‘marginal’ (less ‘successful’) student is later the ‘marginal’ careerist. Scare quotes surround highly ambiguous terms.