The Progressive Fix

Why Young Grads Struggle to Pay Mounting Debt

According to new calculations by the Progressive Policy Institute, the strongest growth in employment for college grads aged 21-29 since the end of the recession has been in jobs like dental assistants, bus drivers, hairstylists, and event ticket takers.

This sobering news may make recent college grads – and their bill-paying parents – wonder what exactly they’re getting for all the years and dollars invested in getting a degree.

According to data compiled by PPI, since May 2009 young college grads have seen big employment gains in occupations once held by those workers with less than a college degree. That includes healthcare support, transportation, personal care & service, and production jobs, which all saw employment gains of over 20% for those with a college degree or higher aged 21-29. Employment growth in office and administrative jobs – secretaries, file clerks, bank tellers, payroll assistants, etc. – increased over 10% for young college grads.  Meanwhile, young workers with less than a college degree saw substantial employment declines in similar jobs.

The chart below shows the percent change in employment for workers aged 21-29 by educational attainment for select occupations from May 2009-May 2012.

Across all occupations, workers aged 21-29 with a high school or less saw a 9% decline in employment since May 2009. Those with some college saw almost no change in employment and those with a college degree or higher saw total employment increase just 3%. No wonder college grads are taking what they can get.

The idea of young college grads struggling to make use of their degree is consistent with what we observe in everyday life. A recent survey of young college grads by the John J. Heldrich Center for Workforce Development at Rutgers University found 40% did not have jobs that required a college degree, and just 20% felt their job was the beginning of a career. News stories regularly point out the perils of graduating college under a rising mountain of debt in today’s economy.

Why are young college grads taking jobs that do not require a degree? It’s simple: the jobs young grads normally take aren’t there. Just look at education-related jobs, a sector that typically hires a lot of young college grads. Employment for young grads in education-related occupations fell over 10% since May 2009, as state budget tightening forced hiring cutbacks. And business and financial occupations aren’t hiring fast enough to absorb the new supply of graduates each year, even while shedding those with lower levels of education. That leaves young colleges grads searching elsewhere for work – and well-paid, middle-skill alternatives are slim in today’s economy.

Faster employment growth for young college grads across all occupations is not as simple as higher college enrollments. In a previous post on the subject, I made the point that the labor force has increased for each level of educational attainment since the official end of the recession in 2009.

What’s going on here is a structural shift in the labor market. A hollowing out of mid-level jobs is causing more young college grads to take jobs that don’t require a degree, while non-degree holders are being squeezed-out of the work force altogether. Hopefully the continued recovery will eventually have enough roots to facilitate the creation of better jobs. But time will tell what the impact of the slow and uneven recovery will be on the next generation of workers.

One response to “Why Young Grads Struggle to Pay Mounting Debt”

  1. Paul Fraker

    Dear Ms. Carew, With regard to your appearance last week on CNBC, I have a few observations. Your assumption that higher tuition costs are driving student debt, and not vice-versa, needs some empirical support. To dismiss entirely Mr. Schiff’s contention that increased debt leads to increased tuition is an assertion, not an analytical point. Second, you dodged the question of whether students have a “right” to higher ed. by asserting that “everyone should have the opportunity”. Well, everyone does have an opportunity….that’s why student loans exist. There is a whole range of price points for HS grads, from community colleges and on-line universities to elite private institutions, whose endowments can pay for most of an economically-challenged student’s tution. But no one has a “right” to have his tuition bills paid for by the government., which is essentially what we’re heading for if the Feds forgive as much principal as default rates imply.

    The crisis in student debt has many causes. It is a fact that one of the most important is the failure of high schools to adequately prepare many students for college. Indeed, it is not controversial to say that many who now go to college should not be there, and instead should be able to develop marketable skills in high school. The best and least costly solution, it seems to me, is to fix secondary education.

    Additionally, the idea that college is always a good investment, as you contend, is unsupported by the current reality of grads working in low-paying jobs. That may just be the status quo for the foreseeable future. The rest of the world has caught up with the US in terms of secondary school achievement. And the flexible, mobile and international economy we live in enables companies to get more for their money by hiring grads in developing countries. So, to say that lack of GDP growth is the reason for un- or underemployment of US grads is to ignore what’s happening in the rest of the world.

    Finally, regarding your point that education jobs are no longer there is mainly a function of state budget cuts that inevitably result from out-of-control spending, as in the pension benefits for retired teachers and other public employees. IN fact, one can credibly argue that it is the retirees’ (often) generous benefits that is crowding out spending for new teachers. The NEA’s hardline on hiring and firing discriminates against younger teachers, who are the first to be let go in tough times. If states had been better stewards of the public purse, and if the NEA did not favor tenured over younger teachers, maybe we wouldn’t be in such a mess.

    Sincerely, Paul Fraker, Lovettsville, VA

Leave a Reply