The Great Squeeze: It’s Not Just College Grads

By / 4.18.2012

There’s been a lot of press lately about how young college grads are struggling. And they are – especially younger grads who have seen their real earnings drop 15% over the last decade.

But that’s missing a big part of the story. You see, when college grads struggle, that trickles down to all levels of educational attainment.

While the economy has officially been in “recovery” for almost three years, we are still about six million jobs short of when the recession began in 2007. But just because we’re short on jobs doesn’t mean the number of available workers decreased alongside it. In fact, the opposite is true – with natural population growth, the number of available workers across all levels of educational attainment continued to rise, for workers aged 25 and older.

Now we all know someone with a college degree generally makes a more desirable job candidate than a non-degree holder – after all, that’s the selling point of going to college (and a big factor behind the $1 trillion in outstanding student debt). So in the competition for the 2.2 million jobs that have been created since the recession officially ended, guess who loses? Answer:  Those without education beyond high school.

Certainly “winning” here is loosely defined: college grads nowadays are taking any job they can get even if it doesn’t pay well or use their degree, hence the downward pressure on their wages. But non-college workers really get hammered; many drop out of the labor force entirely as they are squeezed out of the competition for the few available jobs. In fact, government stats show that while the college graduate (and higher) labor force increased by 2.5 million since the recovery began, and the some college labor force increased by 0.7 million, the labor force of high school graduates shrank by 1.8 million. And of course non-college grads make up the bulk of those who are unemployed.

The great squeeze on non-college workers is not completely new. The labor participation rates of the youngest workers without advanced education (aged 16-19 especially) have been plummeting for some time. But the recession exacerbated this trend, and it has only worsened in the recovery. And the root of the problem goes deep: the economy has failed college grads and the effect ripples all the way through, down to the youngest and least educated workers.

In our current low-innovation, consumption- driven economy, there simply aren’t enough middle skill jobs being created to absorb the increasing number of college grads. And where robust innovation is happening, notably in the communications sector, too few college grads have the mathematical and technical skills needed.

In other words, while some of the problems in today’s job market are cyclical, there is an underlying structural problem that we will eventually have to face. If we don’t generate more good jobs for American workers, more people will come to doubt the value of a college education, while those who don’t attend college will face even bleaker prospects for upward mobility. That means we should strive to encourage innovation, get those innovations to market quickly and effectively, and expand domestic production to promote more balanced economic growth. That would go a long way to alleviate the struggles of all workers, college degree or not.