Yesterday’s New York Fed release on recent college graduates concluded that “young college workers have been struggling more in recent years.” The study found that almost half of recent college grads were underemployed in 2012, a figure which has continued to rise since the start of the recession. In fact, last year underemployment of young grads was the highest it’s been since the early 1990’s.
High underemployment for young college grads exactly encompasses what I call the “Great Squeeze.” The continuing disappearance of middle-wage jobs, coupled with a lack of preparedness for today’s high-wage, high-skill jobs, means more educated young people are taking lower skill jobs for less pay. This is squeezing those with less education and experience down and out of the labor force, having a disproportionate effect on the youngest segment of the working population.
To be sure, a college degree is still worth it. In spite of their economic struggles, those with a degree are still more likely to find a job and have higher earnings than those without a college degree.
And not all college graduates are feeling the squeeze. The New York Fed presentation also showed, not surprisingly, that those who studied more technical fields that were in high-growth sectors of the economy are enjoying significantly less underemployment and higher earnings than those in other fields of study.
But that doesn’t negate the clear majority of recent college graduates that are feeling the squeeze. Adding in the share of recent college grads that were unemployed in 2012, and we see a picture where at least half of young college grads were either underemployed or unemployed last year. Student debt, now over $1 trillion and climbing, is exacerbating the problem.
This is not by any means a hopeless scenario, but it does call for action. The slow-growth recovery we are stuck in is not enough to get today’s young graduates back on track to buy a home or save for a secure retirement. Instead we need policies that prioritize investment over consumption, and move us into a high-growth economy. A key part of that is having an educated workforce which is able to realize its full potential.
