Underemployed College Graduates Still A National Crisis

As a Class of 2015 graduate from the University of Chicago, Brianna Tong considers herself fortunate. She has a job that she loves that makes her degree worth attaining – as a lead organizer with the IIRON Student Network.

But her work puts her in contact with plenty of young people – many of them her friends and former classmates – for whom a college degree has not opened the doors to anything other than low-wage service jobs.

“From a very young age we are told we need to go to school to get a good job, need to do well in school to get a good job,” Tong said in a telephone interview. But even in 2016, eight years after the end of the Great Recession, that “good job” remains out of reach for too many college graduates.

One in eight college graduates are currently underemployed, according to an analysis of the college graduating class of 2016 by the Economic Policy Institute. That is a measure of the percentage of the college-educated workforce that is working at jobs that don’t require a college degree, working part-time though wanting full-time work, and who want to work but are not currently in an active job search. The underemployment rate is much higher today than it was before the last recession: 12.6 percent this year compared to 9.6 percent in 2007.

That’s conclusive evidence that the problems of high unemployment and underemployment – and low earnings – of people under 25 is not a problem of education; the EPI report says it “stems from weak demand for goods and services, which makes it unnecessary for employers to significantly ramp up hiring.”

During the aftermath of the Great Recession, young workers were hit hard when many were beginning to enter the labor force for the first time. An April 2016 study by the Office of the New York City Comptroller found that by 2014 millennials were making about 20 percent less in real terms than what older generations made during their first years in the labor force.

Meanwhile the rate of workers ages 23 to 29 with at least some college experience rose from 61 percent in 2000 to 72 percent in 2014. Despite their gains in education, millennials are not seeing their employment opportunities grow. The New York City Comptroller’s study reports that “about one-third of young New York City workers in low-wage industries have a bachelor’s degree.”

The millennial generation is one of the most mobile in U.S. history. Unfortunately, they will likely face career setbacks that will ripple through a lifetime. Economist Till von Wachter underscored the severity of the issue in testimony to Congress’ Joint Economic Committee in 2010. Using a study he co-authored, he told the committee that “individuals graduating from college during a large recession are likely to see reduced earnings for 10 to 15 years.”

A key reason is that the economy is creating a lot more low-wage employment than opportunities for higher-skilled labor. The New York Comptroller notes that the retail trade saw a 39 percent increase in its share of young workers since 2000. The study says “that sector offers relatively low wages, with the annual earnings of millennials in retail trade in 2014 averaging only 63 percent of the average earnings of all millennials.”

For those who can get into higher-skilled job sectors, there is evidence of a growing pay gap. In 2000, 14 percent of young people worked in finance, insurance and real estate, and were making 77 percent more than the average of their peers. By 2014, only 10 percent of young workers were in the financial sector, but their earnings were 115 percent of the average earnings for their age group. The share of young workers in the financial sector had decreased, but their earnings grew astronomically.

Widespread underemployment and declining wages for millennials do not have to be the new normal. There are several actions that the next president and Congress can take if they have the will.

Democratic presidential candidates Hillary Clinton and Bernie Sanders have plans that address the costs of higher education, raising the minimum wage, and growing small businesses.

The Center for American Progress argues for a number of policy measures that would combat underemployment among young people. In particular, CAP makes the case for government-subsidized job programs that incentivize hiring young workers while also stimulating local economies – an approach also embraced by Sanders. CAP also argues for an increased federal minimum wage that would lift the financial fortunes of millennial workers stuck in low-wage jobs. Sanders has supported setting that wage at $15 an hour; Clinton has said she would support that as well if Congress approves but has not directly endorsed it.

Educated, eager young workers are entering the labor force in historic numbers, yet millennials are not met with open arms and open positions. Given her experience leading efforts to address problems with higher education, Tong understands that young people do not just need education; millennials also need, as she puts it, “an economy that works for us.”

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