The intersection of educational attainment and employment is a major theme of our work, and we’ve recently covered the topic as it relates to both US and European labor markets. The underlying message is always the same: workers with higher levels of education tend to have better employment prospects through their careers. Zoomed out to a macro observation, countries with more highly educated workforces show lower levels of unemployment.
At the same time, cyclical factors play an important role, especially for younger college educated workers. The deeper the recession, the more trouble 22-27 year olds have in landing that first good job. The Great Recession in the US is a powerful case study in this phenomenon.
The New York Federal Reserve has a dataset tool dedicated to the labor market for recent college graduates which was just updated today with June 2018 numbers. Here are a few observations using their online interactive website (link at the end of this section).
#1. While US national unemployment is below prior cycle lows, joblessness rates for recent grads remain above 2007 levels (3.7% now, 3.3% in May 2007). Also worth noting: peak unemployment for recent grads after the Financial Crisis were far higher than any point back to 1990 (6.9% in July 2010 vs. a prior peak of 4.9% in November 1992).
#2. Right now, 42.2% of recent college grads are “underemployed”, meaning they work in a position where less than 50% of coworkers indicate a college degree is required. This is down from the 46.3% peak back in December 2013 but still well above the trough reading of 31.6% in April 2001. Worth noting: 34% of all American college educated workers of any age hold positions where a degree is not a requirement.
#3. Some 13.9% of recent college grads hold low wage jobs right now, defined as positions earning $25,000 or less. This percentage peaked in late 2010 at 15.0%, but even now remains much higher than the 10.9% lows of the last cycle (2006).
The upshot of all this: the Financial Crisis started over 10 years ago, and its shadow remains today in the form of continued under- and unemployment for recent college graduates. A decade of this phenomenon means that even after a college graduate turns 28 (and is no longer “recent” by the Fed’s numbers) they are still likely disadvantaged in terms of career progression and income gains.
Bottom line: chalk this up as yet another explanation for muted US wage growth.
Link to NY Fed resource: https://www.newyorkfed.org/research/college-labor-market/college-labor-market_unemployment.html