The cellophane from the newly minted bachelor’s degree diploma was barely in the recycling bin when his career was permanently crippled. Joe graduated at the wrong time, 2008. The Great Recession ran from 2007 to 2009 and put Joe and his fellow graduates in a career hole that they might never escape from.
They went looking for their first jobs and found there were few of them. Still ringing in their ears were the exhortations of their commencement speakers such as Bono who said to the graduating class of 2008, “What are you willing to spend your moral capital, your intellectual capital, your cash, (and) your sweat equity in pursuing outside of the walls of the University of Pennsylvania? The world is more malleable than you think and it’s waiting for you to hammer it into shape.” Their hammers just weren’t big enough.
These graduates earn less money than their peers earned 25 years earlier reported the Federal Reserve, and they were doomed to continue earning less for at least the next 10 years and possibly their entire careers. A May 2018 study by the Strada Institute found “The first job is critical. Those who start out well employed rarely slide into underemployment. An overwhelming number of workers who were appropriately employed in their first job continued to hold positions that matched their levels of education five years later (87%). Almost all of those appropriately employed at the five-year mark were still at that level 10 years later (91%).”
So Joe’s earnings as a barista at Starbucks, the only job he could find, doomed him to lower earnings than his bachelor’s degree might have meant than those who graduated 10 years later. The report continued, “The financial costs of underemployment are substantial. We estimate that underemployed recent graduates, on average, earn $10,000 less annually than graduates working in traditional college-level jobs. This imbalance leaves underemployed graduates generally on weaker financial footing as they start their careers.” The only graduates who seemed to have dodged the Great Recession bullet were STEM graduates (Science, Technology, Engineering, Math), and some others that we’ll look at in a minute.
Joe was just unlucky to have graduated in 2008, one of the worst years in recent history to have earned a degree. All graduates who end up taking jobs that could well have gone to those without a bachelor’s degree end up in the same boat. A 2006 Harvard University study by Lisa Kahn found “Wage loss ranges from 1%-13% each year, relative to the cohorts with the minimum state and national unemployment rates, or close to $80,000 over the first 20 years of a career.”
The Strada Institute study found that 43 percent of the 2008 graduates took jobs that didn’t require a college degree. Five years later two-thirds of them were still underemployed, and 10 years later three-quarters of those underemployed after five years were still working for less money than those who graduated in better economic times.
Why that occurs is discussed in Lisa Kahn’s paper, but she only speculates from available literature. She speculates “if workers who graduate in bad economies develop disparities in human capital accumulation then they will be less productive than their luckier counterparts, even years after graduation, and we will see long-term effects.” She says further, “These individuals should have lower average wages controlling for experience (relative to graduates who entered in a thick market and probably found matches more quickly) because they have spent more time in bad matches (i.e., where they are less productive).” Let’s look at what her speculation means in more understandable English.
It means that once someone has taken a lower-paying, lower-prestige job, that shows a prospective employer that that person isn’t as qualified as someone who has never taken a lower-paying, lower-prestige job. Employers also look at current wages for prospective employees and may see a qualified prospect whose wage history indicates that he or she will work for less than another prospective employee who has never been underemployed.
Another speculation has to do with the person who is underemployed. He or she may be so desperate to escape a low-paying position that the lower relative salary of the job he or she is applying for looks far better than the pay that person is getting now despite what other people in similar jobs are paid.
But that leaves 57 percent of graduates who were not underemployed. They did better than others and continue to do better than others in the job market. Of course some of them were STEM majors, but others found a way to use their skills by emphasizing those skills of value across a range of industries. Skills such as computer coding, writing, and critical thinking are of value in every industry. A 2007 study conducted by The Conference Board, “Are They Ready for Work?” found that lack of written communications skills was the biggest workforce problem with 80.9%, four out of five, workers showing a deficiency. Another lacking skillset was oral communication. Along with effective writing, effective oral communication is a skill lacking in many people, not just 2008 college graduates.
Then critical thinking is essential. In my own experience teaching college, I found that most college students are simply unable to think logically through different situations. They jump to conclusions, have no ideas about logical fallacies, and so are duped by propaganda from salespeople, advertising, and politicians.
What those who were never underemployed, aside from the STEM graduates, did was emphasize their writing, communication, and critical thinking (and maybe computer coding) skills rather than their major where there may have been far too few jobs to accommodate these them.
Possibly a new approach is necessary from college graduates to cut the risk of their being eternally underemployed.
By Robert L. Cain
