The members of class of 2019 are about to enter into the next stages of their lives and careers. What can these college graduates expect once they leave campus?
The job market and the economy are relatively strong right now, by a host of measures. The unemployment rate is just 3.6 percent. Even wage growth has slowly been improving in recent months. Average hourly earnings increased by 0.6 percent year-over-year in Q1 2019, according to The PayScale Index.
All of this seems like good news for recent college graduates. However, according to a recent report from the Economic Policy Institute (EPI), Class of 2019: College Edition, this demographic group faces some real economic challenges, too. The report explores who these students are, what they plan to do next and what the employment picture looks like for them.
Young college graduates are in the minority
First, it’s essential to keep in mind that young college graduates are in the fortunate minority. According to the report, fewer than one-fifth of adults (18.6 percent) ages 21 to 24 are college graduates.
The results of the 2015 census, which explored educational attainment in the United States, showed similar results. It found that only about one in three adults in the U.S. have a college degree. The number is even lower for some demographic groups. For example, just 15.5 percent of adults of Hispanic origin (of any race) had a Bachelor’s degree or more.
Having a college degree has long been equated with multiple benefits. It’s correlated with significantly higher earnings, more career options and opportunities and better job security. But a degree doesn’t mean that professional success is guaranteed, by any means.
Who is the class of 2019?
We’re just starting to discover what Generation Z might look like in the workforce. This group of more than 61 million individuals, born between 1996 and 2010, grew up with technology in a way that older generations didn’t.
They’re diverse and appreciate the value of their diversity. They crave independence and autonomy at work and they’re great at multitasking. There are also indications that they crave financial and job security in ways that their older millennial siblings did not. This could be because they watched members of this generation struggle to get their careers started during the Great Recession.
The EPI report examined recent young college grads demographically in order to learn a little more about the group. Here are a few of their findings:
- Women between the ages of 21 and 24 are more likely to have a college degree than men. Women make up 57.4 percent of these young college degree holders.
- The employment rate for young college graduates has declined.
- College attainment varies significantly when it comes to race. Two-thirds of young adults with college degrees are white. Those who identify as Asian American/Pacific Islander are also disproportionately likely to have a degree. Young Hispanic and Black adults are the least likely to hold college degrees. Just 9.3 percent of young Hispanic adults have a degree and 12.3 percent of young Black adults. However, 22.6 percent of white adults in this age group have graduated from college.
It’s all relative
This report makes it clear that while things have gotten better for recent college graduates, there is still much room for improvement.
The EPI report states:
While by many measures the labor market for young graduates is now almost—or perhaps even fully—back to where it was before the recession, the economy of 2007 represents a low bar for economic opportunity. We should instead be striving for the high-pressure economy of the late 1990s and 2000, in which an extended period of labor market strength translated into better opportunities for workers across the board. The economy needs to continue on track toward full employment for economic growth to reach all corners of the labor market.
While members of the graduating class of 2019 might have better job and economic prospects than classes who graduated during the recession, they still face more challenges, including underemployment and lower wages, than pre-recession graduates. For example, women and Black workers face greater wage gaps compared with what was experienced by workers entering the labor force 20 years ago.
Only about one out of every 20 young college graduates (5.1 percent) are unemployed — meaning that they’re looking for work but can’t find it. Employment rates are similar for young women and men with degrees.
Still, that’s a higher unemployment rate than in 2000, when only one in 25 recent grads (4.0 percent) was unemployed. Current unemployment rates look more like they did just before the Great Recession. In 2007, the rate was 5.2 percent.
But, unemployment rates alone don’t paint a fair picture of post-degree employment.
Historically, young college grads are unlikely to become idle workers — those who are neither employed nor enrolled in future schooling — but they’re more likely to be idle now than before the Great Recession. The rate peaked at 11.9 percent in 2011, but it hasn’t quite recovered to the pre-recession level of 8.4 percent in 2007. It’s currently 9.7 percent.
“This increase in the share of disconnected young adults represents an enormous loss of opportunities for this cohort, as the loss of work experience or further education will have a lasting negative impact on their lifetime earnings,” the report states.
An increase in the idled population of young college graduates corresponds to a decline in enrollment in further education as well as a decline in employment rates. It suggests that other financial and economic issues might be at play:
While enrolling in school is often thought of as an alternative to employment in a weak economy, this option is not available to all students. Students and workers are not distinct groups; many students must work to pay for school or cover living expenses. A weak economy can therefore prevent would-be students from pursuing additional education by disrupting their own financial stability. Many students also depend on the support of parents—but if a student’s parents saw the value of their home drop when the housing bubble burst, or one or both lost their jobs in the aftermath of the Great Recession, then financial support from parents for continued schooling may not have been available….
Underemployment rates for young college graduates seem to be following a similar trend. These rates are markedly better than they were during the peak of the recession in 2011. But, underemployment is also much higher than it was in 2000.
About one in 10 current young college grads (9.9 percent) can be considered underemployed. (This figure includes the unemployed, plus part-time workers who want to work full-time. It also includes workers who have given up seeking work in the last four weeks, but have looked in the last year.) That’s nearly a full percentage point higher than it was in 2007 (9.0 percent). Underemployment rates in the years following the Great Recession exceeded 17 percent. Underemployment rates haven’t quite returned to pre-recession levels.
Working grads not using their degrees
This underemployment figure does not include young college graduates who are doing work that doesn’t require a degree. For example, it doesn’t include young degree holders who take a job working as a barista or a landscaper — jobs that require skill, but not necessarily further formal education. However, the EPI does include some statistics on these workers.
First, they note that even in 2000 (pre-recession) a “surprisingly high share of young college graduates” worked at a job that didn’t require a college degree. Then, jobs were abundant and the unemployment rate was low. Still, 38.3 percent of working college grads, ages 22 to 27, were employed in a job that didn’t require a college degree.
“No matter how strong the labor market is, recent college graduates often require some grime to transition into their desired career track,” the report explains.
It stands to reason that this figure would increase during the Great Recession and the recovery years that followed. The rate went as high as 46.3 percent during this time and has been falling since. In December of 2018, the percentage of college graduates under the age of 27 who were working a job that didn’t require a degree was 41.4 percent.
Rising college costs also impact financial health
The graduating class of 2019 is entering into a better economy and labor market than graduates during the time of the Great Recession. However, many measures of progress have yet to return to pre-recession levels. It’s very possible for new grads to enter the labor market and find themselves under- or unemployed, despite their education.
Plus, many recent graduates are impacted by the rising cost of college. Per the EPI, improvements in the labor market are: “nowhere near significant enough to offset the heightened financial challenges many of these graduates face in the form of rising college costs and debt loads.”
Today’s grads find themselves facing challenges that their older colleagues never imagined.
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