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The Nation's Recent College Graduates Face Significant Labor Market Problems

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The Great Recession of 2007-2009 may have officially ended in mid-2009 according to the National Bureau of Economic Research, but a deep recession remains in the nation's labor markets with very high levels of official unemployment, underemployment, and hidden unemployment. The economic burdens of the Great Recession have been very unevenly shared among U.S. workers. College educated workers (especially professionals, women, and those over 30 years old) have fared the best. The total number of college educated workers holding jobs requiring four year college degrees did not decline between 2007 immediately prior to the recession and 2010.

Young college educated workers, particularly those 25 and under, however, have not fared very well over the past three years. They have experienced rising joblessness, underemployment, and malemployment problems (i.e. working in jobs that do not require a college degree). During the January-August period of 2010, we estimate that fewer than 50 of every 100 young B.A.-holders held a job requiring a college degree.

The labor market difficulties of many young bachelor degree holders in the U.S. can best be seen in the types of jobs in which they were employed in the first eight months of the current calendar year. Of the 20 individual occupations employing the largest number of young, college graduates (25 and under), seven typically did not require any type of college degree to be employed. There were 175,000 young college graduates working as cashiers, retail clerks, and customer service representatives versus only 146,000 employed in all computer professional professions and all types of engineers combined. There were twice as many four year college graduates working as waiters, waitresses, and bartenders (80,000) as there were engineers (37,000). There were more college graduates working in office related jobs and as bank tellers than in all computer professional jobs (148,000 vs. 109,000).

The likelihood that young bachelor degree holders will end up being employed in a college labor market job is not a random event. Obtaining employment in jobs requiring college degrees has been found to be associated with the majors of new college graduates (engineering, health, business, computer science majors fare better), those who had strong reading and math skills at entry into college, those living in low unemployment states, and having paid work experience in college-related jobs prior to graduation. Having parents who are employed college graduates also appears to matter by providing referrals to appropriate jobs.

This growing problem of malemployment and joblessness among young college graduates has a number of dire economic effects on both the graduates themselves and many other young adults across the country. Those college graduates working in jobs that do not require college degrees are earning substantially less per week (30-40 percent less) than their peers who work in jobs that require college degrees. These substantially lower weekly earnings reduce the private and social economic return to college education for such individuals to close to zero. The presence of large numbers of jobless and malemployed young college graduates provides adverse signals to younger high school students contemplating whether to attend college especially among males living in lower income communities. The non-college labor market jobs obtained by these young graduates displace less educated young adults from employment, increasing joblessness among young adults with only a year or two of college or among high school graduates. This rising degree of malemployment among young college graduates, thus, has adverse consequences on the rest of society, pushing down the growth of real output and employment, wages, and earnings of the non-college educated. There is a critical need for national, state, and local political and educational policymakers and administrators to address this growing labor market problem.

Prepared by: Andrew Sum and Paul Harrington, Center for Labor Market Studies at Northeastern University