Today’s recent college graduates are more likely to work in jobs that don’t require a degree, pay little, and are part-time than in the past, according to new research by the Federal Reserve Bank of New York.
While it is common for graduates to work lower quality jobs right out of school and move up the longer they keep working, the share who find themselves in this position has risen while the quality has dropped. The underemployment rate, or the rate of graduates working jobs that don’t require a degree, has risen since 2001 and jumped sharply after the recession to the point where 44 percent were in these jobs in 2012. This “suggest[s] that it has become more difficult over the past decade for recent college graduates to find jobs that utilize their degrees,” the authors note.
Even worse, these non-college jobs are more and more likely to pay poorly. Well paid jobs that don’t require a degree, such as electricians, dental hygienists, or mechanics, are those that pay an average of $45,000 a year. Low-paid jobs, on the other hand, such as bartenders, food servers, and cashiers, pay below $25,000 on average. The authors report that “the share of underemployed college graduates in good non-college jobs has fallen sharply, while the share working in low-wage jobs has risen, with most of these changes occurring since 2000.” While about half of recent grads could be found in decently paying jobs that don’t require a degree in the 1990s, by 2009 it fell to just over a third. Meanwhile, the share in low-wage jobs rose from about 15 percent to 20 percent, more than the increase among all who have degrees.
CREDIT: New York Fed
Graduates are also less likely to get full-time jobs, working less than 35 hours a week. While there has been an overall increase in part-time work since 2001, “the increase is much steeper for recent graduates,” the authors write. The share of recent graduates working part-time jobs rose from about 15 percent in 2000 to nearly a quarter in 2011, with an especially sharp uptick after the recession.
Of course, those with a college degree have fared better than those without. They’ve seen an overall unemployment rate that is about half of what all workers experienced. But the quality of the jobs they find has declined. “We conclude that while elevated rates of unemployment and underemployment may be typical for recent college graduates, finding a good job has indeed become more difficult,” the authors report.
These trends experienced by college graduates have certainly occurred across the economy for all workers. The majority of the jobs added since the recession officially ended have been low wage and replaced middle-wage work available before the crisis. That trend is set to continue, with one in four workers expected to be in jobs that pay poverty-level wages within a decade. Meanwhile, the share of workers in part-time jobs has hit highs, with 7.8 million workers in these jobs but who would rather be working full time.
The trend carries extra worries for recent graduates, however, who may be struggling to pay off student loans. Total student loan debt is now at $1 trillion, with a record number of Americans holding some of this debt. A record number of people are also defaulting on those loans. The effects of this debt overhang can last well into the future, as those struggling to pay it off are less able to buy a home, have a lower mortgage payment, or save for retirement, and can mean a student who borrows the average $53,000 in debt can expect a lifetime loss of wealth totaling $208,000.