The data in this study is quite fascinating; amazing how much the random luck of what year you were born or graduate from college affect your earnings capacity. Oh well, Obama promised the stimulus would create (OR save) 2.5M... err 3M... err 3.5M... and did we end at 4M jobs? Or was it 3.5M that the dart hit? Whatever the case we have 1.5 million census jobs coming online... and the state of the economy is good and getting better. Listen to the soothing whispers of the stock market; she knows far more than this alarmist piece of doom and gloom.
- The bad news for this spring's college graduates is that they're entering the toughest labor market in at least 25 years. The worse news: Even those who land jobs will likely suffer lower wages for a decade or more compared to those lucky enough to graduate in better times, studies show.
- (college grad Friedson) To save money, he's living with his parents. ... If asked a year ago whether he'd be tutoring now, Mr. Friedson says, "I would have laughed in your face."
- Trading down to a lower-skilled job isn't just a hit to Mr. Friedson's ego. It could also hurt his bank account for years to come. Economic research shows that the consequences of graduating in a downturn are long-lasting. They include lower earnings, a slower climb up the occupational ladder and a widening gap between the least- and most-successful grads. In short, luck matters. The damage can linger up to 15 years, says Lisa Kahn, a Yale School of Management economist. She used the National Longitudinal Survey of Youth, a government data base, to track wages of white men who graduated before, during and after the deep 1980s recession.
- Ms. Kahn found that for each percentage-point increase in the unemployment rate, those with the misfortune to graduate during the recession earned 7% to 8% less in their first year out than comparable workers who graduated in better times. (sounds bad but you'd think this would be corrected once we got back to our normal bubble of the half decade economy) The effect persisted over many years, with recession-era grads earning 4% to 5% less by their 12th year out of college, and 2% less by their 18th year out. (not so much it appears - I'd assume this is because most wage gains outside of promotions or job changes are the usual 2-3% type; so if your original base is low, you're indexed to that base in many cases)
- For example, a man who graduated in December 1982 when unemployment was at 10.8% made, on average, 23% less his first year out of college and 6.6% less 18 years out than one who graduated in May 1981 when the unemployment rate was 7.5%. For a typical worker, that would mean earning $100,000 less over the 18-year period. (that is truly amazing, an 18 month difference in graduation date means the typical worker earned 6.6% less nearly 2 decades later)
- One reason behind declining wage potential, economists say: The caliber of jobs available in a recession, and their accompanying wages, tend to suffer. High-end firms hire fewer people and drive down salaries because jobs are in such demand.
- That means many graduates end up with lower-wage, lower-skill jobs at less-prestigious firms or in firms outside their field of interest. Once the economy picks up and they try for better jobs, these workers have to learn skills they should have been developing immediately out of college. In the meantime, colleagues who graduated in a better economy have already developed these skills and progressed much further.
- This year, employers say they'll hire 22% fewer college graduates than last year, according to the National Association of Colleges and Employers, an organization of career counselors. At the same time, colleges are expected to see the highest number of graduates in a decade. (most of these kids will "find work" in the birth / death model - creating a multitude of jobs in companies the size of 1-5 people... per Washington D.C. metrics... no unemployment here, move along)
- ...a college degree isn't an automatic ticket to upward mobility, either. Even before the recession began, graduates were seeing their wages shrink. Between 2002 and 2007, according to government data, the inflation-adjusted hourly wage for men ages 25 to 35 with bachelor's degrees (and no graduate degrees) fell 4.5%. For the typical woman, inflation-adjusted wages fell 4.8%. (and as long time readers know - we discussed often in 2007 and first half 2008 how the inflation reports are ANOTHER government report that has been "adjusted" over the past few decades so it doesn't show the same levels of inflation it did as measured in the 70s, 80s - so I'd once more say the data above is a lot worse than presented because inflation is understated by government decree)
Here are some examples of recent grads - alarmist of course as the Wall Street Journal clearly went out of its ways to find atypical situations. Granted, these folks are still earnings degrees that are better suited to the 70s and 80s, rather than jobs that are better suited for the 00s, i.e. anything that gets you a government job. Keep in mind many of these kids, due to the ever increasing inflation at colleges (another parallel universe that only now feels the slightest of pressure) are graduating with $10, $15, $20K of debt... just for undergrad. [Dec 5, 2008: NYT - College May Become Unaffordable for Most in US]
- Plenty of recent graduates are making far less than the average. Between her business marketing degree and numerous New York City contacts, Nicole Buckley, 21, figured she would find a marketing job after graduating. She didn't expect to be working the jobs she has now, five months after graduation: As a full-time receptionist with a part-time gig as a model, promoting Bacardi rum and Grey Goose vodka to patrons at bars. But after doing two interviews a day and applying to more than 50 jobs, she had to do something to pay the bills. "I don't think anyone went to college and said, 'I want to graduate and make $25,000 a year,' " says Ms. Buckley. She estimates her earnings at a little less than $30,000 between the two jobs. (welcome to the most dynamic economy on Earth Ms. Buckley)
- Diane Hempe, 24, planned to be a teacher. But after graduating from the University of Maryland last year with an elementary education degree, she failed to find a job at a school. So she settled for working at a day-care center, where the $12 an hour she brought in felt like an affront. (and just imagine, eduction is one of the "high growth" areas of our economy the past few years)
- Sarah Veilleux, 22, one of Ms. Buckley's two roommates in a $1,125-a-month Brooklyn apartment, graduated in May 2008 from the University of New Hampshire with a communications degree. For a few months, she worked selling band merchandise at a music venue. Then she found her ideal job: doing promotions for Sirius Satellite Radio. But they need her only 20 hours a week. "As soon as I saw the offer for Sirius," she says, "it didn't matter how many hours a week." She spends the other half of her week doing administrative tasks for a staffing company, earning $1,500 a month -- $18,000 a year -- between the two jobs. (check out Sirius' stock price to see how "healthy" of a company it is)
- Still, Ms. Veilleux probably will be better off than those who take low-wage jobs outside their fields, says Till Marco von Wachter, a Columbia University economist (now that's a kicker)
- People who majored in fields that lead to high-paying jobs, such as chemistry, biology, physics and engineering, tended to catch up to other graduates more quickly, primarily by switching jobs during the economic recovery and landing at better firms. In contrast, says Mr. von Wachter, the wages of humanities majors at less prestigious schools were less likely to catch up to the wages of their peers who graduated in healthier times.
- Another alternative to unemployment or a low-paying job: Stay in school. Graduate applications for 2007-2008 were up 8% nationwide compared to the year before, according to the most recent numbers from the Council of Graduate Schools. Schools such as Northwestern University and Harvard are already tracking double-digit increases this year. College grads who went to graduate school instead of the job market during the early '80s recession didn't suffer the same wage losses, says Ms. Kahn, the Yale economist.
- That's the approach John Bence is taking. A 2008 graduate of Kenyon College in Ohio, the history major worked with a temp agency and did a six-month stint at an international consulting company. After repeatedly losing out on jobs -- at museums, universities, consulting firms -- to more-qualified candidates with master's degrees, he'll head to New York University to get a master's degree in history, specializing in archival management. "I wasn't surprised I didn't get those jobs in, like, museums," Mr. Bence says. "But I was surprised that no one was willing to hire me to do anything."