I keep seeing this statistic that large percentages of young college graduates—around half–are un- or underemployed. This doesn’t surprise me, in that the downturn has been tough on young people in general, though those with college educations certainly have a leg up on those without.
The rhetoric around this part of the debate, especially in tandem with the too high debt levels carried by some young college grads, may veer into over-discounting the advantages of college attainment, even in today’s tough job market. For example, as I show below, even in jobs where they’re arguably underemployed based on their skill levels and the demands of the job, young college grads get a significant wage bump.
Why? Probably because they’re bringing some extra value added to those jobs, even when the occupations are categorized as low skill.
First, though, let’s look at unemployment. Not controlling for age, college unemployment was around 2% before the downturn and has ranged between 4-5% since (4% last month). That’s a doubling of the rate and a big deal. But for those with only a high-school degree, the jobless rate went from the mid-4’s to almost 11% in 2010, down to about 8% in recent months.
The Economic Policy Institute has done some of the best work tracking younger workers, and they find that controlling for age matters a lot:
For young high school graduates, the unemployment rate was 32.7 percent in 2010 and 31.1 percent over the last year (April 2011–March 2012), while the underemployment rate was 55.9 percent in 2010 and 54.0 percent over the last year.
For young college graduates, the unemployment rate was 10.4 percent in 2010 and 9.4 percent over the last year, while the underemployment rate was 19.8 percent in 2010 and 19.1 percent over the last year.
The reason EPI’s underemployment rate for young college grads is less than half of the one cited in the media—Gov Romney also cites this “more-than-half” number–is because the latter includes young college grads working in jobs that we tend to view as below their skill levels.
The website ONET provides descriptions of the tasks required across all the different occupations and ranks them 1-5, from “little or no preparation needed” to “extensive preparation needed.” You’ll find cashiers and food prep workers in the first category, and mathematicians and physicians in the latter.
What I wondered was whether young college grads, even when they’re in level one and two jobs, still get higher pay than non-college grads. In economese, do “underemployed” young college grads get a wage premium?
In fact, they do. EPI was good enough to run the numbers for me, and the table below shows a substantial wage premium of 37% for young college grads in ONET job categories 1-2. A smattering of the relevant occupations and their individual wage premiums are shown in the table (I chose ones for which I had a large enough sample). Young, college-educated retail sales workers, customer service reps, and childcare workers* earn almost 50% more than their non-college counterparts.
Don’t get me wrong—we want our college grads filling job slots that utilize their skills. In fact, no one should have to settle for a job below their potential, regardless of their education level. And when this recovery gains momentum, it will be important for these underemployed folks to move up. While they get a wage premium even in their less demanding occupations, they would get a much larger one in higher skilled jobs.
But it would be wrong to conclude on the basis of the underemployment shares alone that these young college grads gained nothing from their education.
*If you’re wondering why “childcare worker” is ranked as skill level two out of five, I share your concern. Here’s the ONET description of the tasks and skills required for childcare workers, in their view.