It’s tough being a young worker in today’s difficult job market. But if your parents tell you it was even tougher when they were your age, don’t roll your eyes and write them off. They might just be right.
A common predicament among recent college grads is the difficulty finding professional work that matches their qualifications. Some hold out and refuse to take a job for which they’re overqualified, which is why the unemployment rate for recent grads, at about 6%, is higher than the rate for college grads as a whole, which is only about 4%.
A bigger problem, however, is underemployment. Many new diploma holders need a paycheck, no matter how small, so they take jobs that don’t require a college degree, such as retail clerk, waiter, barista, or medical technician. Nearly 45% of college students who graduated during the last five years count as underemployed in this manner, according to new data compiled by economists at the New York Federal Reserve.
That sounds high—but it was even higher during the mid-1990s, when the economy was also recovering from a recession. Back then, the underemployment rate among recent college grads was nearly 50 percent, or a few points higher than it is now. That’s peculiar because the 1990-1991 recession was mild, whereas the 2007-2009 recession we’re still recovering from was severe. By most other economic measures, the recent recession was the worst since the 1930s.
There was nothing unusual about the economy in the 1990s that punished college grads. In fact, it was typical back then for recent grads to toil beneath their standing, as it were, before finding better work and starting a career. “It’s not unusual for a significant share of college grads to be working in a job that doesn't require a degree,” says Richard Dietz, a senior economist at the New York Fed. “Even during the best of times, some underemployment tends to persist.”
The unusual part may be what happened starting in the mid 90s: The technology industry exploded, attracting millions of younger workers who would naturally be more drawn to new fields than older workers would be. By 1999, the underemployment rate for college grads fell to 35%, the lowest level in the 20+ years the Fed examined. It went back up after the dot-com bust in 2001, but was still below 40% when the latest recession started at the end of 2007.
The burden of a low-paying post-college job may be heavier today, however, because students tend to carry more debt used to pay for school. The percentage of 25-year-olds carrying student loans has risen from 25 percent to 43 percent during the last 10 years, according to Fed data. Of those with loans, the average balance has nearly doubled to about $20,000. Some students graduate with $50,000 in loans, or more. Proceeds from the tip jar aren’t likely to cover those monthly payments.
With age comes relief, however. Both the unemployment and underemployment rate tend to drop and then flatten out as recent college grads approach 30. The percentage of 23-year old college grads who are underemployed today is about 55 percent, for instance. The Fed’s data suggests that by the age of 33, only about one-third percent of recent grads will be underemployed. That’s roughly the historical average.
Technology jobs still favor younger workers over older ones, with fields such as social media and app development—poorly understood by most people over 40—growing faster than other industries and offering a lot of good jobs. That could give recent grads with the right credentials the kinds of opportunities that would make prior generations envious.
Not everybody graduates with a technical degree, of course, but research shows that a college degree in just about any field is still better than no degree. “A college education is still a very good thing to have,” says Dietz. It just takes some grads longer to recognize the benefits than others.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
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