Report

Class of 2017 in US – Underemployment rates among young graduates have improved but remain higher than before the recession began

After years of elevated unemployment and depressed wages, young graduates’ economic prospects have finally begun to brighten. Members of the Class of 2017 have better job prospects than their peers who graduated in the aftermath of the Great Recession. Unemployment rates for young high school and young college graduates have returned to within one percentage point of their pre-recession levels and wages are continuing to slowly recover. While young high school graduates on average are still paid less than they were in 2007 (adjusted for inflation), the average wages of young college graduates have finally surpassed the 2007 level.

Yet the economy of 2007 is a low bar for economic opportunity. Relative to the full employment economy of the late 1990s and 2000, the shares of young graduates who are unemployed and underemployed, and generally “idled” by the economy (neither working nor in school), are still quite high. And economic growth has not yet reached all corners of the labor market. Unemployment rates for young black and Hispanic graduates entering the workforce are still substantially higher than that of their white peers. Young female graduates are paid less than their male peers directly out of school, when they have fairly comparable labor market experience. We need the economy to continue toward full employment in order to ensure healthy job prospects and decent wages for all young graduates.

Key findings include:

  • The labor market for young graduates remains weaker today than it was in 2000 or 2007. There is nothing unique about the Great Recession and its aftermath that affected young people in particular. Rather, young workers always experience disproportionate increases in unemployment during periods of labor market weakness—and the Great Recession and its aftermath constituted the longest, most severe period of economic weakness in more than seven decades.
  • High school graduates matter. Only 36.7 percent of people in their prime working years (age 25 to 54) have a bachelor’s degree or higher, while 36.3 percent have a high school diploma or less. We need an economy that works for everyone not just those with the highest credentials. Access to good jobs for those without a college degree is especially critical, as stable employment allows them to build a career or pay for further schooling.
  • Unemployment among young graduates is close to where it was in 2007 but still far higher than in 2000. Unemployment rates among young graduates have nearly returned to where they were before the recession. Yet the unemployment rates for young graduates today remain much higher than unemployment rates for young graduates in the full employment economy of 2000.
    • For young high school graduates, the unemployment rate is 16.9 percent (compared with 15.9 percent in 2007 and 12.1 percent in 2000).
    • Among young high school graduates, the unemployment rate for men has nearly returned to its pre-recession level while the unemployment rate for women is still elevated. Neither men nor women have reached the unemployment rates of the full employment economy of 2000.
    • For young college graduates, the unemployment rate is currently 5.6 percent (compared with 5.5 percent in 2007 and 4.3 percent in 2000).
    • Among young college graduates, women have made a full recovery since the recession and reached the unemployment rate they had in 2000—4.4 percent. Their male peers have made progress at a slower pace. At 7.1 percent, their unemployment rate comes close to their 2007 unemployment rate (6.6 percent) but far from that of 2000 (4.1 percent).
  • Underemployment rates among young graduates have improved but remain higher than before the recession began.
    • In addition to the unemployed (jobless workers who report that they are actively seeking work), the underemployment rate also includes those who are “involuntary” part-timers (those who work part time but want full-time work) and “marginally attached” workers (those who want a job and have looked for work in the last year but have given up actively seeking work in the last four weeks).
    • For young high school graduates, the underemployment rate is 30.9 percent (compared with 26.8 percent in 2007 and 20.8 percent in 2000).
    • For young college graduates, the underemployment rate is 11.9 percent (compared with 9.6 percent in 2007 and 7.1 percent in 2000).
    • While unemployment rates for young graduates draw near to pre-recession levels, underemployment rates remain elevated. This suggests that young graduates in the weakened labor market are taking less desirable positions than they used to.
  • The share of young graduates who are “idled” by the economy—neither enrolled in further schooling nor employed—remains elevated in the wake of the Great Recession. This indicates that many graduates are unable to take the two main paths—obtaining further education or getting more work experience—that enable future career success.
    • Among young high school graduates, 15.1 percent are neither enrolled nor employed (compared with 13.7 percent in 2007 and 12.1 percent in 2000).
    • Among young college graduates, 9.9 percent are neither enrolled nor employed (compared with 8.4 percent in 2007 and 8.6 percent in 2000).
  • The overall unemployment rates and idling rates of young graduates mask substantial racial and ethnic disparities in these measures.
    • The unemployment rates of young black and Hispanic graduates are substantially higher than the unemployment rates of white non-Hispanics, for both young high school graduates and young college graduates.
    • Young black college graduates have an unemployment rate of 8.0 percent—and only recently (in 2016) did their unemployment rate fall below the peak unemployment rate of young white college graduates during the recession (9.0 percent).
    • The shares of young black and Hispanic graduates who are not employed and not enrolled in further schooling are substantially higher than that of white graduates.
  • Wages have stagnated—or fallen—for most young graduates since 2000.
    • Young high school graduates are paid less today than they were in 2007 (after adjusting for inflation). Among young high school graduates, real (inflation-adjusted) average wages are $10.89 per hour—4.3 percent lower than in 2000.
    • Young college graduates’ wages have recovered since the recession, but only enough to make up lost ground rather than raise living standards. Among young college graduates, average wages are $19.18 per hour—only 1.4 percent higher than in 2000.
    • Wages of young high school and college graduates follow the same trends as wages of older workers, signaling that the slowdown in young graduates’ wages stems from a wider wage growth problem.
  • The wage gap between male and female young high school graduates has narrowed since 2000, while the wage gap between male and female young college graduates has widened.
    • Stark wage disparities between men and women occur even at this early part of their careers, when they have fairly comparable labor market experience.
    • Among young high school graduates, women are currently paid 90 cents for every dollar paid to men (compared with 86 cents in 2000). Among young college graduates, women are paid 86 cents for every dollar paid to men (compared with 92 cents in 2000).
    • Young male college graduates earn 5.4 percent more than young male college graduates in 2000, while young female college graduates earn 2.2 percent less than young female college graduates in 2000. These gender wage discrepancies are primarily driven by faster wage growth for top-earning men than for top-earning women, which drives up the average male wage.
  • Young graduates are burdened by substantial student loan balances.Because the cost of higher education has grown far more rapidly than median family income, many students must take out loans that they may find difficult to repay once they graduate.
    • From the 1978–1979 enrollment year to the 2016–2017 enrollment year, the inflation-adjusted cost of a four-year education, including tuition, fees, and room and board, increased 162.0 percent for private school and 151.1 percent for public school (according to the College Board). Median family income increased only 20.2 percent over this 37-year period, leaving families and students increasingly unable to pay for the ticket price for colleges and universities.
    • Between 2004 and 2014, there was a 92 percent increase in the number of student loan borrowers and a 74 percent increase in average student loan balances (according to the Federal Reserve Bank of New York).
    • For young college graduates, limited job opportunities, stagnating wages, and the rising cost of higher education make college an increasingly difficult investment.

Chosen excerpts by Job Market Monitor. Read the whole story at The Class of 2017 | Economic Policy Institute

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