More than half of recent four-year college graduates, 52 percent, are underemployed one year after graduation, according to a study new report Strada Institute for the Future of Work and the Burning Glass Institute. A decade after graduating, 45 percent of them still don’t have a job that requires a four-year degree.
These compelling data were highlighted in a report released today called “Talent Disrupted.” The report describes the employment outcomes of recent graduates and explores the factors contributing to their short- and long-term underemployment. The report was based on federal data sources, job advertisements, and online resumes and professional profiles of more than 60 million workers.
The report defines underemployment as having a job that does not require a college degree, meaning at least half of employees in that position do not have one.
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“Colleges, states and our country can and must do more to help students prepare for the critical transition from college to the workforce,” said Stephen Moret, president and CEO of the Strada Education Foundation, at a news conference Tuesday.
The report found that graduates who began their careers in a sub-college-level job typically remained underemployed for years. The majority of graduates (73 percent) who were underemployed in their first job remained so a decade after graduation.
In contrast, 79 percent of graduates who started in a college-level job continued to hold college-level jobs five years after graduation. And of graduates who held college-level jobs five years after graduation, 86 percent held college-level jobs a decade later.
Moret said the first jobs are “extremely high risk” because the results are very “consistent.”
“For me, the most important lesson, both for individuals and for universities, is that for most college graduates, their first job after college plays a pivotal role in determining the trajectory of their entire career,” he said.
Black graduates were more likely to be underemployed compared to their peers, the report found. One year after graduation, 60 percent of black graduates were underemployed compared to 53 percent of white graduates, 57 percent of Hispanic and Latino graduates, and 47 percent of Asian graduates. The share of graduates who were underemployed five years later declined across racial groups, but the groups with higher rates of underemployment remained relatively constant.
The type of institutions students attended appeared to be related to their likelihood of being underemployed. Graduates of more selective institutions that served fewer low-income students were more likely to have college-level jobs. Private nonprofit colleges had lower percentages of underemployed graduates than public colleges—49 percent and 54 percent, respectively, one year after graduation; for-profit colleges had the highest share of underemployed—63 percent one year after graduation and 58 percent 10 years later. Graduates of historically black colleges and universities were 15 percent less likely to be underemployed, and graduates of Hispanic-serving institutions were 3 percent less likely to be underemployed, compared with graduates of other institutions.
Underemployment comes at a cost, the report noted. Recent graduates with college-level jobs earn $60,000 a year on average, 88 percent more than the average high school graduate and 50 percent more than four-year underemployed recent graduates.
Prevention of underemployment
The report also highlights factors that appear to make a difference when graduates start and continue in college-level employment.
Internships appear to have given students an advantage. According to the report, the likelihood of becoming underemployed dropped by 49 percent for students who participated in an internship during college. Internships seemed to especially benefit black graduates of selective private colleges: Underemployment rates were 17 percentage points lower for these graduates when they did an internship compared to those who did not. However, the benefits of an internship overall varied by major.
The report also found that field of study played a larger role in graduates’ likelihood of holding college-level jobs than the type of colleges they attended. For example, health, education, and engineering students at less selective public universities were underemployed at lower rates than biology, psychology, and communications students at selective public institutions.
Overall, graduates in STEM fields, such as computer science and engineering, had lower underemployment rates, although biology and physics graduates did not necessarily fare as well. For example, 74 percent of engineering graduates had college-level jobs five years after graduation, compared with 53 percent of biology graduates. Math-intensive business fields, such as accounting and finance, also had better college-level employment outcomes than standard business degrees.
The report offers a number of recommendations for universities and policymakers to curb underemployment, including ensuring at least one paid internship opportunity for all students, providing transparent data on employment outcomes for each institution and degree program, offering comprehensive career guidance to students, and ensuring that all students have access to fields that contribute to well-paying college-level jobs.
Moret noted that “the vast majority of students, even if provided with very comprehensive information about their salary outcomes, will choose a field of study that they like and in which they believe they will be academically successful,” and they should not have to change their minds.
“But if you look at the broader labor market, it turns out that in many cases there is actually more demand for students than capacity in these high-wage, high-demand programs,” he said. “Often, it’s not so much about convincing someone to study something different, but simply making sure they have access to study precisely what they want to study.”
The value of higher education
Matt Sigelman, president of the Burning Glass Institute, said at the briefing that examining post-college underemployment data is an “unambiguous” way to analyze the returns to higher education amid a “growing chorus of voices seeking to demand that higher education justify its value.” He noted that other metrics, such as earnings data, can be skewed by graduates going into fields they may love but that don’t pay well.
The question is: Are underemployment rates detrimental to higher education in that national conversation, or are there other nuances at play?
Jaison Abel, head of urban and regional studies at the Federal Reserve Bank of New York, said it is “very complicated” interpreting underemployment rates in general because a certain amount of underemployment is normal.
“We’ve looked at this over many decades,” he said. “And it’s never the case that anyone is underemployed. What we find is that about a third of all college graduates at all points in the business cycle are underemployed. And for recent college graduates, which we define as … the first five years out of school, it’s always higher than that” — about 43 percent — with the exception of the tech boom of the late 1990s.
“I don’t think anyone would disagree that a lower underemployment rate is better than a higher underemployment rate,” he said. But “what should the underemployment rate be? That’s not very clear.”
Rich Deitz, economic research adviser for urban and regional studies at the New York Federal Reserve, added that higher education still has financial benefits for graduates who go on to jobs below the college level.
“Even underemployed people, if they have a college degree, are probably doing much better … than someone who doesn’t have a college degree,” he said. “It’s not that there’s no benefit,” especially when underemployment “may be temporary.”
Some higher education leaders stressed that while some of the report’s findings concern them, college has more to offer than college-level jobs.
Lynn Pasquerella, president of the Association of American Universities, said the report’s findings are “certainly something we need to pay attention to, especially given the fact that higher education is under siege and people are more skeptical about the value of a college degree than ever before.”
But he stressed that the concern should not just be whether graduates are in jobs below their educational levels that pay less than they could earn, but whether they are in jobs that offer a “sense of meaning and purpose.”
“Getting a job is important,” she said. But a deeper goal is for graduates to “find meaningful work, especially at a time when there is skyrocketing mental health issues among college students and graduates. We need to pay attention to helping students find not just a job where they are not underemployed, but a job that fulfills them and prepares them for a path that allows them to thrive in life.”
He noted that the report does not address that aspect of the value of higher education.
“We need to return to the public and personal purposes of higher education: educating for democracy, but also lifelong learning, adaptability and flexibility,” which are also valued by employers, he said.
Hironao Okahana, associate vice president and executive director of the American Council on Education’s Educational Futures Lab, similarly noted that higher education has more to offer than employment outcomes, including providing students with the broad knowledge that a liberal arts education provides, producing engaged and educated citizens, and providing research discoveries.
At the same time, “these are real data that are part of a solid analysis that presents one aspect of how post-secondary education contributes to society and also to individual students, and that is that it helps people prepare for jobs that allow them to put a roof over their heads and put food in their homes. It is really important,” he said.
He said he saw the findings as an opportunity to think about how universities can better re-engage underemployed graduates and continue to prepare them for the workforce.
“The results seem to underscore the importance of post-baccalaureate training and reskilling opportunities” as workforce needs change, such as additional certificates, non-college credentials or workplace learning opportunities, she said. Some universities and colleges may need to work on “re-skilling these students to help them remain prepared for emerging and high-demand occupations.”
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