Underemployment, College Graduates, and the Recession

By James, Jon; Vecchio, Christopher | Economic Trends, July 2013 | Go to article overview
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Underemployment, College Graduates, and the Recession


James, Jon, Vecchio, Christopher, Economic Trends


06.21.13

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The exceptionally high unemployment rate of recent years indicates that the U.S. workforce has been persistently underutilized. With fewer individuals working than would otherwise be, or those with jobs working fewer hours than they would prefer, the economy is producing at a level far below its potential. This underemployment impacts current standards of living, but it could also have long-lasting effects on workers and the economy.

College graduates in general have fared better than those without a college degree in the conventional measures of underemployment. The unemployment rate for recent college graduates ages 25-29 is currently below 6 percent. This is less than half of the unemployment rate for workers in that age group without a college degree (around 13 percent). Similarly, college graduates have experienced only a mild reduction in full-time employment since the recession, while those with no college degree have experienced a far greater drop-off. Male college graduates, for example, went from around 91 percent working full time before the recession to around 88 percent now, a 4 percent drop. Meanwhile, males with no college degree saw a greater drop, from about 90 percent working full time to 83 percent.

While college graduates have been less susceptible to high unemployment or major reductions in work hours, they face a very different--but potentially equally damaging--form of underemployment in a slack labor market. The problem for these workers, especially those just entering the workforce, is that they may be more likely to take jobs in which they are overqualified. By taking jobs that do not require a postsecondary education, they leave the benefits of their college degrees unused and are likely producing at a level below their full potential.

Comparing the top occupations for recent college graduates in 2005 to the top occupations in 2011 provides some evidence that in the last few years, college graduates may have been more likely to take jobs in which they are overqualified. While the set of top occupations has remained the same across the years, there has been some noticeable change in the rankings. For example, retail sales--where a sizeable fraction of workers aged 25-29 do not have a college degree--has climbed from 12th to 7th. Similarly waiter and waitress occupations (not on the list) has climbed from 23rd to 16th.

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These trends tend to corroborate popular stories about the recent experiences of college graduates, but are these experiences representative of the typical college graduate? One way to answer this question is to classify each occupation as either a high-school type job or a college-type job. In this analysis, we will classify an occupation as a college-type job if the majority of the workers in that occupation (greater than 50 percent) have a bachelor's degree or more. We can then evaluate whether the probability that a college graduate takes a college-type job has decreased during the recession.

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