In the midst of ongoing conversations about whether the high cost of college is worth it, a report released May 1 by the Economic Policy Institute shows that though many young U.S. workers have been idled by the weak economy, the unemployment rate of those with college degrees is still lower than those with high school diplomas.
According to the report, “The Class of 2014,” the high unemployment of young graduates is not due to something unique about the Great Recession. “Rather, it is high because young workers always experience disproportionate increases in unemployment during periods of labor market weakness – and the Great Recession and its aftermath is the longest, most severe period of economic weakness in more than seven decades,” the report states.
The March 2014 unemployment rate of workers under the age of 25 was 14.5 percent, slightly more than double the overall unemployment rate of 6.7 percent, the report notes. However, there are nearly 1 million young workers described by the report as “missing,” in that they are neither employed nor actively seeking employment because of the labor market. These individuals are not counted in the unemployment rate of workers under age 25, which would jump from 14.5 percent to 18.1 percent if they were included.
While the economy is slowly improving, the predicted job prospects for young high school and college graduates “remain dim,” according to the report. The current unemployment rate among young college graduates is 8.5 percent, compared with 5.5 percent in 2007, and the underemployment rate for those with degrees is 16.8 percent currently, compared with 9.6 percent in 2007. For young high school graduates, the unemployment rate is currently 22.9 percent, compared with 15.9 percent in 2007, and the underemployment rate is 41.5 percent, compared with 26.8 percent in 2007.
In addition, there are substantial disparities in unemployment rates by race and ethnicity among both high school and college graduates, which are much higher for blacks and Hispanics than white non-Hispanics.
The increase in young high school and college graduates who are neither employed nor enrolled in school “represents an enormous loss of opportunities for this cohort that will have lasting consequences,” the report states.
The slower growth of family income to help pay for higher education compared with the growing cost of higher education has also resulted in students taking out more loans to pay for school, which they may not be able to repay given the limited job opportunities they face upon graduation.
According to the report, the class of 2014 is likely to earn less in the next 10 to 15 years than if they had graduated when job opportunities were greater. In addition, real (inflation-adjusted) wages for young graduates have substantially decreased since 2000, dropping 10.8 percent for high school graduates and 7.7 percent for college graduates. These students also have a declining likelihood of receiving employment provided health insurance or pensions.
Improvements in the labor market are expected to be slow overall, meaning it will be even slower for young workers in the coming years. However, there are some measures that if taken would bring down unemployment among young workers, such as strengthening safety net programs and reinstating the emergency unemployment insurance benefit program that expired in December 2013, according to the report.
“The bottom line,” the report concludes, “is that policies that will generate demand for U.S. goods and services (and therefore demand for workers who provide them), or policies that would spread the total hours of work across more workers, are the keys to giving young people a fighting chance as the enter the labor market during the aftermath of the Great Recession.”
Publication Date: 5/6/2014