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The Looming Jobs Crisis of Underemployment

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August 29, 2013 | 1,782 views | Post a comment

By Jeremy Kee

Five years after the Great Recession, Americans are tired of hearing about the myriad crises—budget, housing, deficit—they should fear. Unfortunately, there is a new crisis looming which until now has flown largely under the radar. This one involves not employment or unemployment, but rather under-employment – working at an occupation beneath one’s credentials. The twist here is that education—long held as the remedy to an employment crisis—now serves in part as its cause.

According to the book Academically Adrift, 31 percent of the class of 2009 was forced to move back in with their parents after graduation. Furthermore, of the graduates of this class who did find employment, the average salary was less than $30,000. According to a New York Federal Reserve Bank report, 44 percent of recent college graduates are underemployed, with the overall underemployment rate for the U.S. sitting at 14.3 percent as of June 2013. Combined with a graduate unemployment rate around 8 percent, a full 51 percent of recent college graduates are either unemployed or underemployed.

As a reference, in 1967 when the U.S. population was 198.7 million and college attainment was 10 percent, the underemployment rate for college grads was 10.8 percent (2,145,960). The most recent data available shows that with the U.S. population at 313.9 million and college attainment at 33 percent, 44 percent (45, 572,280) of college grads are underemployed. In 45 years, the U.S. has added 43,432, 320 million underemployed college grads to the population.

Today, the purpose of higher education is to prepare students for the professional world, but even at this most basic function the university is falling behind. There are myriad reasons for this is, among which being that the content and skills taught in universities are inadequate to the professional life. Poor teaching, however, is not the only factor.

An arguably greater factor is the “college for all” crusade, a critical element of the “equality of outcome” ethos pervading our culture, which has replaced the traditionally held view of “equality of opportunity.” Policymakers claim the way to solve the employment problem is to sow more college graduates into the workforce, believing a more educated workforce to be more productive. While there is a basis for this expectation, universalizing college degrees, instead, results in an over-educated, underemployed workforce by way of academic inflation. As the market is flooded with more college grads, the marginal utility of each college grad, after a certain point, begins to decline. Case-in-point, whether there are two college graduates or one-hundred applying for a job, there is still only one position available. One will get the job, the other(s) will remain unemployed.

As significant as this problem is, it can easily worsen. Put simply, college isn'’t getting any cheaper. The price of college has been on a steady upward march for decades. Since 1980, the cost of a four-year degree at a public institution of higher education has increased at four times the rate of general inflation, forcing students to take out increasingly cumbersome student loans to finance an increasingly devalued endeavor. The student takes out tens, if not hundreds of thousands of dollars of debt and may well end up working for minimum wage over a prolonged period of time, making repayment over any period of time a monumental achievement. A recent report shows that the average student debt amount for the graduating class of 2013 is $35,200. How many of them would have signed the dotted line for these loans if they knew there was only a 49 percent chance of finding full-time employment after soon after graduation?

The academy is in trouble. What is needed are reforms aimed at providing more professional beneficial curricula. If college is, indeed, the training ground for future professionals, then better preparation for the ever-changing realities of the market must be accounted for. This would prove an indispensable first step in fulfilling the promise of higher education in the United States.

Jeremy Kee works in Higher Education at the Texas Public Policy Foundation.
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