If you graduated college during a U.S. economic downturn any time before the Great Recession, your luck generally depended on your major. Yes, wages for new job entrants fell across the board, but the losses tended to be most severe in lower-paying fields. Those in the best-paying professions — engineering or accounting, for instance — tended to be more sheltered from the pain, building a major advantage relative to their peers.
But the Great Recession has proven different. Not only are the wage losses deeper, but they also extend more forcefully into better-paying fields, according to a new research paper. This recession, the authors wrote, “is more broad-based, impacting recent college graduates and higher-skilled majors to a greater extent than previous recessions.”
As for that advantage held by the higher-skilled workers? It’s been cut in half.
The paper, released this week by the National Bureau of Economic Research, analyzed earnings outcomes for college graduates between 1974 and 2011, a period of several recessions and expansions. We’ve known for a long time that recessions are a brutal time in which to graduate from college, amounting to a 2 percent pay-cut over your first 10 years of work. Between 2008 and 2012, income fell 8.7 percent among full-time workers between 22 and 25, according to Census data crunched by TIME.
The authors of the new paper, two from Yale and one from the University of Memphis, don't offer any definitive conclusions on why high-earning and low-earning majors took an income hit after this recession that was more similar in size than historically had been the case. But they reason that whereas earlier U.S. recessions dealt a blow to manufacturing and construction, this one took a direct shot at the high-paying financial industry.
To get a sense of how this recession has been different, look at wages in the first year after graduation.
It is here that the impact of recessions is most extreme. Let's compare two people — a well-paid engineer and, say, an average-paid health care worker. In a typical year, the engineer, in his or her first year after college, would make 20 percent more than the health-care worker. But in a recession — or, rather, a normal recession — his relative advantage would increase. Although they both would have taken pay cuts, the engineer would make 28 percent more than the health care worker.
In the Great Recession? Again, paycuts for both. But the engineer is "only" making 24 percent more.
If there’s good news for young workers, it’s that the impact of when they graduate diminishes over time. A decade after graduation, it no longer matters whether you graduated during a boom, a bust, or something in between.