Study. Extracurricular-ize. Memorize SAT words. Get into college. Graduate. Get a job -- a good job. One that lets you not only pay your student loans, but also your rent — and maybe, just maybe, puts you on a path toward being able to afford really adult things like a house.
According to new research, though, young college graduates not only get stuck in jobs below their skill level in bad economies, but they get stuck in them for long spells. And that hit their wages even once they've got better jobs.
That, at least, is what economists at Duke and the University of North Carolina found when they looked at the numbers for people who came of age during the bad double-dip recession of the early 1980s. It turns out that being overeducated not only hurts your earnings in the short run, but can also hurt your earnings growth in the longer one.
Underemployment, in other words, can hurt just as much as unemployment.
The bad news is we have a lot of both right now.
Today 44 percent of recent college grads are stuck in jobs — that's a soy chai latté, right? — that don't require any sort of higher education. This is high, though not crazily so. (Related: Was your college degree worth the cost? Depends on how you're paying for it.)
Indeed, the Duke and UNC researchers found that 37 percent of four-year grads and 66 percent of people with some college have tended to be underemployed at the start of their careers. They were able to calculate this by looking at a long-term study that began in 1979 and followed a group of 14 to 22-year olds for the next 15 years. The study told them how much schooling people got, what kind of jobs they got, and how much they made. And from there, they could figure out who had more education than they needed for their job, and what that did to their earnings.
It's an ugly picture. Even after controlling for things like race, sex, and cognitive ability, the overeducated tend to make between 2.6 to 4.2 percent less than their similarly-educated peers for up to four years time. What's most startling is that, while the unemployed suffer a bigger income hit their first year back on the job, their wages actually tend to recover faster than this.
So underemployment seems to cast a longer shadow on earnings than unemployment does.
Well, simply enough, because underemployment tends to last longer. You can see that in the chart below from Clark, Joubert, and Maurel's paper. The odds of being overeducated—the dark section—do fall the longer you've been working, but they don't fall that much. Underemployment, in other words, isn't just a transitory state for 23-year olds as try to figure out who they are, how they can break into the career they really want, and whether their lives are just Lena Dunham clichés. It's a reality that sucks people in, and a lot of times doesn't let them go.
It turns out that the longer you stay underemployed, the more likely you are to stay that way. The first year, there's a 66 percent chance that an overeducated worker will stay that way, and those odds only get worse. But it's a little more complicated than that. The researchers found that black workers and people who did worse on standardized tests were the most likely to stay underemployed. Once you control for those things, it's hard to predict who will and who won't move on to a job that actually uses their degree.
This is why recessions, which push grateful grads into whatever jobs they can find, tend to hurt earnings for a long time. What you think is just a temporary stop on the way to something bigger and better doesn't always end up that way. And it's also why unemployment insurance is such a good idea. It gives the jobless the time to find the best, and not just any, job match.
Careers are like dating. Desperation is never a good thing, and neither is settling.