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UNDEREMPLOYED BUT NOT UNDERPAID: Recent College Graduates Secure Good-Paying Jobs, Even Those That Do Not Require a Bachelor’s Degree, According to New Report

The unemployment rate for recent college graduates has declined since the end of the Great Recession. And although a significant portion of recent college graduates remain “underemployed,” meaning they are working in jobs that typically do not require a bachelor’s degree, they still are more likely to work in high-skilled, high-paying jobs than similarly aged peers without degrees, according to a report from the Federal Reserve Bank of New York.

Despite the nation’s economic recovery, the underemployment rate for recent college graduates—those aged twenty-two to twenty-seven years—continued to climb in the years after the recession, peaking at more than 46 percent in 2014, according to Underemployment in the Early Careers of College Graduates Following the Great Recession. But contrary to media reports, the majority of those underemployed college graduates were not working in low-skilled minimum-wage service jobs. In fact, between 2009 and 2013, nearly 40 percent of underemployed college graduates secured positions in occupations with average salaries of $50,000 per year or more, the report says.

“The image of a newly minted college graduate working behind the counter of a hip coffee shop has become a hallmark of the plight of recent college graduates following the Great Recession,” the report’s authors write in a blog post about their research in Liberty Street Economics. “However, while there is some truth behind the popular image of the college-educated barista, this portrayal is really more myth than reality.”

The researchers examined data from the U.S. Census Bureau’s American Community Survey to determine the types of jobs underemployed recent college graduates held from 2009 to 2013. They identified ten distinct categories of “noncollege” jobs—those that typically do not require a bachelor’s degree for employment—that they grouped into six income tiers based on the average annual salaries for those occupation fields.

For the period examined, the findings show that nearly one-quarter of underemployed college graduates worked in occupations in the study’s top income tier, which includes jobs in information processing and business support and positions as managers and supervisors, the report says. Employees in these occupations typically earn more than $55,000 per year, the report notes. An additional 15 percent of underemployed college graduates worked in second-tier jobs in sales and public safety, averaging $50,000 to $55,000 per year, as shown in the table below.

Undergraduate Employment Data Table

“While these jobs may not be as desirable as the typical college job, which pays around $78,500 annually, they are significantly better than low-skilled service jobs,” the report’s authors write. In fact, less than 20 percent of underemployed recent college graduates worked in low-skilled service jobs like cashiers, waiters, cooks, and coffee shop employees, which average less than $25,000 per year, the report says.

Furthermore, underemployed recent college graduates were more likely to work in the higher-paying noncollege jobs than their similarly aged peers without a bachelor’s degree, the report notes. Less than 18 percent of young workers without a college degree held positions in the top two income tiers, the report says. By contrast, more than half of young workers without a college degree had positions in the two lowest income tiers, with nearly 28 percent working in low-skilled minimum-wage service jobs. The researchers also find that within each occupation category, recent college graduates earned more than similarly aged peers working in comparable positions. “So it appears that a college degree confers significant economic benefits on many graduates, even those who find themselves underemployed at the start of their careers,” the researchers write.

As Straight A’s previously reported, the economy has added 6.6 million new jobs since 2010 and the majority of them—2.9 million—pay more than $53,000 per year. Workers with at least a bachelor’s degree secured 97 percent of those high-paying “good jobs.” This new report from the Federal Reserve Bank of New York offers further evidence of the value of a college degree.

Additionally, the report finds a significant correlation between underemployment rate and college major. Criminal justice and performing arts majors had the highest rates of underemployment at 70 percent and 66 percent respectively, the report says. By contrast, nursing majors had the lowest rate of underemployment at 9.5 percent. In general, college graduates with technically-oriented and occupation-specific majors—particularly in science, technology, engineering, and math (STEM) fields—were less likely to be underemployed, the report notes. Meanwhile, college graduates with majors in more general and less quantitative fields, such as liberal arts, anthropology, philosophy, and history, had higher rates of underemployment.

Underemployment in the Early Careers of College Graduates Following the Great Recession is available at https://www.newyorkfed.org/research/staff_reports/sr749.html.

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