Why College Graduates are Underemployed

January 31, 2013 / Education

Recently the Center for College Affordability released a report titled “Why Are Recent College Graduates Underemployed?” The report focused on university enrollments and labor-market needs.

We are producing vastly more college graduates than needed in the economy, and makes some interesting predictions about the future. It touches on many of the points I made the other day about how we our treating symptoms, instead of problems.

I was taking notes for my own purposes, but realized others interested in education reform might want to skim through them.  I highly recommend going through the full report, but if you are short on time the notes below will suffice. The notes start with the three functions of college: human capital formation, screening and socialization.

Human Capital Formation

One of the main purposes for higher education is that to create productive workers.

Even if the skills gained in college are not directly applicable to a jobs, the student has the ability to learn those skills.

College as a Screening Device

Hiring a quality staff is costly in money and time. Employers are trying to maximize profits, while reducing expenditures.

A diploma shows that an individual is fairly intelligent, persistent and obedient. This helps employers narrow the pool of applicants, and passes the costs of search and training onto the potential employee.

Colleges have been able to increase tuition rates over-time as the quality of high school education drops, and more and more employers use the diploma as a benchmark to vet job applicants.

Employers hiring unskilled labor now have the luxury of requiring a college degree, because the job market is inundated with college graduates.

College is a financially devastating investment for most as the cost of a diploma have grown over time, while financial gains have started to decline as graduates take unskilled positions.

The signaling value of a college degree drops over time as more of the population attains one. The new signaling device are Ivy League universities.

College as a Socialization Device

Many attend college because of the capital function, many use it in combination as a socialization function.

College is the time when many become young adults, where they learn about making friends, as well as time and resource management.

For this reason it is believed that the better residential colleges will not go away for the next generation or two, despite the rise of MOOC (massive open online courses) and other disruptive technologies.

Socialization involves networking. Well-networked students often receive better jobs than students that are equally or more qualified for a position.

If the function of higher education is socialization then that raises questions about public policy. Why should taxpayers subsidize kids partying and having fun, when many are from affluent families?

Educational Attainment and the World of Work: Some Evidence

There are 13 million more college graduates than jobs requiring college degrees.

According to the Bureau of Labor Statistics 37 percent of graduates are in occupations requiring no more than a high-school diploma.

According to the Bureau of Labor Statistics of the 30 fastest growing jobs, only 4 require a bachelors degree or higher: Postsecondary Teachers, Elementary School Teachers, Accountants, and Physicians. Unfortunately, these positions make up only 900,000 jobs out of 9.3 million, or just under 10 percent of jobs that will be added.

Underemployment will continue through the next decade.

Job grow trends compared to educational needs show that the disparity between high-sill jobs versus graduates will continue to grow.

By 2020 there will be 54 million jobs for 80 million college graduates.

By 2020 we will be producing 3 college graduates for every new job requiring a bachelors degree.

Two Possible Scenarios: Falling College Enrollments or Master’s in Janitorial Studies Degrees?

In the first scenario, top tier schools would likely survive; however, second and third-tier schools would likely close down, as local and federal governments financial statuses become increasingly strained.

The later scenario lines up with the historical progression of education. People will become increasingly aware that a bachelors degree is no longer a ticket to a middle-class existence. Master and doctorate level degrees will have to be attained in order to signal competence.

Conclusions: College Graduates are Underemployed and Over-Invested

We need to ask serious questions about the “college for all” movement. Should we look for newer and cheaper ways to assure employee competency? Does the deteriorating quality in primary and secondary education play a roll in credential inflation?

Colleges are too costly, inefficient and shielded from market forces. Over investment reflects an indifference to labor-market realities. As a result we are wasting public and private resources on education.

We are only now starting to see market forces take effect. Recently the Wall Street Journal reported that “demand for four-year college is softening.”

This study suggests that we are seriously over invested in higher education, and further brings into question if that increased investments in higher education correlate to economic growth.


Source: Center for College Affordability