Why college graduates are working as baristas
Why college graduates are working as baristas
Plus: An early look at how skills-based hiring is going, and the "crystal ball" approach to student loan forgiveness.
Welcome to The Tassel, FREOPP’s newsletter on higher education policy, written by senior fellow Preston Cooper. Each month, The Tassel dives into our latest work on higher education, along with a handpicked selection of research and articles from around the web that we think are worth your time. To manage your subscription preferences, visit your Substack settings.
About this time nine years ago, I was a college senior sending out applications for my first full-time job. Fortunately, I found a research assistant position at the Manhattan Institute that aligned with the field of my degree (economics) and allowed me to use some of the skills I had developed in college. But many college seniors sending out résumés today will not be so lucky, according to a fascinating new report from the Burning Glass Institute and the Strada Education Foundation.
Over half of recent college graduates are underemployed
The report, which I covered in my Forbes column last week, finds that 52 percent of recent college graduates are working in jobs where they don’t use their degrees. The authors reach this conclusion by analyzing the work histories of millions of college graduates. A recent graduate is classified as “underemployed” if she works in a job where a college degree is not usually necessary, as measured by the share of workers with a degree in that occupation currently (among other factors).
The authors find that most underemployed college graduates work in jobs that typically require “only a high school education or less, such as jobs in office support, retail sales, food service, and blue-collar roles in construction, transportation, and manufacturing.” My own research finds that the share of secretaries—traditionally a high school-level job—with a bachelor’s degree or higher rose from 9 percent to 33 percent over the past three decades.
There’s nothing inherently wrong with these jobs, and we shouldn’t look down on them as “beneath” college graduates. But underemployment is troubling nonetheless. The report finds that underemployed recent college graduates earn just $40,000 per year—only a few thousand dollars more than someone with only a high school diploma. At those salary levels, an underemployed college graduate is less likely to recoup the considerable costs of higher education. (By contrast, the typical college graduate in a traditionally college-level job earns $60,000 per year.)
The new report adds to previous research on the subject by looking at underemployed college graduates’ career trajectories over a long time horizon. The vast majority of graduates who are underemployed in their first job out of college remain so ten years later. Persistent underemployment appears to be a key reason why many college graduates fail to receive a return on their investment in higher education.
Fortunately, students have some agency to improve their prospects. Those who choose majors with a heavier quantitative component are less likely to be underemployed after graduation. Students who complete an internship while in college are half as likely to be underemployed, after accounting for other factors.
But hiring practices are also fueling underemployment
The report on underemployment completements another paper that caught my eye this past month. Employers and state governments have made noise over the past few years for (rightly) dropping bachelor’s degree requirements from jobs where a degree is not strictly necessary. The second report, also from Burning Glass and Harvard Business School, looks at whether the “skills-based hiring” movement has led to an actual change in hiring practices.
The results are somewhat disappointing. After a firm removes a degree requirement from a job posting, hiring of workers without degrees for that role increases by just 3.5 percentage points. That’s not insignificant—it translates to around 97,000 new hires without degrees per year—but it’s far less progress than advocates of skills-based hiring, including myself, had hoped for.
The second report suggests we can’t ignore the role of employers in fueling underemployment. Employers have a strong preference for candidates with bachelor’s degrees, even for jobs where a bachelor’s degree is not required. If employers hire college graduates into these noncollege roles, the mechanical result is higher underemployment.
That’s not a great situation for anyone. College graduates are stuck in jobs where they don’t use the skills they (and taxpayers) paid for. People with only a high school diploma are shut out of job opportunities that they’re qualified for. Even employers lose out: the Burning Glass/Harvard report finds that college graduates have higher turnover than high school graduates in the same roles. The only winners seem to be colleges, as the average American worker needs to stay in school for longer just to qualify for the same jobs.
There are no easy fixes here, but policymakers ought to rethink the blanket, unconditional subsidies that higher education currently enjoys. College funding should be tied to outcomes, so schools with a track record of placing their graduates in noncollege jobs face incentives to improve. More equal funding for noncollege pathways into the labor force is also a good idea. Most importantly, these disappointing results should not stop policymakers and advocates from pushing employers to adopt skills-based hiring. It’s a promising concept, but there’s much more work to do.
What I’m writing
Student loan cancellation enters its crystal ball era. (OppBlog) The Department of Education’s effort to cancel federal student loans through executive action took a farcical turn last month, as the Department advanced a proposal that would allow the Secretary of Education to cancel debt for borrowers in “hardship.” What qualifies as hardship? Whether the Secretary, relying on a black-box model, determines that the borrower is likely to default in the next two years. The likeliest outcome is that ED will look into its crystal ball and declare that tens of millions of borrowers are at risk of default, and therefore tens of millions of borrowers must have their debts cancelled. The proposal could be costlier than the one-time loan forgiveness plan the Supreme Court struck down last year.
How the student loan safety net backfired. (Forbes) Income-driven repayment (IDR) plans allow federal student borrowers to tie loan payments to their incomes—and allows many to set their payments at $0. But new research from two economists affiliated with the Department of Education finds there’s a hidden cost to those $0 payments. Zero-payment borrowers become disengaged from the student loan system and are less likely to enroll in auto debit or recertify their participation in IDR each year. As a result, zero-payment borrowers are more likely to become delinquent on their loans after a year (when their IDR enrollment expires), relative to borrowers with a small but nonzero payment. The problem is likely to get worse thanks to the Biden administration’s expansion of IDR, under which more than half of participants “enjoy” a $0 payment.
What I’m reading
The disastrous launch of the revised FAFSA will delay financial aid awards for millions of college students, and could stop some from attending altogether. An Inside Higher Ed investigation looks at what went wrong. The reporting paints a picture of an Education Department distracted by political priorities such as loan cancellation: “A source familiar with the project said they thought the department underestimated the work involved in the FAFSA overhaul from the get-go and viewed the project primarily as a system issue—one that wasn’t as high-profile as their other ambitious plans.”
A new high school in New York City will train students to jump directly into health care jobs, the New York Daily News reports. The school, operated in partnership with a major health care provider, will open in 2025 and enroll 900 students. It’s a great example of investment into college alternatives. “Just graduating kids who are not college-bound with no skills is doing them a tremendous disservice,” says one of the school’s funders.
Kansas will sue the Department of Education over its new income-driven repayment plan, writes Sunflower State attorney general Kris Kobach in the Washington Free Beacon. The new loan repayment plan, which will set loan payments at $0 for millions of borrowers and cost $475 billion over ten years, has already begun enrolling borrowers—and some have already seen loan cancellations. A case to keep an eye on.
Speaking of loan cancellation, there’s a great explainer of the Biden administration’s various cancellation initiatives over at the Dispatch. Former Education Department official Dan Currell walks us through some loan cancellation programs you might have heard about—and quite a few you haven’t.
A House bill would ban large employers from automatically screening out job applicants without a bachelor’s degree. The bipartisan proposal would require employers to consider these applicants’ alternative experience and qualifications, but wouldn’t ban bachelor’s degree preferences entirely.
What I’m doing
I enjoyed a brief long weekend in London last month. As any self-respecting higher education scholar would, I took a day trip to Cambridge, one of the world’s original college towns. The place is beautiful, but I was disappointed that most of the university’s colleges are fenced off. You have to pay to enter some, and others don’t allow visitors at all. Here’s a photo I took on the grounds of King’s College Cambridge (after paying £12).
I have no shortage of criticisms of American universities, but I do appreciate that most allow visitors to stroll their campuses unimpeded. I’m not sure if that benefit is worth the massive property tax exemptions we give them. But it is a nice perk.
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