In the Class of 2018: College edition, EPI Senior Economist Elise Gould and Research Assistants Julia Wolfe and Zane Mokhiber provide in-depth analysis of the labor market for young college graduates. The report focuses on college graduates (ages 21–24) and analyzes their demographics and whether they are employed, enrolled, both, or neither. The authors then look at unemployment rates and wage trends to paint a picture of the class of 2018’s economic prospects as they start their careers. New to this year’s research is wage data by race and ethnicity, which includes data on African American, Hispanic, and Asian American and Pacific Islander graduates.
“While by many measures the labor market for young college graduates is now almost or fully back to where it was before the recession, we should be striving for a stronger labor market than 2007,” said Gould. “We should instead be striving for the high-pressure economy of the late 1990s and 2000, in which an extended period of labor market strength translated into better opportunities for workers across the board.”
After ten years of slow, but steady, recovery young graduates’ economic prospects continue to look up. Due to the progression of the economic recovery and a substantial improvement in the unemployment rate, members of the college class of 2018 currently have better job prospects than the classes of 2009 through 2017. However, compared with those who graduated in the tight labor market of 2000, the class of 2018 still faces real economic challenges—as demonstrated by elevated levels of underemployment as well as worsened wage gaps, particularly for women and black workers.
“While the recovery has shown overall positive trends, it hasn’t benefited everyone equally,” said Wolfe. “Young black workers face large pay penalties right out of college. And even though women are the majority of college degree holders, their wages continue to lag behind men’s.”
Other main findings of the paper include:
- The unemployment rate among young college graduates has fallen to pre-recession levels, but is still higher than the full employment economy of 2000. For young college graduates, the unemployment rate is 5.3 percent, as compared to 5.4 percent in 2007, and 4.3 percent in 2000.
- The underemployment rate, which includes those who work part time but want full-time work and those who have looked for work in the last year but have given up actively seeking it, is 11.1 percent in 2018, as compared to 9.4 percent in 2007, and 6.9 percent in 2000. This, along with research on other forms of underutilization suggests that young graduates have fewer opportunities than they did before the Great Recession hit.
- Between 1990 and 2018, average wages of young college graduates grew only 15.5 percent in total; if it hadn’t been for the tight labor market of the late 1990s and 2000, wages would be no higher today than in 1990. Because men’s wages have risen while women’s have barely budged between 2000 and 2018, the gender wage gap for young college graduates has grown over the last 18 years from a pay penalty of 11.0 percent to 14.7 percent.
- In 2000 as well as for much of the late 1990s, the hourly pay of black college graduates closely tracked that of their white counterparts; black wages have seen large declines in the Great Recession and its aftermath translating into lower wages and significantly larger pay penalties right out of college. Today, young black college graduates face a 16.8 percent pay penalty compared to their white counterparts.
“It’s important to remember that only about one-fifth of 21 to 24 year olds have attained a bachelor’s degree,” said Mokhiber. “While there are many barriers keeping young people from graduating from college, policymakers need to ensure that young people enter a job market that allows them to reach their full potential.”