Many college grads are overwhelmed with student loans and may still be feasting on Ramen noodles, but not all are flipping burgers or making lattes, according to a new report from the New York Fed.
Its provocative title is meant to challenge a common notion: “Working as a barista after college is not as common as you might think.”
With chatter everywhere about the financial struggles young adults face, Liberty Street Economics, a research division of the New York Federal Reserve, reviewed American Community Survey employment data from 2009 to 2013 of young adults between the ages of 22 and 27. The purpose was to determine if a college education is actually helping young adults land jobs following the Great Recession.
Good news: College degrees do make a difference, even if a young adult’s first post-college job isn’t in his or her field of study.
Liberty Street Economics research found that while about 45 percent of recent college graduates are “underemployed”—working jobs that usually don’t require degrees—only about 19 percent are actually working low-skilled service jobs, such as a barista or server.
And even if a college grad is underemployed, they are still probably making more than someone of a similar age who doesn’t have a college degree. More than half of those surveyed without college degrees were working low-paying, physical labor and service occupation jobs, while about 40 percent of underemployed college grads were working the highest-paid, “no college degree required” jobs, such as information processing and business management. That’s good news for a college grad trying to pay down student loans.
Underemployment doesn’t last forever, either. The more time a recent college grad spends in the labor market, the more likely she is to move up the ladder into a position better suited to her level of education. Liberty Street Economics found that by age 27, only 6.6 percent of college grads in the data pool were still working low-paying, lower-skilled jobs. Plus, the demand for college-educated workers has picked up in recent months, indicating better job opportunities may be close on the horizon for recent and upcoming college graduates.
As someone who started college in 2009, just as the effects of the Great Recession were starting to sink in, the optimistic perspective this report provided was refreshing. Throughout my four and a half years of college, I was repeatedly reminded to set myself up for a skill-oriented job post-college.
“You have to network, intern, volunteer, and start applying for jobs early,” instructors told me and my classmates, never failing to mention how competitive the job market was. We worried the college degrees we were paying an arm and a leg for would only lead to a job at Starbucks.
Fortunately, for many of us that wasn’t the case. Most of my friends who didn’t secure jobs in their desired field after graduation found employment of some kind, even if it wasn’t ideal.
For any young who’s still trying to kickstart a career, I think this report is filled with reassuring news.
If aren’t in an ideal job right now, don’t worry. New opportunities will likely become available as long as you stay engaged in the workforce. And if you’re fretting about finances, your struggles will get easier once you start making more money.
This report could also indicate that recent college graduates won’t have poor credit scores for much longer. Opportunities to earn more income could also open doors to the possibility of handling a credit card or small personal loan. More income may also allow a young adult to take out an auto loan to replace a clunker car that’s hung on since high school. Diversifying a credit profile in these ways could give a lower-than-average credit score a boost.
Millennials’ financial growth could expand even further, thanks to an improving job market. More opportunities to land higher paying, skilled jobs may also increase the likelihood that mom and dad’s basement won’t be home to so many millennials much longer. About 26 percent of millennials were living with parents or relatives in 2015, according to Pew Research.
Whether it’s renting an apartment or buying a home for the first time, the sooner young adults can enter the housing market, the sooner they can start checking off other major life milestones, such as getting married or starting a family — if they so choose. A mid-2015 study by loan management company Navient and market research company Ipsos, “Money under 35,” found college grads are likely to achieve such milestones eventually, but an income boost might help as they battle student loan debt.
Overall, I’m glad one of the first millennial-oriented reports I read in 2016 was a positive one. If things are on the up and up for young adults, maybe older generations will stop fretting about us so much. I can only hope, right?