As U.S. student debt has now passed the amount of credit card debt, and the intellectual returns of U.S. college are coming under fire [Jan 18, 2011: Report - First Two Years of College Show Small Academic Gains], grads are also being pressured on the job front. Some quite startling data in this New York Times story as 22.4% of 2009 college grads are not working, and (more troubling from this set of eyes) 22.0% are in jobs that don't require a college degree. It's no wonder student debt default rates are at record highs. The issue of jobs is not just U.S. centric - many (high cost) developed countries are facing the same situation; Spain's youth unemployment is near 40% for example. [Feb 7, 2011: BW - The Youth Unemployment Bomb] However what makes the U.S. unique is the enormous cost of secondary education - which is now garnering a poor ROI (return on investment) for an increasing amount of graduates. While Wall Street is focused on the number of jobs, they have missed the forest for the trees - the quality of jobs gained versus what has been lost is putrid. [Feb 3, 2011: CNNMoney - Jobs Coming Back, but the Pay Stinks!]
Anyhow, I've been told not to worry for years by those who live in ivory towers and speak dogma - once we outsource a big chunk of jobs, it will make other countries middle class well off.... whom will one day have more disposable income to buy U.S. goods. That are built in the foreign countries. Which somehow will lead to U.S. jobs. For example....McDonald's burgers (staffed by locals), and Apple iPhones (assembled in China). [Oct 4, 2010: WSJ - Americans Souring on Free Trade as Losing Their Jobs Overpowers Lower Prices] Don't ask questions, just believe it will all work out in the end.
I am not sure when the tipping point will be reached but as I said in 2008 we are approaching a point where for many (not all!) going to college, incurring massive debts, and then entering a job market where many of the jobs they once had have been outsourced (and continue to be) or eliminated via automation/productivity improvements, will simply be a losing proposition even accounting for the 'higher pay' in the long run. I don't know when the college bubble bursts but eventually it will face the same end as all bubbles.
From the story....
- The individual stories are familiar. The chemistry major tending bar. The classics major answering phones. The Italian studies major sweeping aisles at Wal-Mart.
- Employment rates for new college graduates have fallen sharply in the last two years, as have starting salaries for those who can find work.
- What’s more, only half of the jobs landed by these new graduates even require a college degree, reviving debates about whether higher education is “worth it” after all.
- The median starting salary for students graduating from four-year colleges in 2009 and 2010 was $27,000, down from $30,000 for those who entered the work force in 2006 to 2008, according to a study released on Wednesday by the John J. Heldrich Center for Workforce Development at Rutgers University. That is a decline of 10 percent, even before taking inflation into account.
- Of course, these are the lucky ones — the graduates who found a job. Among the members of the class of 2010, just 56 percent had held at least one job by this spring, when the survey was conducted.
- Even these figures understate the damage done to these workers’ careers. Many have taken jobs that do not make use of their skills; about only half of recent college graduates said that their first job required a college degree.
- An analysis by The New York Times of Labor Department data about college graduates aged 25 to 34 found that the number of these workers employed in food service, restaurants and bars had risen 17 percent in 2009 from 2008..
- There were similar or bigger employment increases at gas stations and fuel dealers, food and alcohol stores, and taxi and limousine services.
And when college majors are busy waiting tables, being baristas, or selling liquor and gas - it has a cascading effect.
- This may be a waste of a college degree, but it also displaces the less-educated workers who would normally take these jobs. “The less schooling you had, the more likely you were to get thrown out of the labor market altogether,” said Mr. Sum, noting that unemployment rates for high school graduates and dropouts are always much higher than those for college graduates. “There is complete displacement all the way down.”
And about those loans the federal government is just dying to hand out so that the massive Ponzi scheme called the college tuition bubble can escalate?
- Meanwhile, college graduates are having trouble paying off student loan debt, which is at a median of $20,000 for graduates of classes 2006 to 2010.
- Many graduates will probably take on more student debt. More than 60 percent of those who graduated in the last five years say they will need more formal education to be successful.