Further analyses of the labor market for college graduates – Research Summaries
Daniel E. Hecker
An article in the July 1992 issue of the Review discussed the sharp increase in earnings of college graduates relative to high school graduates that occurred during the 1980’s.(1) Over the same period, the article pointed out, the proportion of college graduates employed in noncollege-level jobs remained unchanged, at 17 percent to 18 percent.(2) The earnings data led some economists to conclude that there was a growing shortage of college graduates in the 1980’s, while the employment patterns led others to conclude that more college graduates entered the labor force than there were available openings in college-level jobs. The earnings and employment profiles that have emerged in the early 1990’s have remained similar to those of the 1980’s.(3)
This report presents an overview of recent analytical work by Tom Amirault and Kristina Shelley.(4) The aim is to reconcile the apparent conflict in the data on the labor market conditions for college graduates.
Using data from the Current Population Survey cps) that became available in 1992 and that show the highest degree held,(5) Tom Amirault analyzed the profile of college graduates in 1992 by age and occupation. The data clearly showed that most college graduates were employed in college-level jobs, earned substantially more than the average of all workers, and experienced lower than average unemployment rates. This provides clear evidence that, on average, “college pays.” Among the different groups making up the college graduate labor force, however, there were significant variations in outcome. Not surprisingly, the median earnings premium over high school graduates was substantially greater for workers with advanced degrees than for those holding bachelor’s degrees, as shown in table 1.
[TABULAR DATA 1 OMITTED]
The earnings of college graduates varied widely, and not all graduates earned a premium over high school graduates. The following tabulation shows the percent of college graduates who earned less than the median earnings of high school graduates in 1992 ($21,241): Degree level Percent
Total, all graduates 16 Bachelor’s degree 20 Master’s degree 11 Ph.D. degree 7 Professional degree 5
On the other hand, the data show that workers with college degrees who are in the top decile of the distribution of earnings had significantly higher than average earnings. For example, bachelor’s degree holders at the top decile earned $67,416, more than 3 times the earnings of the median high school graduate. Also, earnings varied significantly within occupational groups. For example, bachelor’s degree holders in the top decile in nonretail sales jobs earned $87,519, compared with earnings of $15,281 for those in the first decile.
Among detailed occupations, physicians ($88,281), lawyers ($73,572), and dentists ($71,319) led off the median annual earnings ranking in 1992 by a wide margin. Marketing, advertising, and public relations managers were the highest paid bachelor’s degree holders ($50,428), earning nearly 50 percent more than. the median for workers with a bachelor’s degree and several times more than the median for bachelor’s degree holders employed as retail sales workers ($23,839), prekindergarten and kindergarten teachers ($21,050), and secretaries ($20,426). For master’s degree holders, financial managers ($60,754) earned significantly more than the medians of secondary school teachers ($36,464), social workers ($34,483), and librarians ($32,695).
The earnings and employment patterns of new college graduates also indicate that graduates of some fields of study are much more likely than graduates of other fields to have success in the labor market. June 1991 data from the National Center for Education Statistics on the bachelor’s degree class of 1990 show wide variations in employment outcomes by the field in which the degree was earned.(6) Health professions and engineering graduates experienced the best outcome in terms of earnings and relatedness of employment to the major field of study. Based on these same measures, history and humanities majors did the worst. (See table 2.)
[TABULAR DATA 2 OMITTED]
Although 80 percent of all college graduates were employed in professional, managerial, and other college-level jobs in 1992, 17 percent were in noncollege-level administrative support, retail sales, food and other service, craft, operative, laborer, or farm jobs. The proportions of the latter group varied by degree level: 4 percent for those with Ph.D. or professional degrees, 10 percent for those with master’s degrees, and 23 percent for those with bachelor’s degrees. Employment in noncollege-level jobs did not vary much by age, except for recent graduates aged 20-24 years. As the following tabulation shows, 20 percent of bachelor’s degree graduates aged 40-49 years were in noncollege-level jobs, compared with 24 percent for 25- to 29-year-olds:
noncollege-level Age jobs 20-24 36 25-29 24 30-39 22 40-49 20 50-59 19 60-44 21 65 and older 25
The unemployment rate for college graduates was 3 percent, significantly less than the national average of 7 percent in 1992. Rates ranged from 1 percent for those with Ph.D.’s or professional degrees to 4 percent for bachelor’s degree holders.
Future jobs for college graduates
Although the past can be a useful indicator of outcomes for college graduates, labor market supply-and-demand conditions can change radically in a short period of time. For example, college graduates in the 1960’s experienced very favorable labor market conditions, but job market conditions changed radically in the 1970’s, when large numbers of baby-boom graduates entered the labor force and competed for available jobs. The Bureau of Labor Statistics takes into account expected population and labor force growth, economic projections, trends in college attendance, and many other factors in developing projections of job market conditions for college graduates. Shelley’s analysis of the future job market for college graduates indicates a somewhat more competitive job market over the 1992-2005 period than during the 1984-92 period, with slightly more entrants relative to openings.(7) About three-fourths of the graduates entering the labor force during the 1992-2005 period are expected to find college-level jobs, compared with nearly 4 out of 5 from 1984 to 1992. Although annual average job openings for graduates are projected to be more than in the previous 8 years, substantially more entrants are also expected, at least if National Center for Education Statistics midlevel projections of bachelor’s degree awards are on target. Underlying the latter projections is an expected increase in the number of 18- to 24-year-olds in the late 1990’s, as well as the assumption that college enrollment rates of high school graduates will continue to rise as they did during the 1984-92 period. The following tabulation shows the number of college graduates entering the labor force and the number of job openings for the 1984-92 period and projected for 1992-2005:
1984-92 1992-2005 Entrants 1,200,000 1,380,000 Openings 940,000 1,050,000
Job openings for college graduates were based on the Bureau’s moderate-growth projections, presented in the November 1993 Monthly Labor Review, and on replacement rates measuring permanent labor force separations. The Bureau projections show a 40-percent growth in college-level jobs, more than twice the growth rate of noncollege-level jobs (17 percent). Faster-than-average job growth results from above-average growth of industries, such as education services, that utilize graduates extensively, and from industries, such as computer services, that increase their employment of graduates relative to nongraduates, partly because of changes in technology and business practices. In addition, employers are expected to continue to upgrade some jobs, seeking workers with at least a bachelor’s degree for jobs previously filled by people with less education.
THE DATA SHOW THAT, on average, a college degree will continue to provide significant returns to graduates. As has been the case for a number of years, however, simply obtaining a college degree guarantees neither high earnings nor employment in a college-level job. Advanced degree holders and graduates in some fields have a greater probability of high earnings and a college-level job. Furthermore, the data also show very wide earnings ranges for college graduates by field in which the degree was earned and by occupation.
Information on the characteristics of graduates who hold college-level jobs and on graduates who hold noncollege-level jobs is incomplete. Further research is needed on outcomes beyond 1 year after graduation and on how academic performance, the quality of the college attended, and other factors affect outcomes. Information also is needed on characteristics, such as informally acquired skills, innate talents, and job search skills, that also may have a significant effect on outcomes, but that are difficult to measure. Such information may help explain why some graduates end up in noncollege-level jobs with low earnings. Currently, we do not know how many college graduates take noncollege-level jobs because of labor market supply-and-demand conditions, how many do so because their individual educational backgrounds limit their options, and how many do so through deliberate choice.
(1) Daniel E. Hecker, “Reconciling conflicting data on jobs for college graduates,” Monthly Laborer Review, July 1992, pp. 3-12. (2) Ibid. (3) See Income Gains and Losses Tied to Education and Gender, Summary 94-5 (Bureau of Labor Statistics, July 1994). (4) For more details, see the following two articles in Occupational Outlook Quarterly, Summer 1994: Thomas A. Amirault, “Job Market Profile of College Graduates in 1992: A Focus on Earnings and Jobs,” pp. 20-28; and Kristina J. Shelley, “More Job Openings–Even More New Entrants: The Outlook for College Graduates, 1992-2005,” pp. 4-9. The latter article is an update of “The future of jobs for college graduates,” Monthly Labor Review, July 1992, pp. 13-21, by the same author. (5) Prior to 1992, the cps data on education level were based on respondents’ answers to a question on years of school, rather than highest level of education, completed. (6) Gary Steinberg, “The Class of ’90: One Year After Graduation,” Occupational Outlook Quarterly, Summer 1994, pp. 10-19. (7) Shelley, “More Job Openings,” pp. 8-9.
Daniel E. Hecker is an economist in the Office of Employment Projections, Bureau of Labor Statistics.
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