Low-paid grads face stunted careers, income

Underemployment also threatens economic expansion as educated young adults spend less on things like technology, entertainment and cars.

By MSNMoney partner Jul 11, 2012 9:07AM

By Jeff Green and Carol Hymowitz

Michael Baum took every substitute teaching job he found and has sent out hundreds of resumes since graduating from college two years ago. He never got a full-time offer and works as a waiter at a pizza parlor in Chicago, earning $650 during a busy week.


"It's discouraging," said Baum, 25, who is certified to teach in Texas and North Carolina as well as his native Michigan. His pay is just enough to cover basic living expenses.


Baum has joined the growing number of underemployed graduates in the U.S., in an election year when both President Barack Obama and presumptive Republican challenger Mitt Romney are vying for young voters with promises to restore jobs. Underemployment isn't debilitating only for individuals whose career and income opportunities are stunted. It threatens the economic expansion as college-educated young adults have traditionally fueled consumer spending on clothes, technology, entertainment and cars.


"If you have a stumbling entry into the labor market, you risk getting stuck in jobs for which you're overqualified and poorly paid for the rest of your life," said Katherine Newman, a sociologist and dean of the school of arts and sciences at Johns Hopkins University in Baltimore who has studied the long- term effects of underemployment. "There's a scarring effect, with employers you want marking you as undesirable. The economic toll is enormous."


The underemployed include those of all ages who are working part-time but want full-time positions. There were 8.2 million people working part-time for economic reasons in June, according to the U.S. Bureau of Labor Statistics. That number had doubled to 9.1 million in the last quarter of 2009 from 4.5 million in the same period of 2007.


Unemployment for Americans ages 20 to 24, which has topped 10 percent for four years, was 13.7 percent in June, up from 12.9 percent the previous month, according to the Labor Department. Employers added 80,000 jobs in June, fewer than forecast, and the overall rate stayed at 8.2 percent, the data showed July 6.


There were 1.9 million jobless ages 20-24 who weren't in school in June, a gain of 312,000 from May and the biggest increase since record keeping began on the topic in 1985, according to nonseasonally adjusted statistics. The age group's labor-force participation is the lowest since 1985, and the percentage working part-time and not in school is the highest since then, data show.


The outlook is brighter for recent graduates with degrees in computer science, engineering and accounting, with skills that are in high demand, according to the National Association of Colleges and Employers. While the group's latest survey of companies shows a 10.2 percent increase in hiring plans from 2011, the improvement isn't benefiting all majors the same way, said Edwin Koc, who heads research at Bethlehem, Pennsylvania- based NACE. Those "with certain skill sets are doing quite well," while things are tougher for others, such as liberal- arts, humanities and education majors, he said.


Instead of indulging at the start of their career, many young people with degrees now are scrimping. Compared with five years ago, Generation Y -- people born from 1981 to 2001 -- is shopping more at discounters and value stores such as TJX Cos. (TJX)'s T.J. Maxx and Marshall's and Dollar General Corp. (DG), and less at premium-priced retailers such as Limited Brands Inc. (LTD)'s Victoria's Secret, Macy's Inc. (M) and Nordstrom Inc. (JWN), according to Kantar Media. The New York-based research company analyzed shopping habits from January to May this year and in 2007.


Consumers ages 18 to 34 accounted for 8.7 percent of new vehicle registrations through April and 8.9 percent in 2011, according to Edmunds.com, which tracks the data. That's down from 13.8 percent for eleven months in 2007, heading into the 18-month recession that started in December of that year.


About 60 percent of buyers in that age range said they are "more likely to choose a lower-priced brand than my usual brand if it means I can save money," compared with 50 percent of 35- to-54-year-old buyers and 42 percent for people who are 55 and older, according to a survey of shopping trends conducted in February by WSL/Strategic Retail, a New York-based consultant.


Half of the young consumers said they avoid going into stores where they might be tempted to spend money, and 57 percent said they "make a point to search online for store discounts," compared with 45 percent of 35-to-54-year-olds.


"Retailers used to be able to count on young adults to be the first to buy whatever was new and to purchase the bigger brands at better stores," said Candace Corlett, president of WSL/Strategic Retail. "Now they can't afford that, and they're so comfortable with mobile technology, they've become the savviest at getting the best prices. We're smothering aspiration at a very early age."


Baum, who can't afford a new laptop or a tablet, uses a computer he inherited from his father. When he lived with his parents in suburban Detroit for a year after finishing his degree at Oakland University in Rochester, Michigan, he went out to restaurants or bars a few times a week, spending $60 to $80 each time. Now it's once or twice a month. He and his two roommates have Internet service in their $900-a-month apartment and no cable -- to save money. He still plans to try to get a teaching position in Illinois.


Jeffrey Joerres, chief executive officer of Milwaukee-based staffing company ManpowerGroup, said there may be a "lost generation" of educated young adults in today's workforce.


"If they don't have very specific skills that are in high demand, like engineering or computer science, young B.A.s are vulnerable and often aren't building any skills in jobs they can find," he said. "Within a year or two, they're competing with a newly minted group of B.A.s, so fall behind further."


They're also displacing less-educated young people from less-skilled service jobs, said Mark Melnik, deputy director for research at Boston Redevelopment Authority, who has studied underemployment.


The number of waiters and waitresses ages 18 to 30 with college degrees increased 81 percent from 2000 to 2010, to 159,645, according to U.S. Census Bureau figures. Educated bartenders, dishwashers and file clerks in that age group doubled. The number of janitors with college degrees rose 87 percent to 20,475, and the number of maids climbed 52 percent to 10,930, the data show.


The weak job market dissuaded Richard Wagner from even looking for a job requiring a college degree after he graduated from the University of California at Santa Barbara a year ago with a major in psychology.


"I didn't have high expectations," said Wagner, who said he felt lucky to find a job as a dog walker for $15 an hour when he moved to New York last winter.


"That's more than minimum wage, so a lot of people want to do this," said Wagner, who spends seven hours each day walking 10 to 12 dogs, two at a time.


Determined to support himself, he has learned to live frugally. Besides his rent of $600 a month in a Brooklyn apartment shared with five roommates, he allots $10 a day for food, cooking most of his meals. He uses his bike for transportation to avoid having to pay subway fare.


"All of my roommates are in the same boat, so we aren't encouraging one another to spend money or go out," he said.


Since she graduated from the University of Colorado in 2010, Darien Buckley has moved to two cities for three different jobs that don't utilize her double major in studio photography and communications. She first worked as an office clerk at a financial-services company in Pittsburgh and then as a data- entry clerk in Orange County, Calif.


Currently, she works in telemarketing at an Orange County company that produces pet-themed magazines, the closest she has gotten to the career she wants. She sells advertisements by phone, and her office is one exit on the highway from the editorial-staff office.


"You just have to pull strings and hope for something that will get you that 'in,'" said Buckley, 24, who hopes she'll eventually get a job in the editorial division.


Meanwhile she's struggling to cover her rent, car and other living expenses on the $30,000 she earns. Buckley calls herself a bargain shopper -- looking for deals at Target Corp. (TGT), Forever 21 Inc. and Hennes & Mauritz AB (HMB)'s H&M. She and her fiance have sworn off credit cards to avoid making impulse purchases. Several times a week they eat canned black beans and corn for dinner. They hardly ever dine out.


Buckley's biggest indulgence is caring for her dog, a mixed-breed adopted from a shelter. The cost of treating Ralphie for fleas recently nearly broke her budget, she said.


In the end, underemployed youth will rob the U.S. of economic and intellectual firepower, said Johns Hopkins' Newman.


"Underemployment can't be tracked as closely as unemployment, but we know from studies of what happened in the Great Depression there's a chronic impact," Newman said. "Young people working jobs they're overqualified for don't get trained or encouraged to advance and become successful, and both they and employers lose out."


More from Bloomberg

Jul 12, 2012 9:44AM
Welcome to the new working-world order; A 4 Year College Degree is the new High School Diploma. Many available jobs in today's world require a Degree, but could in reality be done by an 8th grader. Instead of dumping a bunch of time and money cramming basically worthless information into ones head, spend the $$$ on cosmetic surgery. Most service industry jobs (which is about all there is en-mass), place priority on being easy on the eye over the ability to add two numbers, or name the capitals of all 50 states. Computers do that much better...
Jul 16, 2012 6:27PM
What else should be expected. Colleges are turning out dumbed down students just as our highschools started years ago. Why would anyone think that a degree ensures a job. Industries need people tat can do something productive. These silly arts degrees along with marketing, music, and many other similar degrees are a waste of resources.
Jul 13, 2012 10:33AM
I.T is no longer an "in-demand" job. If you look at simple places like craigslist, you see MAYBE 5 job postings a day, MAYBE. There are over 100 postings a day in the medical section. Wages for IT positions have dropped drastically unless you happen to luck out with a big company which is becoming more rare since everyone is rushing to try and get these positions.  I live in florida where employers want $60k/yr skills for $13/hr and that is the NORM here. Very few postings reach a potential of $20+/hr. Here is a quote from a few days ago. "Supeme court Justice Potter Stewart said "I dont know how to define obscenity, but I know it when I see it."
These are Americans wanting to hire other experienced American I.T professionals for $7-$8 an hour."
This is disgusting to hear since there are so FEW I.T openings at all. I am over qualified for most I.T jobs I apply for but some of us want to stay in our profession if we can and take that pay cut so we don't have to be waiters and McDonalds employee's.
Jul 13, 2012 4:56AM

If 40-50% of students are majoring in computer science and cos are adding 10.2% to their hiring,
that leaves a gap of 29.8% - 39.8%.And with that much overflow the salaries are sure to be comparable to the dogwalker in NY in a flash.Plus the whole world is putting out CS people which will speed up that salary decline. soon the dogwalker who I'm sure gets paid cash will have the higher paying job.

Jul 16, 2012 7:48PM
These college kids all need to be politicians.  I can't think of a better job.  High pay, lifetime medical insurance, lifetime pension, free travel, free food, free hotels, 15 hour work weeks, 10 vacations a year. 
Jul 13, 2012 3:56PM
Craigslist has to be one of the worst places to find an IT job (besides CareerBuilder!). Try Dice.com, JobServe, or even Monster.

IT is still in demand, but not fixing computers...things like mobile app development and database development are in very high demand.

More importantly though is having a combination of skills, not only IT. For example, if you have business experience (or degree) AND database development experience (or degree) you will be in much higher demand than just one or the other.

And the suggestion that people major in Law? Good luck with that one. Unless you go to a top school and graduate in the top 10% of your class you better have family connections or you will be a barista at Starbuck's.

Jul 12, 2012 6:11PM
Maybe they should have majored in something useful like engineering, accounting or law. What skills can a humanities major bring to any company? They may have found ways to get hired in the good times, but now that companies are watching their bottom line the positions simply aren't there for those people. So yes, unfortunately you will be stuck working in the service industry for the rest of your life...
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