College graduates may be losing their edge in the labor market, as the unemployment gap between them and workers with only high school degrees has narrowed and reached its lowest level in decades, according to a new report.
The Federal Reserve Bank of Cleveland analyzed unemployment trends for high school and college graduates between the ages of 22 and 27, as high school graduates have typically experienced relatively higher levels of unemployment.
The Cleveland Fed economists found that the unemployment gap has continually declined since the 2008 financial crisis and recently reached its lowest level since the late 1970s. They also found that the decline has been accompanied by a decline in the job-finding rate – the fraction of the unemployed who find a job on a monthly basis – for young college graduates starting around 2000.
“Recently, the job-finding rate for young college-educated workers has declined to be roughly in line with the rate for young high-school-educated workers, indicating that a long period of relatively easier job-finding prospects for college grads has ended,” the researchers wrote.
TARIFFS HAVE SURPRISING EFFECT ON UNEMPLOYMENT AND INFLATION PATTERNS, FED ANALYSIS REVEALS
The study also found that other transitions to and from unemployment, such as the job separation rate or entries from outside the labor force, have moved in tandem for both high school and college grads over the long run, aside from temporary divergences over business cycles.
However, high school graduates remain at a disadvantage compared with their college graduate peers in terms of job retention and compensation.
“In particular, the entry rate into unemployment for young high-school educated workers remains above that for young college-educated workers. As a result, despite convergence in job-finding rates, young college graduates maintain advantages in job stability and compensation once hired,” the economists wrote.
CONSUMER CONFIDENCE FALLS SHARPLY AS AMERICANS WORRY ABOUT THE ECONOMY
The report noted that with young graduates experiencing higher-than-average unemployment rates, there are “widespread anecdotes of difficulties in finding employment and stories of tech industry contractions.”
Concerns about artificial intelligence (AI) powering the automation of entry-level jobs that have historically been filled by college graduates have “compounded those worries, especially since poor job market outcomes early in life can translate into persistent earnings shortfalls over the course of a career,” the report noted.
US ADDED 119K JOBS IN SEPTEMBER, DELAYED JOBS REPORT SHOWS
The Cleveland Fed economists noted that if these trends continue, they could upend the way young Americans view the value of investing in a college degree.
“The labor market advantages conferred by a college degree have historically justified individual investment in higher education and expanding support for college access. If the job-finding rate of college graduates continues to decline relative to the rate for high school graduates, we may see a reversal of these trends,” they wrote.
However, they cautioned that their report is mainly focused on the prospects of finding initial jobs and that college graduates still hold the edge over high school graduates in other key elements of the workforce.
“It is important to note, however, that not all employment advantages have disappeared for young college graduates. They continue to experience lower job separation rates than high school graduates, meaning greater job security once employed. College graduates also still retain substantial wage premiums,” the report noted.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
“The convergence we document concerns the initial step of securing employment rather than overall labor market outcomes,” the economists said. “These details suggest a nuanced shift in employment dynamics, one in which college graduates face greater difficulty finding jobs than previously but maintain advantages compared with high school graduates in job stability and compensation once hired.”
