A line in Bob Dylan’s “Subterranean Homesick Blues” goes, “Twenty years of schoolin’ / And they put you on the day shift.” It was written in 1965, but would probably resonate with today’s college graduates who are stuck working part-time in menial jobs.On top of massive student loan debt, many recent college graduates now enter a job market where 34 percent of their peers lack full-time employment. For Americans aged 16-24 who have not earned a bachelor’s degree or higher and are not enrolled in school, this number is closer to 60 percent. A recent article in the WSJ addresses the consequences of this post-recession trend:
The costs of a “lost generation” go beyond the impact on young people themselves. A 2012 analysis commissioned by the Corporation for National and Community Service, a federal agency, estimated that the 6.7 million American youth who are disconnected from both school and work could ultimately cost taxpayers $1.6 trillion in lost tax receipts, increased reliance on government benefits and other expenses. Look at broader economic and social effects such as lost earnings and increased criminal activity and the impact tops $4.7 trillion, the researchers estimated.…Economic research has shown that the first few years after college play an outsize role in determining workers’ career trajectories: About two-thirds of wage growth, on average, comes in the first 10 years of a person’s career. In weak economic times, graduates are likely to accept lower wages and work for smaller companies with fewer opportunities for advancement. And in many cases, they never move off that second-tier track.
In addition to the predicted impact on tax revenues and social service expenditures, the effect this has on the expectations of young workers is important. Citing a recent Pew survey, the article states that only 11 percent of young people who are employed said they have a career rather than “just a job”; less than half believed they were on track for a career.Garden-variety economics contends that individuals do not base their spending habits on their current income, but rather on what they expect to earn throughout their career. Consider 23-year-old working an entry-level position at a bank in Manhattan. Her salary probably won’t be high enough to cover the costs of living and a rainy day fund. However, her prospective earnings are high enough that she’s probably inclined to spend a greater portion of her current income, both on living and discretionary expenses. By contrast, a worker who sees no prospect for higher earnings (or at least significantly higher) will be less likely to spend freely. As young workers adjust their career expectations downward, the resulting decline in consumption could make a dent in overall demand.It’s important, then, that young people emerge from college equipped with the skills they need to succeed in the competitive job market. It’s a key step toward restoring confidence in the economy as a whole.