With about three months before graduation, senior-year students know they will be emerging in the working world during the worst economic crisis since the Great Depression.
And seniors likely realize finding a job in an economy with an unemployment rate of 10.6 percent, the highest students have seen in their lifetimes, will be difficult, especially since there are about six unemployed workers for every available job in the U.S.
But what seniors may not know is that their earnings may never meet the earnings of those who didn’t graduate during a recession, perhaps earning as much as 25 percent less than grads employed during good times.
Yale economist Lisa Kahn studied career paths of white male college graduates from 1979 to 1989, which included a recession in the early ’80s. Kahn found that for every one-percentage-point increase in the national unemployment rate, the starting income of new graduates fell by as much as 7 percent. Those who graduated in the thick of the recession, from 1981-82, made about a quarter less than graduates in positive economies.
While this may not be surprising, the effects of graduating in a recession linger – Kahn found that even up to 15 years after graduation, recession students never close the wage gap with their non-recession counterparts, sometimes earning 10 percent less than good-time students.
“It’s not surprising information,” said Richard Gretz, assistant professor of economics. “You always build on your starting salary,” he said. “So it might be more difficult to catch up.”
Gretz said students who graduate during a recession have lower salaries because more people are looking for jobs, giving companies more “bargaining power.”
But Gretz said GDP has been growing over the last few quarters – a “good signal” for grads. Job growth will follow, but it typically lags behind.
Still, any growth is good growth for grads, Gretz said.
“It’s potential good news for 2010 grads,” he said. “But things in 2011 will probably be much better, as job conditions catch up to the economy.”
Senior dietetics major Caitlin Ramis has another one to two years of school left and said she’s relieved she doesn’t have to job-hunt just yet.
“I’m hoping by the time I’m ready to get into the workforce, the economy will be improved over what it is now,” she said. “I guess I’m sort of glad I have to go through more schooling because of that.”
Associate Director of the Smith Career Center Sandra McDermott said though the predictions seem dire, they are just predictions.
“The employment market regularly cycles between lean and good times,” she said. “To find a job or advance within an organization, you have to be willing to do the work that will set you apart from your peers … you have to be willing to work at Plan A and be flexible enough to consider Plan B.”
