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College Graduates Maintain Edge in Evolving Tight Job Market
Despite a challenging job market, college graduates continue to exhibit an advantage over less-educated peers, a recent analysis suggests. Outlook appears tough for all - data on labor-force participation, employment-to-population ratios.
A Persistent Advantage for Graduates
The job market for young college graduates remains demanding, particularly for those without a bachelor's degree. The class of 2026 anticipates one of the most stressful job markets, as employers reduce hiring and artificial intelligence skills become increasingly critical. Despite this, data indicates a persistent advantage for graduates.
According to a quarterly report from the New York Fed, the unemployment rate for individuals aged 22 to 27 with a bachelor's degree was 5.6% in March, a significant increase from 3.6% in December 2019, before the Covid pandemic. For the same age group, the unemployment rate for all workers, including college graduates, those with associate degrees, and those with just high-school degrees, reached 7.2%, reflecting a move higher than pre-pandemic levels, when it stood at 6.8%.
Brad Hershbein, a senior economist at the W.E. Upjohn Institute for Employment Research, notes that the employment prospects for young college graduates have significantly worsened compared to those with less education. However, unemployment rates alone offer an incomplete picture when comparing outcomes across different worker groups.
Employment Trends by Education Level
Analysis of government data suggests that the employment outlook for less-educated young individuals has weakened more substantially than for college graduates. Hershbein states, "Young people with college degrees are more likely to be employed, they are more likely to be earning money."
Among those without bachelor's degrees, a larger proportion is not actively seeking work. The Labor Department's unemployment count only includes those actively looking for work, thus understating the total number of people without jobs. Hershbein's findings indicate that in the first quarter of the year, the labor force participation rate for those aged 22-27 working or looking for work averaged 75.9% for individuals with high school through associate degrees. This figure decreased from 77.1% in the first quarter of 2019. In contrast, the participation rate for young people with bachelor's degrees was 86.7%, up from 85.7%.
This narrow gap in unemployment between young college graduates and their less-educated peers could suggest that the college-educated group is more actively engaged in the labor market, while others are sidelined.
Degree Holders and Overall Employment
A broader measure of labor market engagement is the employment-to-population ratio. For college graduates aged 22 to 27, this ratio averaged 82.4% in the first quarter, nearly flat with its average of 82.5% in the first quarter of 2019. For those with high school through associate degrees, the employment-to-population ratio was 70.5%, down from 71.8%.
Guy Berger, a labor economist, has conducted similar analyses. Berger emphasizes that today's college graduates face a challenging environment, but their employment outlook has not deteriorated as severely as for the less educated. Historically, they have fared better during economic downturns than they are currently. A significant factor in this could be artificial intelligence, potentially increasing competition for roles where a bachelor's degree was once a distinct advantage.
Wage Boosts and Evolving Labor Market Dynamics
A detailed government data analysis by economists at the Economic Policy Institute reveals that the wage premium for workers with a bachelor's degree, relative to less-educated workers, has decreased to about 55% last year, down from approximately 63% in 2015. This shift may be due to the rising number of workers holding college degrees.
As of March, around 42% of U.S. employees held a bachelor's degree or higher, representing a 30% increase over a decade. This trend is further supported by research from Harvard University economists Claudia Goldin and Lawrence Katz, who documented that in the early 1900s, only a small fraction of workers had high school degrees, and those who did earned a substantial wage premium. However, that premium has diminished over time as high school degrees became nearly universal.
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