Permanently Underpaid

The populist movement that elected Donald Trump was heavily focused on bringing solid-paying blue-collar jobs back to the United States. Disenfranchised coal miners and assembly line workers ignored the decade-after-decade decline in the demand for their services, the serial bankruptcies of their traditional employers, the change in environmental requirements and the fact that labor was now a global commodity. Even as automation leveled the production cost playing field between developed and developing nations, even as international outsourcing faded as the most relevant cause of job displacement, blue-collar workers believed that they could push the clock back and recapture a labor system long since rendered obsolete. Economists knew that this could never happen… progress seldom unwinds to return to costly and inefficient processes.

Even as many white-collar jobs, some even at the top of the food chain (investment advisors, financial analysts, lawyers and even surgeons), vaporized as complex robotics meet-ever-more-sophisticated artificial intelligence, there was (still is) this pervasive assumption that a college education is a panacea, regardless of degree, an unwavering path to a better job and a lifetime of solid earning power. Not exactly. Certainly not always.

Forgetting about the eventual impact of growing artificial intelligence in the workplace, there are a couple of axioms from the old job market that continue to apply to contemporary employment, as a number college-educated young adults first entered the job market during the last Great Recession, and  this one in particular: the lower the pay of your first real post-college job, regardless of the reasons, the lower you can expect your earnings to be for the rest of your life.

Work as a barista pending another degree? That “between years” job won’t be enough to satisfy a top law or business school admissions office; that low-pay journey will of necessity delay your entry into that ultimate professional job (assuming you stick with it), which will cascade into the rest of your earning life… all the while those who started earlier at that better earning power work will be years ahead in raises and promotions by the time you get to market.

But wait, it gets worse if that is a “take a little less to get your foot in the door” job or if an economic downturn has momentarily dropped entry-level pay for that career. Raises and promotions, with some serious exceptions, usually evolve from those entry-level pay scales. Start low, a 10% raise is against that lower pay level… and so on, and so on.

Another feature of the current job market is the severe polarization between what jobs get the fabulous pay… and the rest. College grads often have to take what they can find, dive into the gig market of contract work or Uber/Lyft or take second jobs. We call that underemployment, and since job figures are based on “averages” – where very high pay at the top makes everyone look rich but the median workers are hardly well-compensated – seeing how much underemployment there is in the United States takes some of digging. Politicians love averages and falling unemployment numbers… even if those numbers fall apart in deeper analysis. Here’s how important it is to make that first real job after college count:

“Although making lattes or staffing a cash register is often considered a youthful rite of passage during that bumpy transition from campus to the workforce, new research suggests that settling for a subpar job out of the gate can harm career prospects for years to come.

“Two-thirds of people who were underemployed in their first job after college were still underemployed five years later, while only 13% of new grads who landed college-graduate-level jobs right away were underemployed after five years, according to a study released in May by Burning Glass Technologies, a labor market analytics company, and the nonprofit Strada Institute for the Future of Work.

“Underemployment gets harder to escape as time goes on. Three-quarters of those who were underemployed five years after college continued to be so at the 10-year mark, according to the report.

“The skills and professional connections gained in the first job help lead to the next and then the next, and those who missed out early have a hard time catching up. Their earnings fall behind. Recent college graduates who are underemployed earn, on average, $10,000 less a year than their counterparts doing college-graduate-level work, the report found.

“Women are disproportionately affected — 47% of women were underemployed in their first post-college job, versus 37% of men, the report found. The researchers didn’t examine the reasons for the gender divide, but it could be linked to the growing specificity of job descriptions, as research has shown that women are less likely than men to apply for a job if they don’t believe they meet all the listed requirements, Burning Glass Chief Executive Matt Sigelman said.

“‘That first job is so critical because so many who do start out behind stay behind, and the financial implications are substantial as well,’ said Michelle Weise, chief innovation officer for the Strada Institute. The research was based on 4 million resumes of people who graduated after 2000. To account for rising employer standards, it defined college-graduate-level jobs as those for which more than half of current job postings require a college degree.

“In decades past, wandering aimlessly for a while after college was an accepted part of the transition to adulthood. Today’s new grads face a very different labor landscape that favors the focused, the researchers said… For one, ballooning student debt — approaching $1.5 trillion nationally, with California’s new graduates on average facing nearly $23,000 each as of 2016 — makes it unwise to cut short earning potential.

“In addition, employers no longer expect new hires to stay with the company for the long haul and so many don’t invest in entry-level training, yet they have high expectations that people come in with a specific skill set, Sigelman said.

“Meanwhile, the population of college graduates has risen markedly — more than one-third of people over 25 have at least a bachelor’s degree, compared with about one-fifth 20 years ago — which has made it harder to stand out and has enabled employers to make college a prerequisite for jobs that traditionally didn’t require it. And new graduates face competition from older peers still recovering from the misfortune of graduating during the Great Recession.” Los Angeles Times, July 9^th.

Young adults don’t have the same leeway to spend time “discovering themselves” anymore. They need to get on a job track early, in the earliest years of college, or their fellow students will leave them in the underemployment earnings dust… forever. Employers also prefer focused and directed students who know what they want… and whose education is fresher and more relevant.

I’m Peter Dekom, and in the world of harsh competition and too many people wanting the same goal, he or she who hesitates… is quickly left behind.