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Job Prospects Pick Up for (Some) College Grads

The employment picture is brightening for college grads, but some majors are benefiting more than others, says Anthony Carnevale of the Georgetown University Center on Education.

Adam Zoll: For Morningstar, I'm Adam Zoll. A recent study by Georgetown University Center on Education and the Workforce found that hiring has been picking up for new college grads, but not across all majors. Here to talk about the study and some of its findings is the center's director, Anthony Carnevale, joining us by phone.

Tony, thanks for joining us today.

Anthony Carnevale: Thank you for having me.

Zoll: So, for years now, we've been hearing about the dismal hiring prospects for recent college grads--graduates who couldn't find jobs or couldn't find good-paying jobs. Do the findings in your study indicate that we're finally turning a corner?

Carnevale: It looks very much as if we're turning a corner. We're not there yet. I don't think we'll get to what you might call full employment in the college labor market until 2017. Most agree that that's when we'll finally hit true full employment after we've drawn a lot of the people who have stepped off on the sidelines in the labor market back in. But, no, there is definitely a fairly consistent and linear upward shift in college hiring.

Zoll: Your study also noted that this was not true necessarily across all majors. I believe it was the social sciences and architecture that seem to be lagging?

Carnevale: There are realities in the American economy that weren't there decades ago. And that is, there was a time when college was just the preferred pathway to get a good job; but nowadays, it's the best-traveled pathway, and more and more jobs require at least some college. Maybe 60% of jobs or so, we think. But there is another shoe that has to drop on that story, and that is that what you'll make and whether you'll get hired depends more and more and more on what you take when you're in college--what your major is or your field of study. So, the recovery is panning out very much in line with that trend, and some college majors are doing better than others.

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Zoll: Your study also looked at a gap between what college grads in certain fields make versus their counterparts with only a high school diploma. That also found some interesting discrepancies, depending on the college major. Can you discuss that?

Carnevale: There are majors that, on average, don't give you much of a shot at a real college wage, and they are fairly obvious. One of them is psychology. If you only get a B.A., a bachelor's degree, in psychology, for instance, your earnings are going to be well below $30,000 a year to start, and the prospects aren't really good unless you get a graduate degree in counseling or learn to become a social welfare worker.

So, there are degrees like that. And as you would expect, there are others like that: art, the humanities--with the exception of English and American history, which do pretty well. The labor markets for both of those are good. Everybody is trying to hire somebody who can write and has high verbal skills, and there's a lot of demand for American history teachers. So, in the end, there are a bunch of majors in which you'll make more than [if you just had a high school diploma], it's oftentimes not a lot more. And if you're in the bottom 25th percentile--in the humanities or psychology or art--then you're not going to make any more than a high school graduate.

Zoll: What about on the flip side? Other than science, technology, engineering, and math, what majors would particularly make more than their high school counterparts?

Carnevale: The jobs that do best in terms of earnings relative to high school are the STEM [science, technology, engineering, and math] jobs, of course; but at the same time, business jobs, people who major in finance, marketing, accounting, business economics--economics, in general--even hospitality, which is working in hotels and other recreational kinds of jobs. They don't do as well as the other business majors, but they do substantially better than high school. Then, there are majors that will get you a job, but you won't make much. And the classic among those is education--that is, people who are education majors. Their unemployment rate is relatively low. Their job prospects are relatively good and improving, in part, because the American teacher workforce is retiring very fast now. They are a very old workforce. But you won't make much money. So, sometimes a major will get you a job, and other times it will get you a job and get you the money as well.

Zoll: Some economists--including our own director of economic analysis, Bob Johnson--are forecasting a labor scarcity in the coming years, where employers may have trouble filling certain positions. What does this mean for the job market, not only for today's new grads but new grads in the coming years as well?

Carnevale: One of the remarkable things we've watched as we've tracked this recovery is that we keep waiting for college wages to plummet. Now, they have gone down. The average B.A. wage has gone down by more than $4,000 over the recession, but the average high school wage has gone down by about the same amount. So, the difference between the two, the so-called college-wage premium, has pretty much held up, and that's a clue about the future. Even in the worst of times--and these have been the worst of times, not just since 2007, but really since 2002. The labor market hasn't been performing well.

So, the fact that college held up and the fact that we're headed for full employment in the college labor market by 2017 suggests that there will be shortages, in general. And the final part of that argument, which is really telling as well, is that even during the recession in 2007 up until now--the recession and the recovery--we've seen longer durations for employer hiring--that is, in science, technology, engineering, mathematics, accounting, in computer science, and in health-care occupations. What's actually been happening is that we've seen scarcity in those labor markets because it's taking a lot longer for employers to find people. They're having a difficult time, and that tells us when the college labor market comes fully back around, we're going to have a lot of shortages.

Zoll: So, for someone who's an incoming freshman today or maybe hasn't declared a college major yet, you still see the opportunity being in those STEM fields?

Carnevale: Yeah, I think, in general, college is becoming a good bet again--although always with the proviso that what you take is going to drive whether you get a job and it's certainly going to drive how much you make. But college is set up now for something of a very strong recovery because we know that once you hit full employment that these jobs become more and more scarce. So, all college majors, I have a suspicion, are going to do better.

Even the humanities--arts, psychology, education--there will be wage pressures coming in all these areas. Whether we'll get increased wages because employers are competing for talent, we don't know. It seems to be very hard to raise wages in the American system, but we may be headed [in the direction]. If we have long durations of full employment after 2017--and that's always a possibility--I expect we'll see wages for college graduates rise. One thing that's very important to say to the public about this because there's a lot of talk about the rich and poor in America now: We know that since the income divide [began]--the income inequality among Americans that has been growing since 1983--all the research shows that about 70% of that difference over those many years is due to differences between people who get college degrees and people who don't. So, college is part of the American dream and part of our social contract. Nowadays, you've got to have college to get anywhere.

Zoll: Tony, I'm sure that your outlook will be welcome news to a lot of people who are looking at paying high tuition bills and hoping that they're going to pay off, ultimately. Thank you so much for sharing your thoughts with us today.

Carnevale: Sure. You're welcome.

Zoll: For Morningstar, I'm Adam Zoll. Thanks for watching.