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Young grads didn't suffer as badly as less educated peers in the aftermath of the recession, a new report finds.
The Great Recession was hard on young college graduates, but a new analysis finds that it was much tougher on people in their early 20s who didn’t have a bachelor’s degree.
The analysis of government data, released Wednesday by the Pew Charitable Trusts, found that 21- to 24-year-olds with a college degree saw considerably smaller drops in both employment and wages than their peers with just a high school or associate degree.
“Having a college degree really helped individuals weather the recession at much better rates … than for those with lesser credentials,” Diana Elliott, research manager with the Pew Economic Mobility Project, said in a conference call with journalists Wednesday.
Pew’s findings come as some experts have started to question whether going to college is as valuable as it once was, given the rapidly rising cost of tuition and the growing burden of student loan debt. Those concerns have been exacerbated by years of high unemployment for the country overall, and particularly for younger workers.
The unemployment rate for all 20- to 24-year-olds, regardless of education level, was 13.7 percent in December, according to the Bureau of Labor Statistics. That compares with a general unemployment rate of 7.8 percent that month.
Elliott, the researcher, said she doesn’t think Pew’s findings discount the familiar reports of young college graduates who have had to move back in with their parents after being unable to find a job
But she said the new data shows that overall, many young college grads appear to be doing OK.
“It shows on a national level, with nationally representative and really reputable data, that the trends overall do not find this to be the case,” she said.
Pew used government data from 2003 to 2011 for its analysis. The researchers found that 69 percent of 21- to 24-year-old college grads were employed before the recession hit in December of 2007. That figure fell to 65 percent in the period after the recession ended in June of 2009 and entered a period of weak recovery.
By contrast, just 55 percent of people that age with a high school degree were employed before the recession began, and that figure fell to 47 percent after the recession.
The young people in each group who weren’t employed could have been in school, looking for work or out of the labor market for another reason.
The researchers did not find an increase in the amount of people at any education level who started attending school once the recession hit, so it doesn’t appear the sharper drop in employment among high school grads was the result of more people going to college.
Everyone in their early 20s saw a drop in average wages after the recession hit. But the Pew researchers found that average weekly wages fell by 5 percent for the young college grads, but by 10 percent for the high school grads.
College grads also earned much more, on average, even after the hit they took because of the recession. The average weekly wage for young college grads was $645 after the recession, the Pew researchers found. For high school grads that age, it was $394.
Young people with an associate degree generally fared better than their high school-educated peers but worse than those with a college degree.
“Any amount of education does improve the labor market outcomes for those recent graduates,” Elliott said.
A college degree has always been seen as a key part of achieving the American dream of upward economic mobility. There’s plenty of data to show that college graduates generally earn more money and are more likely to be employed than their less educated counterparts.
The unemployment rate college graduates ages 25 and over was 3.9 percent in December, compared with 8 percent for those with just a high school degree.
But some say that while it’s clear college graduates make more than those without a college degree, that doesn’t mean all college degrees will pay off. That’s because some graduates are so financially hobbled by high student loan debt, which has neared $1 trillion by some estimates, that they end up giving back much of their wage gains.
“The issue is the cost/benefit analysis of what do you have to give up to get that higher salary?” said Laurence Kotlikoff, an economics professor at Boston University who has calculated the relative lifetime benefit of things like choosing a private college over a cheaper public school.
Kotlikoff said people who are heading to college need to take a nuanced look at where they are going to college, what they will be studying and how much it will cost. He also noted that young people starting out their careers must be flexible and willing to adapt to a changing job market. That’s harder if you have tens of thousands of dollars in debt.
“Taking on tons of debt doesn’t give you much flexibility,” he said. “You’re stuck having to pay it off and taking maybe something that comes along, no matter how good it is.”