Posts Tagged college graduates

An article at WallStreetJournal.com delivers some bad news: college graduates from the Class of 2009 face a tough road in their new careers.  Not only will they be entering the toughest labor market in 25 years, but they will suffer lower wages for a decade or more than those who graduated in better times.  What wasn’t mentioned in the article was the impact to the long-term savings of these new grads.

The article profiles a recent graduate who was forced to resort to tutoring high school students when his job prospects evaporated:

Trading down to a lower-skilled job isn’t just a hit to Mr. Friedson’s ego. It could also hurt his bank account for years to come. Economic research shows that the consequences of graduating in a downturn are long-lasting. They include lower earnings, a slower climb up the occupational ladder and a widening gap between the least- and most-successful grads.

A study found that those graduating during a recession earned 7% to 8% less during the first year, 4% to 5% less by the 12th year, and 2% less by the 18th year.  On top of that, there are ominous signs that unemployment could reach the 10.8% level of the early 1980s, putting a bigger bite into earning power.

This leaves many people being underemployed at the start of their careers, causing the low starting pay.  We all know about the time value of money, so this lack of earning will have a huge impact on the savings rate of new grads.  Coupled with the shakiness of Social Security, this lower income may cause the grads to work more years in order to have sufficient retirement resources.

My son will start college in the fall.  Coming out of school to a bad economy could have a disastrous effect on his future wealth.  Hopefully, when he graduates, the economy will have rebounded, and he won’t face the same challenges the Class of 2009 will have faced.

I was a college grad in the mid-1980s.  Luckily, I found a job in my field.  How about you?  Did you graduate during a recession?  Were you able to find employment in your field, or did you have to take a position where you were underemployed?

Follow this link for the original article: The Curse of the Class of 2009

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