College grads taking low-wage posts displace less educated

Washington • Jeanina Jenkins, a 20-year-old high-school graduate from St. Louis, is stuck in a $7.82-an-hour part-time job at McDonald's that she calls a "last resort" because nobody would offer her anything better.

Stephen O'Malley, 26, a West Virginia University graduate, wants to put his history degree to use teaching high school. What he's found instead is a bartender's job in his home town of Manasquan, N.J.

Jenkins and O'Malley are at opposite ends of a dynamic that is pushing those with college degrees down into competition with high-school graduates for low-wage jobs that don't require college. As this competition has intensified during and after the recession, it's meant relatively higher unemployment, declining labor market participation and lower wages for those with less education.

The jobless rate of Americans ages 25 to 34 who have only completed high school grew 4.3 percentage points to 10.6 percent in 2013 from 2007, according to Bureau of Labor Statistics data. Unemployment for those in that age group with a college degree rose 1.5 percentage points to 3.7 percent in the same period.

"The underemployment of college graduates affects lesser educated parts of the labor force," said economist Richard Vedder, director of the Center for College Affordability and Productivity, a not-for-profit research organization in Washington. "Those with high-school diplomas that normally would have no problem getting jobs as bartenders or taxi drivers are sometimes kept from getting the jobs by people with college diplomas," said Vedder, who is also a Bloomberg View contributor.

Recent college graduates are ending up in more low-wage and part-time positions as it's become harder to find education- level appropriate jobs, according to a January study by the Federal Reserve Bank of New York.

The share of Americans ages 22 to 27 with at least a bachelor's degree in jobs that don't require that level of education was 44 percent in 2012, up from 34 percent in 2001, the study found.

Competition can leave less-educated — yet still qualified — individuals with few employment options, said Heidi Shierholz, economist at the Economic Policy Institute in Washington.

"College graduates might not be in a job that requires a college degree, but they're more likely to have a job," she said.

Less-educated young adults are then more likely to drop out of the labor market, said Paul Beaudry, an economics professor at the University of British Columbia in Vancouver who studies U.S. employment trends.

The labor participation rate for those ages 25 to 34 with just a high school diploma fell four percentage points to 77.7 percent in 2013 from 2007. For those with a college degree and above, the rate dropped less than 1 percentage point, to 87.7 percent.

"At the complete bottom, we see people picking up the worst types of jobs or completely dropping out," Beaudry said.

The share of young adults 20 to 24 years old neither in school nor working climbed to 19.4 percent in 2010 from 17.2 percent in 2006. For those ages 25 to 29, it rose to 21.3 percent from 20 percent in that period, according to a Federal Reserve Bank of Boston report in December.

Those with the least education have trouble securing even the lowest-paid jobs. Isabelle Samain looked for work in Washington from April until September of last year. As prospective employers continually passed over her applications, the 20-year-old mother of two from Cameroon realized she was missing out because she lacked a U.S. high-school diploma.

"I don't even remember how many places I applied," Samain said of the "frustrating and discouraging" search.

Samain passed the General Educational Development test in December and recently started working at Au Bon Pain in Washington for $8.50 an hour for 36 hours a week.

A year-long survey ending in July 2012 of 500,000 Americans ages 19 to 29 showed that 63 percent of those fully employed had a bachelor's degree, and their most common jobs were merchandise displayers, clothing-store and cellular phone sales representatives, according to Seattle-based PayScale Inc., which provides compensation information.

The share of recent college graduates in "good non-college jobs," those with higher wage-growth potential, such as dental hygienists, has declined since 2000, according to the New York Fed study. Meanwhile, the portion has grown for those in low- wage jobs paying an average wage of below $25,000, including food servers and bartenders.

Yet those with college degrees have more opportunity to advance even in lower-paying fields. Kimberly Galban, 34, vice president of operations at the One Off Hospitality Group in Chicago, cites her own career as an example.

She got a job as a hostess at Blackbird, a One Off restaurant, while pursuing a bachelor's degree in Germanic studies and communications at the University of Illinois at Chicago in 1999.

"The formality of classes, papers and grades did lend a hand in where I am today because I had a broader sense of cultures, interactions and interpersonal skills," said Galban, who is now also a partner at the restaurant Nico Osteria, one of seven Chicago restaurants managed by One Off.

Of the company's more than 700 employees, more than 60 percent hold college degrees or higher, yet fewer than 10 positions require a degree, Galban said.

"We would rather have somebody who is passionate, knowledgeable about their craft and really hospitable than somebody who walks in and says 'hey I have a master's degree,'" Galban said. "But the funny thing is, the majority of our servers, bartenders and people who work in the corporate office do carry either a master's or Ph.D."

O'Malley, the bartender from New Jersey, has a master's in history, and he says the degree has its drawbacks as he applies for teaching positions.

"The master's is cool and I went to school longer, but on the other side of the coin, they have to pay me more," O'Malley said. Teachers with higher degrees in New Jersey receive more compensation, pricing him out of some jobs, he said.

As the number of college graduates outweighs the availability of education-appropriate jobs and they take whatever they can get, everyone else is pushed down the ladder, said Katie Bardaro, PayScale's lead economist and analytics manager.

"There's not really a lower-level job they can move into since they were already in a low-level job," Bardaro said.

The education-wage disparity has grown since 1979, when high school graduates were paid 77 percent of what college graduates made; today they make about 62 percent, according to a study by Washington-based Pew Research Center released last month. College graduates ages 25 to 32 working full-time now earn on average $17,500 more annually, adjusted for inflation, than those with just a high-school diploma. In 1979, it was $9,690 more.

The Federal Reserve is "very worried about trends in income inequality," Chair Janet Yellen said in testimony before the Senate Banking Committee on Feb. 27.

Twenty-two percent of those ages 25 to 32 with only a high school diploma live in poverty, compared with 6 percent of today's college-educated young adults, according to the Pew study. Only 7 percent of those in that age group with just a high school diploma lived in poverty in 1979, compared with 3 percent of college graduates.

Those in the top one-fourth of income distribution have an 85 percent chance of going to college, compared with 8 percent for those in the lowest quarter, said Peter Henry, dean of the Stern School of Business at New York University, in an interview on Bloomberg TV Feb. 27, citing Yellen's comments on income inequality.

Jeanina Jenkins knows reaching her goal of becoming a registered nurse requires a college education. Her current McDonald's hourly pay pales in comparison with the prospective wages of a registered nurse, with a median annual 2012 salary of $65,470, according to the BLS.

"To work somewhere else, you need more than just a high school diploma," said Jenkins, who had to drop out of the University of Missouri-St. Louis as a freshman last fall to help support her family. "I'm afraid for my career because I'm not in school anymore."

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