Further analyses of the labor market for college graduates

Monthly Labor Review, Feb, 1995 by Daniel E. Hecker

An article in the July 1992 issue of the Review discussed the sharp increase in earnings of college graduates relative to high school graduates that occurred during the 1980's.(1) Over the same period, the article pointed out, the proportion of college graduates employed in noncollege-level jobs remained unchanged, at 17 percent to 18 percent.(2) The earnings data led some economists to conclude that there was a growing shortage of college graduates in the 1980's, while the employment patterns led others to conclude that more college graduates entered the labor force than there were available openings in college-level jobs. The earnings and employment profiles that have emerged in the early 1990's have remained similar to those of the 1980's.(3)

This report presents an overview of recent analytical work by Tom Amirault and Kristina Shelley.(4) The aim is to reconcile the apparent conflict in the data on the labor market conditions for college graduates.

1992 profile

Using data from the Current Population Survey cps) that became available in 1992 and that show the highest degree held,(5) Tom Amirault analyzed the profile of college graduates in 1992 by age and occupation. The data clearly showed that most college graduates were employed in college-level jobs, earned substantially more than the average of all workers, and experienced lower than average unemployment rates. This provides clear evidence that, on average, "college pays." Among the different groups making up the college graduate labor force, however, there were significant variations in outcome. Not surprisingly, the median earnings premium over high school graduates was substantially greater for workers with advanced degrees than for those holding bachelor's degrees, as shown in table 1.

[TABULAR DATA 1 OMITTED]

The earnings of college graduates varied widely, and not all graduates earned a premium over high school graduates. The following tabulation shows the percent of college graduates who earned less than the median earnings of high school graduates in 1992 ($21,241): Degree level Percent

Total, all graduates 16 Bachelor's degree 20 Master's degree 11 Ph.D. degree 7 Professional degree 5

On the other hand, the data show that workers with college degrees who are in the top decile of the distribution of earnings had significantly higher than average earnings. For example, bachelor's degree holders at the top decile earned $67,416, more than 3 times the earnings of the median high school graduate. Also, earnings varied significantly within occupational groups. For example, bachelor's degree holders in the top decile in nonretail sales jobs earned $87,519, compared with earnings of $15,281 for those in the first decile.

Among detailed occupations, physicians ($88,281), lawyers ($73,572), and dentists ($71,319) led off the median annual earnings ranking in 1992 by a wide margin. Marketing, advertising, and public relations managers were the highest paid bachelor's degree holders ($50,428), earning nearly 50 percent more than. the median for workers with a bachelor's degree and several times more than the median for bachelor's degree holders employed as retail sales workers ($23,839), prekindergarten and kindergarten teachers ($21,050), and secretaries ($20,426). For master's degree holders, financial managers ($60,754) earned significantly more than the medians of secondary school teachers ($36,464), social workers ($34,483), and librarians ($32,695).

The earnings and employment patterns of new college graduates also indicate that graduates of some fields of study are much more likely than graduates of other fields to have success in the labor market. June 1991 data from the National Center for Education Statistics on the bachelor's degree class of 1990 show wide variations in employment outcomes by the field in which the degree was earned.(6) Health professions and engineering graduates experienced the best outcome in terms of earnings and relatedness of employment to the major field of study. Based on these same measures, history and humanities majors did the worst. (See table 2.)

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Although 80 percent of all college graduates were employed in professional, managerial, and other college-level jobs in 1992, 17 percent were in noncollege-level administrative support, retail sales, food and other service, craft, operative, laborer, or farm jobs. The proportions of the latter group varied by degree level: 4 percent for those with Ph.D. or professional degrees, 10 percent for those with master's degrees, and 23 percent for those with bachelor's degrees. Employment in noncollege-level jobs did not vary much by age, except for recent graduates aged 20-24 years. As the following tabulation shows, 20 percent of bachelor's degree graduates aged 40-49 years were in noncollege-level jobs, compared with 24 percent for 25- to 29-year-olds:

Percent in

noncollege-level Age jobs 20-24 36 25-29 24 30-39 22 40-49 20 50-59 19 60-44 21 65 and older 25