Is A Sheepskin Worth It All?

Many parents of recent college graduates are frustrated these days. Despite the vaunted value of college, a lot of grads are taking low-wage jobs that require only high-school skills. Such experiences and recent reports that more and more U.S. graduates are employed in low-skill jobs raise troubling questions about the efficacy of investing in college.

A new study by John Tyler and Richard J. Murnane of Harvard University's Graduate School of Education and Frank Levy of Massachusetts Institute of Technology allays these fears. It finds that the low pay levels of many new grads only last for a few years (chart). Apparently, young graduates often take low-paying jobs temporarily, while searching for better opportunities. By the time they reach 30, most have managed to enter middle-class ranks.

As for rising "underemployment"--working in a job beneath your skill level--the study finds that this problem has afflicted primarily older men. During the 1980s, median real earnings increased among young (25 to 34) graduates of both sexes and among older (45 to 54) women grads--by 23% among younger and older women but by a modest 3% among the young men. And the share of underemployed workers in these three groups declined.

College-educated older men, on the other hand, lost ground. The share of 45- to 54-year-olds with BAs who had lower-skill jobs rose from 14.5% to nearly 18%, and their median real earnings fell by nearly 4%. "Older male college graduates were the chief victims of the wave of restructuring that surfaced in the 1980s," says Harvard's Murnane.

One reason young grads did better is that they responded to market signals by seeking degrees in fields with high and rising wages. Meanwhile, the real pay of less-educated workers was dropping sharply, and many older males found themselves with outmoded skills at a time of rapid technological change.

All of this underscores the value of a college education in today's turbulent labor market. Indeed, after rising modestly during the 1980s, the real median earnings of young male graduates actually dropped 4.4% from 1989 to 1993. In the same four years, however, the real earnings of young male high-school grads plunged 13.7%.

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