It’s Not All Good News for This Year’s Graduates

It’s Not All Good News for This Year’s Graduates

Most of this year’s annual graduation season surveys in the US have indicated that the class of 2018 will enjoy a bright start to their careers, with a tight labor market and lots of demand for college-educated talent enabling them to demand the highest starting salaries in years. A new analysis from Korn Ferry, using a large data set of 310,000 entry-level positions from nearly 1,000 organizations, finds that new entrants to the professional job market this year might not be making big gains after all, notwithstanding their excellent prospects for finding a job:

Based on the analysis, 2018 college grads in the United States will make on average $50,390 annually. That is 2.8 percent more than the 2017 average ($49,000). “With the 2018 U.S. inflation rate hovering just over 2 percent, real wages for this year’s grads are virtually flat,” said Korn Ferry Senior Client Partner Maryam Morse. “However, with competition for top graduate talent so fierce, it’s critical that companies pay competitively, create an engaging culture and provide clear paths for advancement.”

In other words, this analysis points to the fundamental quandary of the US labor market right now: employers have every reason to pay more for talent, but wages aren’t growing as quickly as the law of supply and demand should compel them to.

Korn Ferry’s analysis also highlights the variation in starting salaries among major US cities: A graduate looking for work in Atlanta can expect to earn an average of just under $50,000, compared to over $60,000 in New York and nearly $64,000 in San Francisco (not adjusted for cost of living). The study also calculated average entry-level pay in various professions: A new customer service representative earns on average $35,000, an accountant $48,000, a registered nurse just under $55,000, and a software developer $67,000.

Another new report, from the left-leaning Economic Policy Institute, considers this graduating class’s prospects by analyzing data on recent college graduates aged 21 to 24. While EPI does not dispute the strong labor market position of these graduates compared to recent years, it also argues that the class of 2018 can and should be doing better than the class of 2007:

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Class of 2018 Has High Expectations for Pay and Career Progression

Class of 2018 Has High Expectations for Pay and Career Progression

Every spring, the talent acquisition software company iCIMS surveys college graduates in the US to gauge their expectations and ambitions as they prepare to enter the workforce. This year’s survey, which SHRM’s Roy Maurer flagged earlier this week, finds that this year’s graduating class is expecting higher starting salaries than their peers in recent years: On average, they expect to earn $54,010 in their first job, slightly more than the class of 2017 and almost $8,000 more than the class of 2016. Last year’s graduates were a bit unrealistic in their pay expectations, despite a tight labor market, with recruiters reporting starting salaries well below grads’ aspirations.

This year, Maurer notes, employers’ pursestrings are looking a little looser:

“This year’s graduates are confident in their ability to find the job they want after graduation, and a well-paying one at that,” said Susan Vitale, chief marketing officer at iCIMS. … The data revealed that recruiters estimate they will pay entry-level employees $56,532 on average this year—a substantial jump of more than $10,000 since last year, when the estimate was $45,361 on average. “For employers, even with an abundance of educated candidates, nearly 80 percent of recruiters are finding filling entry-level positions more challenging than they did three years ago,” Vitale said. “In response, recruiters have upped their game by offering better salaries and benefits, increasing training and development, and enhancing their employee referral programs.”

Maurer also highlights another survey from Yello, which found that a majority of graduates were putting priority on career advancement in their first job searches. Nearly half of respondents to the Yello survey said they were planning to stay with their first employer for more than three years, in another point of evidence against the myth of the millennial job hopper (though these graduates might properly be classified as members of Generation Z). These findings, Yello CEO and co-founder Jason Weingarten told Maurer, suggest that recruiters should be focusing their value propositions for graduates on opportunities for long-term growth and development. Some employers are already responding to the demand these surveys show for higher salaries and clear career paths, such as Morgan Stanley, which recently raised starting pay and accelerated the promotion path for its junior investment bankers.

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Not All Who Compute Were Computer Science Majors

Not All Who Compute Were Computer Science Majors

In the MIT Tech Review, George Anders flags a recent study from the Brookings Institution’s Hamilton Project, which analyzed US Census Bureau data from 2010 to 2013 to trace the job choices of 1.2 million college graduates and to answer the question: What do people who major in (X) typically end up doing for a living?

Overall, the study offers a fascinating look at how college educations in the sciences, arts, and humanities translate into careers, but Anders highlights one finding that may be of particular interest to employers, that “many people working as computer scientists, software developers, and programmers used their college years not to major in computer programming or software development, but instead to major in traditional sciences or other types of engineering”:

Among graduates with degrees in physics, math, statistics, or electrical engineering, as many as 20 percent now work in computing-based fields. At least 10 percent of people who majored in aerospace engineering, astronomy, biomedical engineering, or general engineering have made the same migration. Even geography, nuclear engineering, and chemistry departments send 3 to 5 percent of their undergraduate majors into software development or similar fields, the Hamilton Project reports.

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Wages Still Declining for Recent College Grads in China

Wages Still Declining for Recent College Grads in China

Millions of college students are graduating from China’s universities this year into a slowing economy where job prospects and starting salaries are on the decline, Bloomberg reported recently:

Monthly salaries plummeted 16 percent to 4,014 yuan ($590) this year for a second-straight annual decline, data from recruitment site Zhaopin.com show. The Ministry of Education estimates that 7.95 million will graduate this year, almost the population of Switzerland. China is losing competitiveness in lower-end industries from textiles to furniture as wages and other costs surge. Policy makers’ efforts to offset that by shifting the economy toward higher-technology industries and services — from aircraft and robots to research and development — may get a boost from an army of highly educated and low-paid graduates.

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Class of ’17 Have Strong Job Outlook, but Set Sights High

Class of ’17 Have Strong Job Outlook, but Set Sights High

This year’s crop of college graduates, some of the first recognized members of Generation Z to enter the workforce, are doing so at an opportune moment. In the US, the college wage premium has never been higher, meaning these grads stand to earn much more than their peers without degrees. The graduate hiring market is also robust, with CareerBuilder reporting last month that 74 percent of employers plan to hire recent college graduates this year, the best outlook since 2007 and seven percentage points above last year’s figure. In terms of pay, CareerBuilder found that half of employers plan to pay graduates higher salaries this year than last, and 39 percent will pay starting salaries of $50,000 or more a year, up from 27 percent last year.

However, the job search site also found that “some employers are concerned that new college grads may not be ready for the workforce”:

Seventeen percent do not feel academic institutions are adequately preparing students for roles needed within their organizations, a decrease from 24 percent last year. When asked where academic institutions fall short, these employers cited the following concerns:

  • Too much emphasis on book learning instead of real-world learning: 44 percent
  • I need workers with a blend of technical skills and those skills gained from liberal arts: 38 percent
  • Entry-level roles within my organization are more complex today: 23 percent
  • Technology is changing too quickly for an academic environment to keep up: 17 percent
  • Not enough focus on internships: 17 percent
  • Not enough students are graduating with the degrees my company needs: 12 percent

Meanwhile, Fast Company’s Lydia Dishman flags another new survey from iCIMS, which finds that graduates have high expectations for their job prospects, but even in today’s employee-driven labor market, these expectations may be a bit unrealistic:

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Study: US Gender Pay Gap Growing Among College Grads

Study: US Gender Pay Gap Growing Among College Grads

Huffington Post business reporter Emily Peck passes along a new report from the liberal-leaning Economic Policy Institute, which finds that in the first four years out of college, female graduates earn an average hourly wage of $17.88, compared to $20.87 among men:

Put another way, young women make 86 percent of what men earn. That’s slightly better than in 2015, when the gap was 83 percent, but far worse than in 2000, when female college grads made 91 percent of what their male peers earned, according to EPI, which analyzed census data on college graduates ages 21 to 24 without an advanced degree and who aren’t enrolled in further schooling.

Though the EPI report didn’t delve more deeply into the numbers, it’s possible that the widening gulf is attributable to rising income inequality. The highest-paying jobs in the U.S. are paying even better, and men are landing that work. Think Facebook engineer, Goldman Sachs analyst, etc. “At the very top of the job market, pay is getting really high, and it’s men, primarily, who are getting those jobs,” Elise Gould, a senior economist at EPI who worked on this analysis, told HuffPost.

That interpretation aligns with other recent research from Glassdoor, which found that the sorting of men and women into different college majors contributed significantly to the gender pay gap, with men dominating the highest-paying fields and women making up most of the majors in the lowest-paying fields. Nonetheless, the same study also found gender gaps in pay and promotions within individual fields.

A study from the Center for American Progress last year also found that gender gaps among college-educated professionals emerge early in their careers and widen over time, and furthermore that this effect was even more pronounced among graduates of elite institutions.

Study: College Wage Premium at a Record High

Study: College Wage Premium at a Record High

A new analysis finds that the wage gap between high school and college graduates in the US is higher than it has been since economists began measuring it over 40 years ago, the Associated Press reports:

College graduates, on average, earned 56 percent more than high school grads in 2015, according to data compiled by the Economic Policy Institute. That was up from 51 percent in 1999 and is the largest such gap in EPI’s figures dating to 1973. Since the Great Recession ended in 2009, college-educated workers have captured most of the new jobs and enjoyed pay gains. Non-college grads, by contrast, have faced dwindling job opportunities and an overall 3 percent decline in income, EPI’s data shows. …

The dominance of college graduates in the economy is, if anything, accelerating. Last year, for the first time, a larger proportion of workers were college grads (36 percent) than high school-only grads (34 percent), Carnevale’s research found. The number of employed college grads has risen 21 percent since the recession began in December 2007, while the number of employed people with only a high school degree has dropped nearly 8 percent. Behind the trend is a greater demand for educated workers, and the retirement of older Americans, who are more likely to be high school-only graduates.

These figures may give pause to those who in recent years have questioned whether a college degree is still worth earning or whether expanding the ranks of the college-educated population is an effective generator of economic growth. They certainly underline the growing realization that a college degree is a must-have in the contemporary job market.

The college/non-college wage gap was one of the points Federal Reserve Chair Janet Yellen highlighted in her commencement address at the University of Baltimore last month, in which she congratulated graduates on joining the workforce at an auspicious time. Recent college graduates in the US are enjoying a strong job market for educated candidates, with some of the best job prospects and starting salaries in about a decade.