Following the passage of severe financial deregulation in the late 1990s under the Clinton administration, inflation-adjusted wages for college graduates fell 8.5 percent from 2000 to 2012, according to the Economic Policy Institute (EPI). And this trend is expected to continue.
Financial deregulation permitted an extraordinary transfer of wealth camouflaged by intricate financial engineering. This perceived value enabled a concentration of labor that offered diminishing returns. After the financial industry imploded in 2008, the excess labor in the financial services industry has been difficult to absorb effectively and efficiently.
According to the Department of Labor, nearly 15.5 million individuals ranging in age from 20 to 24 are currently members of the labor force — either employed or actively seeking employment. Demos, a non-partisan research and public policy center, estimates 4.1 million jobs need to be created to maintain the pre-2008 level of unemployment for this demographic. This would require job growth well over 200,000 each month for many years.
Unemployment for recent graduates tends to translate into lower future wages, according to Joseph Brusuelas, senior economist at Bloomberg. His study suggests six months of unemployment at age 22 results in an 8 percent decrease in wages at age 23, 6 percent less at age 24 and 4 percent less by age 30.
However, graduates who focused on STEM education — science, technology, engineering and math — tend to fair much better than did those in other areas of study. According to Lisa Severy, director of career services at the University of Colorado Boulder, there is strong demand for graduates who possess skills in technology and computer science — they are extremely marketable and receive multiple job offers.
The Georgetown Public Policy Institute also suggests STEM majors have the best opportunities for employment and earnings compared with graduates in non-technical fields. Unemployment in the 20 to 24-year age demographic in engineering is 7 percent and that for health sciences is 4.8 percent. By comparison, the average unemployment in this age group is 13.2 percent, according to the Bureau for Labor Statistics — and it has been at this level for the past year.
Our economic conditions will improve as the labor pool focuses more on STEM and less on finance.
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