As the estimated four million college graduates of the class of 2021 prepare to enter post-graduate life, they will face a job market that has lost 8.4 million jobs between February 2020 and March 2021. Despite their newly-earned credentials, the most recent batch of college students are uniquely disadvantaged in the coronavirus job market. They are trying to start careers at a moment when jobs are scarce, and they are not eligible for unemployment benefits since they technically have not lost a job.
Kofi Assabil, a member of the class of 2020 from University of Colorado Boulder, knows the grim job market all too well. Assabil started his job search in January 2020, months prior to his graduation. But when the pandemic reached the United States and everything went remote, he started to worry. “I realized that things were going to be harder. I was going on LinkedIn and Indeed…calling a few connections every two weeks to see if they had any opportunities,” but “even with internships, it was tough.” Along with several of his roommates, Assabil opted to wait out the labor market crunch in graduate school instead.
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The most recent estimates from Georgetown University indicate that approximately 70 percent of college students work part or full-time during their studies, suggesting 30 percent of new grads — up to 1.2 million recent college students — may be ineligible for unemployment once they graduate, unless they have proof of a rescinded job offer.
As a result, this generation of college graduates is struggling to find work. Coupled with a lack of government support and mounting student debt, personal financial conditions are proving difficult for many. According to the most recent data, among the 69 percent of college students that took out loans in 2019, the average debt upon graduation was $29,900, although numbers are higher for students of color. While Congress placed a temporary moratorium on payments for federal loans, there is still $137 billion in outstanding private student loan debt that is unaffected by the moratorium. Those bills are coming due, whether recent grads are ready for them or not. For the 22 percent of college undergraduates who are also parents, the financial burden is only heightened by the need to care for dependents.
The combination of insufficient economic opportunity and inaccessible unemployment benefits could have serious long-term implications. Elaine Weiss, an analyst from the National Academy of Social Insurance, believes that this will push new college graduates into lower paying jobs, since they cannot afford to wait for an offer that provides a higher wage.
According to a UCLA study, individuals who graduate college during a recession can expect between 10 to 20 percent lower lifetime earnings compared with their peers. According to the Federal Reserve, 40.3 percent of recent college graduates are underemployed. Further, this effect has become more amplified over time, as successive graduating classes experience higher and higher post-college unemployment rates.
One potential solution for new grads is a jobseekers’ allowance that could support them while they look for work. The allowance, which could partially replace foregone wages, would allow recipients to support themselves while they continue to look for work. Australia has a similar program dedicated specifically to providing financial assistance to youth and student job seekers with monthly benefit levels ranging from $1,153 to $1,924, depending on financial and family circumstances. While it’s no windfall, a benefit of that size would help cover a large portion of living expenses for many Americans. Other countries, such as Sweden, provide $1,101 per month, while also providing public child care and a child allowance for any families with children under the age of 16.
The results of these stronger unemployment programs have been well documented. One study from Georgetown University found that during the Great Recession, the enhanced unemployment insurance increased workers’ wages by 2.6 percent, with greater benefits for women, people of color, and people with lower educational attainment. This suggests that unemployment insurance programs help facilitate the job search process, allowing workers more time to find a job aligned with their skills.
With another college class soon to graduate into a still-weak labor market, the imperative of stronger unemployment insurance only becomes more important. While the passage of the American Rescue Plan is welcome news for the American economy, the bill failed to include unemployment protections specifically targeted at recent college graduates. The U.S. should take note of the work done by other nations to provide adequate financial stability for recent graduates as they enter the labor market. History tells us that the failure to do so will have lifelong impacts for college graduates.