With graduation set for Friday, June 13, the class of 2008 faces a rather inauspicious send-off.
Even putting triskaidekaphobia ““ the fear of the number 13 ““ aside, there’s cause to worry. Thanks to a collapse of the credit and housing markets, this class has the honor of graduating right in the middle of a recession. Additionally, economists have found that the returns to public university education aren’t as high as we’d like, meaning that for some reason, we’re less competitive than our compatriots at the privates.
Though the National Bureau of Economic Research, the Cambridge-based think tank that economists rely on to date the business cycle, doesn’t have enough retrospective data to classify the current downturn as a recession, most economists are now fairly sure one is upon us. Bigwig Harvard economist and former Treasury Secretary Larry Summers told Newsweek last month that it was fairly likely we’ll have a recession this year, and that it could last for some time.
So what does this mean for seniors? The NBER defines a recession as a decline in economic activity spread across the whole economy lasting for more than a few months. This decline shows up as a fall in GDP growth, increased unemployment and a drop in sales and industrial production. What should worry seniors most is the increase in the unemployment rate.
In June, we’ll be starting the job search. Rising unemployment, which moved up to 5 percent from 4.5 a year ago, is an indicator that firms are hiring fewer people than they would have otherwise. That suggests our search might be a bit more difficult.
A few years ago, NBER economist Philip Oreopoulos and two co-authors decided to estimate the effect of increased unemployment on the earnings of college graduates. They asked, simply: Are your wages any lower if you graduate in a recession than in a boom? Using data from Canada, the economists found that in their first year of employment those who graduate during a recession generally have earnings 9 percent lower than what they would have earned in a strong economy. It takes up to 10 years for these workers to have wages equal to those who were lucky enough to avoid turning their tassels during a recession. Given that the Canadian economy is similar to that of the U.S. in terms of the goods and services it produces, these findings don’t bode well for American college graduates.
Now, don’t consign yourself to poverty just yet. The economists found that this effect was substantially less for graduates of “high-quality” institutions like UCLA. Graduates from these types of institutions recovered nearly all their potential wages in just five years. Additionally, recent trends in unemployment suggest that professional and technical occupations, into which (hopefully) most of us are headed, have not been hit as hard by this particular recession. The Bureau of Labor Statistics reports that while we’ve lost jobs in manufacturing, retail trade, construction and temp services, professional service and health care jobs have been largely unaffected by the recession.
So, should you worry? Well, as economists love to say, it depends. With a degree from UCLA, it doesn’t look like this recession should have that big of an effect on our earnings. It may not even be any harder for us, on aggregate, to find jobs.
Nevertheless, many students have yet to find jobs. It may be that they’re not looking yet, which is fine, but it may be due to a larger issue.
A 1999 paper by economist Dominic Brewer and co-authors finds little evidence that, all else equal, attending an elite public school improves one’s wages relative to other types of colleges, such as mediocre privates. Graduates of elite privates, however, make more than everyone.
It’s hard to know exactly what’s going on, since it’s hard to differentiate between the effect of college type and students’ innate ability. It could just be that everyone at Stanford is smarter than everyone at UCLA and Berkeley, though I doubt it. Rather, it’s probably the fact that publics, with less money, have worse career centers and alumni networks than the privates.
It does look like it will be slightly harder for UCLA graduates to find well-paying jobs, but not because of the recession. Rather, we’ve got to rely on ourselves instead of alumni to get the jobs we want. Don’t be afraid to go out there, make calls, send e-mails. Looking for a job isn’t just submitting a resume; it’s making a friend out of the person doing the hiring. UCLA doesn’t teach that, but it’s essential, and we must take it to heart.
Or, like me, you could just go to graduate school.
E-mail Reed at treed@media.ucla.edu. Send general comments to viewpoint@media.ucla.edu.