In my last article, I wrote about why busy employees mean companies cannot upskill early talent. Here, I discuss the true value of getting a college degree in today's world and whether it really improves job outcomes.
In an era where the value of a college degree is increasingly scrutinized, it's crucial to periodically reassess its impact on job prospects. In this article, we'll explore the persistent issue of underemployment among graduates, the critical importance of the first job post-graduation, and how internships can significantly lower the odds of underemployment.
It's a loaded question, but one that is worth investigating every few years. To fully answer whether a college degree is worth it, let's take a step back and look at some facts and figures. A February 2024 report from the Strada Institute for the Future of Work and The Burning Glass Institute found that:
In spite of a historically tight labor market, the underemployment of college graduates remains stubbornly high. Overall, 52 percent of graduates are underemployed a year after graduation. Even a decade after graduation, 45 percent of graduates are underemployed.
Graduates who start out in a college level job rarely slide into underemployment, as the vast majority of them (79 percent) remain in a college-level occupation five years after graduation. Of those employed in college-level occupation five years after graduating, 86 percent were still in a college level job 10 years out.
Seventy-three percent of graduates who start out underemployed remain so 10 years after completing college, making them at that point about 3.5 times more likely to be underemployed compared with those who start out in a college-level job.
A recent graduate employed in a college-level job typically earns about 88 percent more than a highschool diploma holder, while an underemployed graduate typically earns only about 25 percent more than someone with no education beyond high school. This leaves underemployed graduates on weaker financial footing as they start their careers, especially those with substantial student loan debt.
There is a strong connection between internships and college-level employment after graduation. Controlling for factors such as gender, race/ethnicity, and institutional characteristics, the odds of underemployment for graduates who had at least one internship are 48.5 percent lower than those who had no internships, and the benefits associated with completing an internship are relatively strong across degree fields. The last point provides pretty good evidence of the impact professional experience has on landing a good job after college – i.e. not being underemployed.
But wait, you say. Isn’t this what college was designed to solve?
Sort of. But not really. The modern university system evolved from medieval institutions that were primarily dedicated to preserving and creating knowledge and advancing research. This focus on research naturally led to the prominence of the Doctor of Philosophy (PhD) degree, which has become a research degree at its core. By the 20th Century, universities had become institutions where scholars could pursue advanced research, and the PhD was the culmination of this academic pursuit.
Bachelor's and Master's degrees were not initially the primary focus of universities. These degrees were more like stepping stones in the academic journey – a sort of consolation prize for those who couldn’t make it all the way to a PhD. The Bachelor's degree was often seen as an introductory level of study, providing a general education rather than specialized training. The Master's degree was a step further but still not the ultimate goal, which was the PhD. The curriculum and course requirements in universities were traditionally designed with this academic and research-oriented hierarchy in mind. The emphasis was on developing scholars who could contribute to academic research, rather than on preparing students for specific skills needed in the workforce. This is why many university courses, especially in the arts and sciences, focus on theoretical knowledge and research skills.
Although much of the public rationale for Bachelor’s and Master’s degrees has become related to preparing students to enter the workforce, there remains a significant gap between academic curricula and industry requirements. This disconnect is evident in the frequent observations of employers regarding the skill gaps in recent graduates. Despite efforts by universities to make curricula more relevant to the job market, many programs still lean heavily on theoretical knowledge, lacking in practical, job-ready skills. For instance, a survey by the National Association of Colleges and Employers (NACE) found that while 80% of students feel well-prepared for the workforce, only about half of the employers agree with this sentiment.
This gap has led many employers to invest in their own training programs to bridge the skills gap. Companies often find themselves needing to provide extensive on-the-job training to new hires, even those with advanced degrees. For example, a report by McKinsey & Company revealed that nearly 40% of employers in the United States believe new graduates lack necessary skills, particularly in critical thinking and problem-solving. Consequently, businesses are increasingly taking on the responsibility of training graduates, with some large corporations even establishing their own corporate universities or extensive training programs. This trend is underscored by data from the Association for Talent Development (ATD), which shows that companies are spending more on employee learning and development year over year, with an average expenditure of $1,299 per employee as of 2020.
To play off an oft cited Mark Twain quip, the reports of the college degree’s death are greatly exaggerated. Yes, some large organizations like Google, Accenture, and IBM have dropped their degree requirements for certain technical roles, but this is more an indication of fields like software development where there is higher demand for experience. A degree is still preferred for the majority of careers. If nothing else, it just signals to an employer that you were willing to commit yourself to a multiyear goal that involved being organized, doing some kind of work that involved thinking and communicating, and actually completing it.
College has pushed students into debt due to the cost of a degree rising significantly faster than the cost of inflation – 12% per year – thereby putting into question the ROI that comes from a degree. The impact is starting to show. A recent survey from YouGov showed that just 39% of Gen Z said advancing their education is important to them, and 46% of them said they don't think college is worth the cost. There were 4 million less enrollments in college in 2022 than in 2012.
Much of the time spent attending classes, writing papers, doing problem sets, and studying for exams could be spent struggling with real problems that lead to real solutions at companies delivering products and services that benefit society. This doesn’t mean that college and universities are pointless. Far from it. The social network that one can cultivate at these institutions can be invaluable. The sharing and exploration of ideas from people of different backgrounds can open one’s mind. The opportunity to explore academic interests and peer into philosophical questions can push people to form creative ideas and develop new points of view in the world.
In my next article, I explore college career centers and how they need to be reimagined to truly offer value to graduating students.
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