Many college students and recent grads these days are asking themselves, “Should I stay in school or enter the job market?” – especially as the recession just keeps on going without an end in sight.
We’ve all heard (or perhaps experienced first-hand) the horror stories about recent college graduates who had maintained a good GPA, done internships during their summer breaks, and utilized the on-campus Career Center, only to wind up waiting tables or mixing drinks at the local bar due to the ongoing recession and the poor job market. It’s one of the many frustrating aspects of our current economic state that the eager and talented young graduates who could be energizing our workplaces are instead often running into a brick wall when they leave campus and begin to search for good job prospects. With the unemployment rate at 9.1 percent, career-launching jobs — the ones that you work so hard in college in order to qualify for — are few and far between these days.
If you were a recent college graduate faced with the current bleak job market, you might look around at the recession-ravaged economy and decide that instead of continuing what seemed like a futile search for work, you were instead going to stay in school and earn another degree in the hope of strengthening your qualifications while waiting out the recession.
You wouldn’t be alone.
Over the last three years, college grads who have borne the brunt of the high unemployment rate have often decided to stay in school to pursue graduate degrees and further their academic training.
But is it wise to take that route, or does it simply postpone the necessary task of getting that first “real world” job? One study, by Lisa B. Kahn, of Yale University, tried to answer this question by attempting to pinpoint the long-term effects of graduating from college during a recession.
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The study, which was published in 2010, used data from the 1980s to compare people’s earnings over a period of 20 years. It found that college students finishing school during a recession could expect to earn 7-8 percent less in their first job for every percentage increase in the unemployment rate at the time of their graduation. Even after 18 years, a person’s wages might be 2 percent lower than others who graduated at a time with a slightly lower unemployment rate.
Most likely, this difference in long-term wages is due to the obvious difficulty of getting a job when unemployment is high combined with the more subtle difficulty of getting promoted from an entry-level job during a recession.
Whatever the reason, the cumulative impact is dramatic: graduating during a recession could equate to $100,000 in “lost” income over 18 years.
Surprisingly, that same study found that the impact of lost wages could be mitigated by obtaining a graduate degree after college instead of immediately entering the job market. Since jobs that would look good on a resume are hard to come by during difficult economic times, a graduate degree may be the best way to improve one’s qualifications to be prepared for seizing the opportunities that arise once the job market improves.
Of course, that assumes you have a way of supporting yourself while staying in school and paying another few years of tuition and academic expenses.
Which brings up the counterargument to this study’s findings: for most people, staying in school means taking out (more) student loans, so even if a few years in grad school might lead to higher wages eventually, the cost of spending that time studying rather than earning income combined with the cost of those student loans may actually be greater than what you ultimately earn via higher wages. (And remember, the cost of a degree can vary quite a bit)
When it comes right down to it, big decisions like staying in school or entering the job market always depend on a person’s unique individual circumstances. For those who have a clear path to graduate school and are sure that it will help their career, staying in school may be the best option. But putting off the job search may not be the best answer for everyone. If you are comfortable with your job prospects after graduating, or if you are not sure of the long-term value of getting a graduate degree, then entering the job market will probably be the appropriate path for you.
Whatever the case, if you are a recent graduate and/or are looking for a job right now, we wish you the best of luck. And regardless of whether you’ve found a job yet or not, you should make good use of our debt-free guide for recent college graduates. It will help you stay in control of your finances as you take on the real world.
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