The Cognitive Cliff: Millennial and Gen Z Underemployment
In 2012, we wrote about the alarming rate of unemployment and underemployment of young people in the U.S. as it hovered around 15% and 45%, respectively (U.S. Bureau of Labor Statistics). In the ensuing 6 years, the U.S. has focused and reported on the drop in unemployment rates, which have dropped to an all-time low of 4.1%.
Rather than indicating improvement, however the cause of this appears to be more a measure of people leaving the workforce rather than health of the labor force.
The chart above details how we rose to over 95 million eligible U.S. workers leaving the workforce. This is not a biased, partisan argument, but rather a statement of fact straight from the Bureau of Labor Statistics. The truth is that the KPI (key performance indicator) the U.S. Government focuses on (the percentage of Americans in the workforce that are not currently employed) is fundamentally wrong — and young employees are going to pay for it.
The cognitive cliff of U.S. unemployment
The U.S. is now facing a professional cognitive cliff, with current college and university graduates — deprived of crucial career building for almost a decade — poised at the precipice.
Several Pew Research Center studies found that a college degree doubles the lifetime earnings of its holder over a 40-year career ($1.4m vs $770k for those who did not finish college). Data gathered by the Social Security Administration also suggest that men with college degrees earn $900k more in their lifetime compared to those with a high school diploma. Women with college degrees earn $690k more than their high school graduate counterparts.
These data show how early career education has significant long-term impact, similar to the way compound interest works on a retirement account.
What will this cognitive cliff cost our country in the long run? Could it be as costly as not sending people to college at all? Will it change the lifetime value of college?
Aggregating data from the U.S. Census Bureau, the U.S. Bureau of Labor Statistics, the Current Population Survey (IPUMS), and the U.S. Department of Labor, the below chart shows the success the U.S. has had in reducing the unemployment rate, while underemployment remains virtually unchanged. Imagine that this was your 401k in its early years and 45% of the money you had wasn’t being invested, not growing, and not accumulating compound interest. In this case, the blue and red lines would represent the early years of the U.S.’s 401k retirement plan. It’s clear we’re leaving money on the table.
The internship as a solution
When we talk about early career education and development, the solution must include internships. What job creators often forget in this topic is that the way in which their company runs its internship program can affect its ability to attract top talent (at any level), its brand, and even its industry. This is the bedrock of our current cognitive cliff.
Too many companies think of internships solely as an audition for the intern, often forgetting that they are simultaneously serving as a professional classroom. Moreover, that supposedly insignificant intern may be an undiscovered industry prodigy.
In the late 1960s, both Universal Studios and Hewlett-Packard gave two such interns an opportunity:
In 1967, Hewlett-Packard CEO Bill Hewlett received an interesting call from a 12-year-old asking about computer parts for a project he was working on. 20 minutes later, Hewlett offered Steve Jobs his first internship, putting screws into frequency counters on an assembly line.
“I remember my first day, expressing complete enthusiasm and bliss at being at Hewlett-Packard to my supervisor, a guy named Chris, telling him that my favorite thing in the whole world was electronics,” Jobs later told Playboy magazine in 2010.
Similar to Jobs, Steven Spielberg kicked off his career at age 17 with an unpaid internship at Universal Studios after a family friend made a life-changing introduction. As an intern, Spielberg wasn’t officially allowed on set, but that didn’t stop him from sneaking on regularly and networking his way into any meeting he could find. He made his first short film, Amblin (1969), and hustled to get Universal executives to watch it.
Once the vice president of the television division saw the film, he offered Spielberg a 7-year contract. Six years later Spielberg delivered his breakthrough epic, Jaws (1975), to Universal Studios and cemented the beginnings of his cinematic legacy (and made us all think twice before sticking our toe into the ocean).
Jobs and Spielberg had a lot in common: an extraordinary work ethic, initiative, and a sense of imagination. Most importantly, though, both young men were given early-life opportunities at great companies, both of which helped to launch them into their respective future careers.
Avoiding the cognitive cliff
On top of this decade-long youth underemployment that has impacted Millennials and now Generation Z, the cost of an accredited degree has increased at 2x the rate of inflation over the past 30 years. Aggregate higher education quality has also dropped as the market gets flooded, while the cost of attaining a degree has risen each year.
This has led to a total of $1.48 trillion in U.S. student loans, held by 44 million people. In 2017, the the average student received her undergraduate degree accompanied by $39,400 in debt.
In the 2012 U.S. presidential election, my generation — a generation of early-onset millennials and late-term Gen X-ers — showed up in record numbers to reelect Barack Obama. The hope that new job plans would move the needle on underemployment for younger voters didn’t come to bear. In 2016, the youth turnout marginally increased over 2012 from 45% to 46.1%. As this voting cohort of Millennials and Gen Z grows to 34% and 2% of U.S. voters, the issue of underemployment will become a more important issue.
Avoiding the “Accredited” death spiral
Underemployment has many roots and one of them is job readiness. The name of the game here: Are our education systems actually doing their jobs?
Large educational institutions will remain a part of the educational journey for decades to come because of the entrenched rules of accreditation, endowments, international demand, and norms of corporation HR culture. These institutions will be slow to shift educational direction to accommodate the shifting job market, as the current underemployment trends suggest.
Moreover, the accreditation process involves — and is controlled by — insiders already in the proverbial club. New for-profit colleges that break into the game seem to be more capitalizing on the valuation of the college degree rather than the goal of training students. The Century Foundation (a former client of Whole Whale) recently reported that 99% of the 100,000 student borrower defense claims made for educational fraud were targeted at for-profit colleges according the the DOE.
In this ecosystem, the most promising solutions seem to be coming from focused, skill-based, micro- and nano-degrees for adult learners. There are great strides being made in diversifying secondary education opportunities through the kinds of work of the Lumina Foundation is doing around general accreditation standards. The hope that the building of a Credential Engine will allow for a diversification of degrees that are far more targeted to the needs of the current market place.
There are also smaller startup nonprofits like Open Master’s and its divinity school-focused learning lab, Alt*Div, aimed at reclaiming and reviving grassroots, community-supported, and self-guided learning journeys that drove the Chautautqua Study Cirlces, Citizenship Schools, and Highlander Institute programs of centuries past. Even the classic MBA has growing competition from programs like Seth Godin’s altMBA that offers an intense everything-you-need-to-know in business.
Solutions…
- You can’t automate empathy, while robots and AI will be able to disrupt many traditional service jobs there is is still tons of work to be done in our service to each other and the world. The third sector employs 10% of the labor force and continues to grow.
- Be a champion for internship programs in your company, growing a pool of interns that learn the trade and how an industry works can jumpstart careers. This young workforce can also bring fresh ideas and perspectives to companies. If you’re looking for some ideas, we wrote the book (literally).
- Reduce the payroll tax for nonprofit employers. Right now, despite being tax exempt, nonprofits still pay payroll tax for their employees at the same rate as companies like Amazon and Apple. Removing or reducing this tax burden on the sector’s employees is one place to start to support job growth needed in the coming years. If tax amounts change based on individual income level, why should companies, regardless of size and purpose be subject to the same rates?
