We’ve documented the pitiable plight of America’s recent college graduates on a number of occasions over the last several months. The Class of 2015 is officially the most heavily-indebted graduating class in the history of US higher education, as each student will leave college with an average debt load of more than $35,000. These proud new graduates will enter a job market where they’ll quickly discover that the idea of a US economic ‘recovery’ is, as Steve Wynn recently put it, “a complete dream”. In fact, high unemployment rates among recent graduates was recently cited by Moody’s as a contributing factor to the ratings agency’s decision to place some $3 billion in student loan-backed ABS on review. This state of affairs is made all the more perilous by the fact that nearly half of college graduates only manage to land a low-wage job which, as the OECD has recently shown, likely won’t pay enough to allow one’s family to subsist above the poverty line.
Now, the same OECD is out with a new report which looks at the world’s youth unemployment problem in an effort to determine why it is that 35 million people between the ages of 16 and 29 are jobless. Spoiler alert: it turns out $35,000 doesn’t buy a very good education.
From the OECD:
More than 35 million young people, aged 16-29, across OECD countries are neither employed nor in education or training (NEET). Overall, young people are twice as likely as prime-age workers to be unemployed.
The OECD Skills Outlook 2015 says that around half of all NEETs in the OECD are out of school and not looking for work and are likely to have dropped off the radar of their country’s education, social, and labour market systems (ZH: recall the case of America’s “vanishing worker”)
The report expands on the findings of the first OECD Survey of Adult Skills (PIAAC), published in 2013, and creates a detailed picture of how young people acquire and use their skills, as well as the potential barriers they face to doing both.
It shows that 10% of new graduates have poor literacy skills and 14% have poor numeracy skills. More than 40% of those who left school before completing their upper secondary education have poor numeracy and literacy skills.
Work and education are also too often separate worlds: less than 50% of students in vocational education and training programmes, and less than 40% of students in academic programmes in the 22 OECD countries and regions covered were participating in some kind of work-based learning at the time of the survey. Even young people with strong skills have trouble finding work. Many firms find it too expensive to hire individuals with no labour market experience.
All of the above helps to explain why two-thirds of graduates expect to rely on their parents for support after graduation. Parents, it turns out, have similar expectations.
Via Sallie Mae:
The survey and related infographic also reveal the expectation of financial support does not end after turning the tassel at college graduation. Approximately 65 percent of parents expect to support their children for up to five years after college graduation. The proportion of parents who think they will need to help out for more than two years jumped to 36 percent, double what a similar Upromise survey in 2014 reported. Sixty-eight percent of students expect financial support from their parents post-graduation. Nearly half of students, however, would be willing to pay rent to live back at home.
And it's no wonder, because paying rent to one's parents is likely to be far cheaper than renting a one-bedroom apartment with the latter option officially out of reach for anyone making minimum wage:
In sum, 35 million people aged 16-29 are unemployed across the globe thanks to a skills gap and weak demand. As discussed last week, this state of affairs has cost the global economy somewhere on the order of $4 trillion in GDP since the crisis. Indeed, the job market for young people is now so abysmal that two-thirds of recent graduates and their parents have come to terms with the fact that parental support will be a necessity for as many as five years post graduation.
For all of those recent graduates who aren't lucky enough to have majored in petroleum engineering and can't count on years of family support, there's always this option: