Lost generation? U.S. grads work for free, look abroad
WASHINGTON (Reuters) - Americans fresh out of university are discovering their expensive degrees are not the entry ticket to a job they had hoped in the face of high unemployment.
Some young graduates are working for free to enhance their skills and bolster their resumes. Some are looking abroad for work while others are determined to push their way into the U.S. job market.
Jessicalind Ah Kit got off to a great start in her job search. One company flew her abroad and gave her a rental car. After a first day of interviews, the company told her it had a freeze on global hiring.
Ah Kit studied management information systems, economics and Japanese in college. After an 18-month search, she has taken an unpaid internship -- her third.
The National Association of Colleges and Employers says only 19.7 percent of 2009's graduates who applied for jobs had them as of May 2009. During the second quarter this year, unemployment for workers under 25 years of age was 17.3 percent, nearly double the national average.
Economists worry that unless the new graduates get on the job ladder soon, it will leave a void in a country where a wave of retiring Baby Boomers need a healthy young work force to pay for their Social Security government retirement benefits.
The generation -- known as Generation Y or the Millennial Generation typically born in the 1980s and early 1990s -- is made up of the children of Baby Boomers.
The Millennials run the risk of following Japan's lost decade. Years of economic stagnation and a sluggish recovery have had what economists call a hysteretic effect on Japan's economy -- something akin to a spring stretched too far.
Changes in Japan's labor force resulted in a larger portion of the population being employed under contract with few benefits. This lost generation missed out on the opportunity to gain skills, resulting in widespread socioeconomic woe in a country known for its rigid corporate structure.
Many U.S. graduates face a further hardship scrambling to pay off loans they took to finance a university education. Many were counting on the higher incomes that college degrees usually promise.
They graduate with an average debt of $27,000 with no means to pay it off and almost 30 percent -- or 13.2 million in 2007 -- of them are uninsured. One concern is that the graduates will lack the skills they need once the jobs come back.
Gaps in employment can cause problems for workers of any age -- a point U.S. Federal Reserve Chairman Ben Bernanke emphasized in recent testimony.
"People who are out of the labor force tend to lose their skills and their connection to the labor force. When the economy recovers, they may not even be employable," Bernanke said in testimony in June.
Research has shown that unemployment early in a person's career makes a lasting imprint.
A working paper by labor economist Lisa Kahn at the Yale School of Management showed that among white male college graduates, the most employed group, there are "large, negative and persistent" effects for those graduating during recessions.
Graduating into a bad economy for this group could mean 6 percent to 8 percent less in wages earned for each additional percentage point in the national unemployment rate. Even 15 years later, there is a 2.5 percent difference for each extra percentage point in the unemployment rate.
Similarly, if they fail to start developing assets, their ability to support major economic activity will be hampered.
LOST? OR NOT?
Despite all that, some recent graduates have gone to great lengths -- figuratively and literally -- to chart a new path in tough times.
Princeton graduate Jason Harper said he and his friends were looking abroad, having exhausted their job search in the United States since graduation in June.
"As much as I want to work in LA, or work in New York, or Chicago, it's just shut-door after shut-door," said the German media and aesthetics major. He said he had made some progress in Berlin.
Whether in the United States or beyond, some U.S. graduates are determined to get into the job market.
"Rather than sitting on the sidelines and waiting for the big job that they might have thought they would get, they are going to go work," said John Challenger, chief executive of job placement company Challenger, Gray & Christmas.
"You'll have more entrepreneurs who say, 'There's no jobs out there for me so I'm just going to go find something, I'm going to make something that matters,'" he said.
Much of the entrepreneurship appears to be at smaller companies, some looking to innovate in a tough market.
"Smaller companies can work just as well as the large companies," said lifestyle design consultant and new media marketer Greg Rollett.
"It's attractive because of the unemployment rate right now. The nature of the job market has really pushed a lot of Gen-Y's to rethink what they are going after."
(Editing by Howard Goller)
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