July 21, 2014 / 5:05 PM / 5 years ago

New college grads hit by slow wage growth: Fed study

SAN FRANCISCO, July 21 (Reuters) - New college graduates have seen their wages rise more slowly than the rest of the U.S. workforce since the Great Recession, new research from the San Francisco Federal Reserve Bank shows, a trend that reflects continued weakness in the economy.

“While this post-recession pattern was also present after the 2001 recession, earnings growth following the most recent recession has been held down longer than in the past, which reflects the depth and severity of the recession,” wrote San Francisco Fed researchers Bart Hobijn and Lisa Benagali in the regional Fed bank’s latest Economic Letter.

Employers can set the hiring conditions and wages of new workers with more freedom than they can change the wages of existing workers, the researchers argued, making the wages of recent college graduates a better indicator of the true price of labor and the underlying strength of the labor market.

“Other signs of the continued weakness in the labor market are the shares of recent graduates not in the labor force, unemployed, or working part-time, which are still elevated compared with the start of the recession,” they wrote.

The researchers found that the slow wage growth does not reflect any shift in the types of jobs college grads get, and argued it would be “misguided” to conclude that going to college is a poor investment.

Rather, they argued, new college grads will need more time to earn back the cost of their education than those who graduated during boom years, but they will still end up earning more over their lifetimes than those who did not go to college. (Reporting by Ann Saphir; Editing by Meredith Mazzilli)

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