More young people than ever will receive a college diploma this year, and an alarming number will enter the ‘real world’ without a job.
The unemployment rate for college graduates is higher today than it was five years ago during the darkest days of the Great Recession. And, it’s unlikely to get much better in the coming years if the United States continues to pursue policies that make landing a job or starting a business more difficult.
The surge in unemployment among recent college graduates is part of a larger trend of youth unemployment in the U.S.
The unemployment rate for those ages 20-24 is more than 13 percent—up from just below 10 percent when the recession started—and significantly higher than the overall unemployment rate of 7.5 percent.
Unfortunately, this trend is poised to continue in the U.S. thanks to several recent policies and proposals.
Begin with the employer mandate in the Affordable Care Act, which requires small businesses with 50 or more full-time employees to offer health insurance to workers, or pay a per-employee penalty.
Several of the law’s rules have yet to be written, leaving employers unsure about what lies ahead in terms of requirements and costs. Many businesses are unclear about whether their existing insurance plans will qualify and how much their premiums will change.
According to the Federal Reserve, these uncertainties are leading businesses to lay-off workers and curtail hiring. Bad news for college grads entering the job market.
Recent proposals to raise the minimum wage to $9 per hour would also dampen job opportunities for recent college graduates. In fact, since 2002 the number of college graduates earning the minimum wage has increased by 70 percent.
The boost in income may help those who already have minimum wage jobs, but raising the cost of hiring could discourage employers from taking risks on younger, inexperienced workers—even those with a college degree who are trying to build a resume.
Occupational licensing laws are another barrier to those trying to enter the workforce. More than 1,100 jobs across the country from dieticians and athletic trainers to interior designers and florists require a license in at least one state.
The burden of occupational licensing laws includes annual fees, tuition for coursework, and often hundreds of hours of classroom time. These demands are particularly heavy for those with little savings and a lot of debt.
Do you know any college students in that boat?
Countries that see the most job growth—for young and old alike—limit labor restrictions like these and give entrepreneurs and business owners freedom to pursue new opportunities with whomever they want, at whatever terms they find mutually agreeable.
Data from the Heritage Foundation’s 2013 Index of Economic Freedom and the Organization for Economic Co-operation and Development (OECD) reveals a strong relationship between economic freedom levels and youth employment: the more economic freedom, the more job opportunities available.
In other words, it’s easier for young people to find work in countries that leave more economic decisions in the hands of private individuals and businesses.
This gap in employment will have long-term repercussions for the Millennial generation. Having a job signals employability and is crucial for acquiring skills to succeed in today’s world of rapid technological change.
Furthermore, labor market research shows the longer a person is unemployed, the more difficult it is to find work, and absence from the labor market can have a long-term negative effect on future earning potential.
Lasting prosperity requires a contribution from every generation. Younger workers often make up for a lack of experience with an abundance of creativity, energy, and tolerance for risk. But they need the freedom to test ideas, learn from their successes and failures, and move onto something new.
We're jeopardizing their futures and ours through policies that limit their job opportunities.
Handing out more diplomas won't do much good if our newly minted graduates can't find a way to use them.
Brian Brenberg is an assistant professor of economics at The King's College in New York City.
Jared Pincin is an assistant professors of economics at The King's College in New York City.