The Wall Street Journal recently published a picture from a Dallas job fair. It depicts individuals holding folders and resumes while standing in line while wearing business casual. Most of them most likely attended college. It’s likely that many of them owe money for it. According to a recent analysis by the Burning Glass Institute, workers who chose not to follow that route and instead entered manual labor, trades, or services are currently experiencing one of the best periods of employment that anyone can recall.
The figures are truly startling. The unemployment rate for workers without a college degree between the ages of 22 and 34 is close to a 20-year low. That is neither a seasonal anomaly nor a blip. Gad Levanon, chief economist at Burning Glass, thinks this trend is structural. “I don’t think it’s a temporary thing,” he said to reporters. For recent college graduates, the situation appears to be much worse. Although their unemployment rate is still lower in absolute terms (2.7% compared to 4.7% for those with only a high school diploma), degree holders are struggling in comparison to their own historical norms. Even five years ago, it would have seemed improbable that the gap between the two groups would have shrunk.
The causes of these trends in the labor market that do not require a college degree are intertwined in ways that are difficult to discern. The trades should come first. There are fewer young people working in professions like electrical, plumbing, HVAC, and elevator repair, and older skilled workers are retiring. The median salary for that final position is more than $100,000, which is more than many white-collar desk jobs can provide.
Reduced immigration has also reduced the number of workers available for manual labor and construction, resulting in shortages that employers are attempting to address with higher wages and quicker hiring. The construction of data centers alone has grown to be a major employer, drawing workers from all areas of the building industry.
And then there’s the AI factor, which cuts in a way that probably unnerves many recent graduates. Artificial intelligence is now being used by businesses to handle entry-level administrative and analytical tasks that were previously the on-ramp for recent graduates. Writing reports, organizing data, responding to standard customer inquiries, and conducting preliminary research were starter jobs that trained young professionals and provided justification for hiring them at low pay.
The people who were supposed to perform those tasks are the first casualties when they are automated. As businesses find new positions for junior workers to fill, this trend might level off. However, there is currently a noticeable narrowing of the college graduate hiring pipeline, and it is unclear when or to what extent it will reopen.
The culture seems to be pushing a long-overdue discussion about what a college degree truly entails. For many years, it was almost universally advised to attend college, earn a degree, and then find employment. It was said by parents. It was stated by guidance counselors.
And the data supported it for a very long time. However, that assumption is being challenged in a way that is difficult to ignore by the current trends in the labor market that do not require a college degree. When compared to a college graduate who sends out hundreds of applications and receives no response, a 22-year-old apprentice electrician earning $35 or $40 per hour and having no student debt looks pretty good. The Reddit discussions on this subject have been direct. A user made a joke about a mechanical engineering graduate earning $60,000 while a skilled craftsman makes $80 per hour. Because the underlying frustration is genuine, the humor succeeds.
All of this does not imply that college is useless. Over the course of their careers, degree holders still typically make more money and have lower unemployment rates. However, the certainty that formerly surrounded a four-year degree has diminished and the margins have narrowed. It’s difficult to ignore the shift in the discourse from “everyone should go to college” to “it depends on what you’re going to do with it.” Workers without degrees are now truly thriving due to infrastructure spending, a shortage of skilled workers, and AI’s disruption of office work. How many of these forces are cyclical and how many are permanent will determine how long that moment lasts. Levanon believes the change is long-lasting. For the time being at least, the labor market appears to concur.
