What do these mean for students and potential graduates?
When university graduates cannot find full-time employment, they will either work part-time or casual or just continue studying in the university system until something else comes along.
This is evident in the number of students currently enrolled in universities. The number has increased significantly.
When this occurs, they are increasing their student loan debts even more while universities maintain their revenue sources. The cycle of debt will continue for many unemployed students.
According to Forbes, more than 43 million Americans carry a total of $1.3 trillion in student loan debt with an average of $25,000 for public school graduates.
Marketwatch reported that the typical 20-something student is weighed down by six-figure debts as he or she looks to start a budding career and adult life.
In comparison, The Australian reported that the median student loan debt in Australia is sitting at $25,000. According to the Parliamentary Budget Office, student loans will increase from $1.7 billion in 2015-16 to $11.1 billion in 2025-26. The number of students getting student loans has also grown by 11.2% annually over the past five years from 308,000 in 2010 to 522,000 in 2015.
These student loan debts can hang around for a long time if not managed appropriately. According to the Huffington Post, nearly 70,000 Americans over the age of 50 are living in poverty as their social security benefits are cut to pay off student loan debts.
Some graduates may even take up jobs that are not relevant to their study area. This will grow more common.
Gallup found that 51% of Americans who pursued a postsecondary education would change their degree type, institution or major.
In the U.S., Forbes reported that 60% of college graduates cannot find a full-time job in their chosen profession.
The Washington Post said that only 27% of college graduates have a job related to their major with a significant number of underemployed.
The Australian Bureau of Statistics found that only 44% (5.0 million) of the 11.3 million employed Australians aged 15 to 64 years had a qualification and worked in the field of their highest qualification.
In the U.K., The Independent reported that only half of all graduates are working in a field that relates to their degree after leaving university. A shocking 96% had switched careers by the time they reached the age of 24.
There’s a huge problem with demand and supply
The skills and knowledge mismatch between what the employers really want and what workers do have to be employable is getting wider.
The irony is that employers are finding it harder to fill vacant positions in their workplaces as more and more people are looking for work.
Here’s the thing.
The unintended consequence of advances in medical science is that people are now living longer and healthier lives.
According to the United Nations, the world population is estimated to increase from 7.6 billion in 2017 to 8.6 billion in 2030, 9.8 billion in 2050, and 11.2 billion in 2100.
The United Nations also predicted that by 2030, older persons will outnumber children aged 0-9 years (1.4 billion versus 1.3 billion); by 2050, there will be more people aged 60 years or over than adolescents and youth aged 10-24 years (2.1 billion versus 2.0 billion).
These trends will put severe pressure on governments to socially, financially, and medically support ageing populations.
The International Labour Organization has warned that the growth rate of the available workforce shall exceed the rate of job creation. Therefore, 2.7 million more people will become unemployed in 2018. The total unemployment is estimated to exceed 201 million people.
The International Labour Organization also said that the number of new entrants into the labour market is also increasing in many countries. Close to 40 million people will be entering the labour market each year.
By the year 2030, the world economy needs to create close to 520 million new jobs in order to match the projected increase in the size of the global labour force.
Let’s put this into context for better understanding.
From 1948 to 2000, jobs grew about 1.7 times over the rate of population growth. This means that there were more jobs available for people to dive into without any problems of finding work.
But from 2000 to 2014, something has shifted.
Instead, the population grew about 2.4 times more than jobs. This means that there are many more people going after fewer jobs.
This trend will only get worse and labour unions can’t do much about.
People are at a structural disadvantaged than ever before.
With more competition for a limited number of job vacancies, there will be stagnant wage growth or even reductions in salaries and wages.
More bad news for existing workers
Some people may argue to leave the universities alone. It’s not their fault that graduates cannot find work.
Instead, businesses should be stimulated by government policies and programs to create new jobs to absorb new graduates.
From the demand side of the equation, these new jobs should be able to absorb people who are looking for work.
With business competition becoming more intense, the business community can only do so much.
Therefore, the only way organisations and businesses can survive and continue keeping workers in employment is to reduce payroll cost. They do this by reducing headcount through automation and business process improvements.
The reality is that if businesses do close down, workers will be out of work.
There is a fine line to walk.
This will certainly be bad news for workers.
Labour unions are calling for increases in salaries and wages through collective bargaining or legislated wage increases.
This will certainly not help existing workers in this fragile environment, especially if you are working in retail or hospitality.
The only way businesses can pay for any forced increases in salaries and wages is to contain payroll cost by reducing hours worked by existing workers or freezing recruitment altogether.
In fact, labour unions will only put at risk jobs of existing workers exposed to these reductions.
The reality is that there will be many more unemployed workers willing to work for less than what is currently being paid to existing workers because of the effects of population growth and automation.
When this occurs, the supply side of labour will further reduce or suppress salary and wage growth for existing workers.
As there are more people looking for work and wages are not rising, economic growth will also be impacted. This is evident in the lower growth rates experienced by most countries.
Academic inflation has become a major problem. A bachelor’s degree is becoming increasingly worthless as more and more people graduate from college. This means that jobs that used to need only a bachelor’s degree now prefer master’s degrees.
Employers are finding it hard to find skilled workers
Strains on labour will become painfully evident.
This pain will increase significantly in the future due to automation, population growth, ageing population, and income inequality.
As millions of Americans remain unemployed, CBS reported that U.S. manufacturers are having trouble filling hundreds of thousands of jobs requiring the skills to operate their high-tech machinery.
CNBC reported that one-third of small business owners say that they can’t find the workers they need to fill critical jobs.
The U.S. Chamber of Commerce Foundation reported that many of those looking for work do not have the skills required by businesses looking to hire resulting in high unemployment even as businesses desperately seek new talent.
The Australian Productivity Commission found that employment outcomes for full-time graduates have been getting worse and many employers are not satisfied with the quality of recent graduates. A quarter of recent graduates believed that their degrees added no value.
Market forces will fail to resolve the demand and supply imbalances for tens of millions of skilled, unskilled, and unemployed workers.
This is a global problem.
The Independent reported that nine in ten U.K. employers are struggling to find skilled workers.
In 2016, 40% of employers globally are having difficulty filling positions, according to Manpower Group. Lack of available applicants and hard skills are the top reasons why employers can’t fill positions.
According to MyBusiness, the higher education sector, by virtue of its size and its bureaucracy, hasn’t been able to keep pace with that rate of change and demands of modern business.
Korn Ferry’s global study found that by 2030, demand for skilled workers will outstrip supply, resulting in a global talent shortage of more than 85.2 million people, especially for people who have completed post-secondary education, such as college or university, or a high-level trade college qualification.
“Acute global talent shortages are clearly a looming threat, and they’re driven by a shortage of skills rather than a shortage of people.”
There’s a severe mismatch between skilled labour available and skilled labour required.