Business writing 305

Rising Unemployment Among College Graduates

What Every College Graduate Needs to Know

Andrew Brown, Bryce Goldbach, Camden Dierkes, Jordan Thompson

4/15/2011

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Contents

Executive Summary.........................................................................................................................2

Introduction......................................................................................................................................4

Higher Unemployment Rates.......................................................................................................5

Lower Wages...............................................................................................................................5

Companies Hiring Fewer Workers..............................................................................................6

Increasing Debt............................................................................................................................6

Graduate Schools Applications Rising............................................................................................7

Employment Opportunities Overseas..............................................................................................8

FIGURE 1: Unemployment Rates of Countries with Large Economies in 2010........................9

Value of International and Internship Experience.........................................................................10

Important Interviewing Tips..........................................................................................................11

Choosing a Major..........................................................................................................................13

FIGURE 2: Unemployment Rate by Major, 2010.....................................................................13

Frequently Asked Questions..........................................................................................................14

Conclusion.....................................................................................................................................15

Appendix A: Wage Comparison Chart..........................................................................................16

Appendix B: S.T.A.R. Example....................................................................................................16

Appendix C: Course Workload for an MBA.................................................................................16

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Executive Summary

College graduates today face four major problems: higher unemployment rates, lower

wages, companies hiring fewer workers, and increasing debt. The unemployment rate of college

graduates ages 20-24 years old has doubled in the past two years to 6.1 percent.1 At the same

time, the average starting salary of a college graduate out of high school dropped by 2.2 percent

from 2008 to 2009.2 To make matters worse, companies are hiring fewer college graduates and

scaling back on the number of hires as the economy continues to struggle. The result is that many

college graduates are left unemployed with large amounts of debt from student loans.

Instead of joining other unemployed college graduates, many college graduates have

applied for graduate school. The most well-known graduate school tests, the GRE and GMAT,

have both experienced significant increases in the total number of students taking the test. As a

result, many qualified applicants are being rejected.3 However, some business schools are

becoming aware of the trend and accepting more applications from college graduates with little

work experience.

The poor conditions in the labor market in the U.S. have persuaded some students to

explore international opportunities. The United States has a high unemployment rate compared

to other large countries around the world.4 Employment opportunities exist in other countries and

more college graduates are starting to take notice.

As upcoming college graduates start to become aware of the high unemployment rates,

many will consider making themselves more marketable to employers through gaining internship

1 College Graduates Tackle Dismal Job Market.” CBSNews.com. 18 Apr. 2009.2 Murray, Sara. “The Curse of the Class of 2009.” WSJ. 5 Apr. 2011.3 Burnsed, Brian. “Getting Into Graduate School Made Tougher by the Recession.” U.S. News & World Report. 1 Apr. 2010.4 International Unemployment Rates and Employment Indexes, Seasonally Adjusted, 2007-2011. Bureau of Labor Statistics. 2011.

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experience and international experience. A survey by NACE, the National Association of

Colleges and Employers, found that students that have internships are far more likely to receive a

job offer than those without.5

With the competitive nature of the job market, it is important that upcoming college

graduates improve their interviewing skills and techniques. Hillis Hughes, Director of the

Marietta College Career Center, recommends using the S.T.A.R. approach.6 S.T.A.R. stands for

situation, task, action, and result. This method is helpful during the interview process when

answering behavioral based questions.

College graduates should also be aware of what opportunities exist in the job market

when choosing their major. Graduates with business majors have fared better in the economy

than those without. Certain business majors, such as Economics, have low unemployment rates

compared to other non-business majors, such as Architecture.7

The challenges that college graduates face today has made it more difficult to decide

which path to take after graduation. Gaining international and internship experience, as well as

perfecting interviewing are essential to finding a job.

Introduction

As the economy continues to struggle, many people find themselves without a job.

Unfortunately, this trend is no different for college graduates. Students attend college in hopes of

acquiring an education that will allow them to obtain a job with benefits and a higher salary than

those who decide not to attend college. The job climate is not as friendly to college graduates as

it has been in the past as the unemployment rate in the United States is the highest it has been

5 Neill, Nancy O. "Internships as a High-Impact Practice: Some Reflections on Quality." Peer Review 12.4 (2010).6 Hughes, Hilles. Personal Conversation. Jan. 2011.7 “Rate of Unemployment by Major.” Student Review, Inc. 2011.

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since 1984.8 With the job market extremely competitive, many people are left on the outside

looking it. The problems that college graduates face today are:

Higher unemployment rates Lower wages Companies hiring fewer workers Increasing debt

Higher Unemployment Rates

Unemployment rates for college graduates are the highest that they have been since

1983.9 The current unemployment rate for four year college graduates 20-24 years old in the

United States is 6.1 percent, while the overall unemployment rate is around 9 percent.10 The

alarming trend has been that the unemployment rate of college graduates ages 20-24 years old

has doubled in the last two years.11 High unemployment rates have forced many college

graduates to pursue “lower-wage, lower-skill jobs at less prestigious firms or in firms outside

their area of interest.”12 Being forced to work in areas outside their focus of study hurts the

productivity in the economy and stunts the development of graduate’s skills.

Lower Wages

College graduates have also experienced lower wages when first entering the job market.

The average starting salary for a 2009 college graduate was 48,515 dollars, which was down

2.2 percent from the previous year, according to the National Association of Colleges and

Employers.13 Furthermore, 80 percent of employers did not plan to raise salaries for 2010, while

8 percent planned to lower starting salaries.14 Lower starting salaries can affect spending habits,

8 Murray, Sara. “The Curse of the Class of 2009.” WSJ. 5 Apr. 2011. 9 Lee, Don. “Job Market Worsens for Recent College Graduates.” LA Times. 5 Apr. 2011. 10 Ibid11 “College Graduates Tackle Dismal Job Market.” CBSNews.com. 18 Apr. 2009. 12 Murray, Sara. “The Curse of the Class of 2009.” WSJ. 5 Apr. 2011. 13 Ibid14 Yousuf, Hibah. “Job outlook for 2010 grads: still stinks.” CNNMoney.com. 18 Nov. 2009.

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as well as major life decisions, such as where to live and what house to buy. 15 Even after the

recession ends, people affected by a slow start to their earnings will see less potential for

increasing their future earnings, which could eventually lead to struggles when saving for

retirement. By accepting a lower salary to start a career, it causes a “ripple effect” on earnings

when looking long term. A lower salary initially gives less bargaining power to the individual

when searching for a promotion or raise. Historically, students who graduate during a recession

make up to 30% less in the first year, than people who graduate in a “normal” economy (See

Appendix A: Wage Comparison Chart).

Companies Hiring Fewer Workers

Companies hired 22 percent fewer college graduates in 2010 compared with 2009. 16

Companies are hiring fewer college graduates at a time in which the number of college graduates

is approaching record highs.17 When the economy struggles, employers will hire few workers to

cut costs. Cost cutting also occurs in retirement plans employers offer. More companies are

switching to declined contribution plans as opposed to defined benefit plans, which place more

of a burden on the employee to save for the future. 18 With lower wages, college graduates who

gain employment will find it tougher to contribute to their retirement accounts under this new

system.

Increasing Debt

In the U.S., the average cost of a four-year college education is 27,293 per year in tuition

and fees.19 College graduates face mounting debt in addition to the uncertainty that looms after

graduation due to higher unemployment rates. Almost two-thirds of college students have

15 Ibid16 Murray, Sara. “The Curse of the Class of 2009.” WSJ. 5 Apr. 2011. 17 Hoover, Eric. “Application Inflation: When is Enough Enough?” The New York Times. 5 Nov. 2010.18 Isidore, Christine. “Say Good-Bye to Full Time Jobs with Benefits.” CNN Money. 5 Apr. 2011. 19 “What It Costs to Go to College.” The College Board. 2011.

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student loans when they graduate, which has led to an increase in federal student loans

spending.20 The amount of money borrowed in 2009 was 25% higher than the amount

borrowed in 2008.21

Graduate Schools Applications Rising

With the economy struggling and fewer job opportunities available to college graduates,

more students are applying for graduate school. The GMAT, or Graduate Management

Admission Test, is used primarily by business schools to evaluate a student’s ability to complete

a graduate level program.22 The GMAT has been taken by 5.8 percent more students in the U.S.

than last year.23 The other most common standardized test for graduate school is the GRE, or

Graduate Record Examination. The number of GRE test takers rose by 8.6 percent in 2009,

which is the largest increase in the history of the test.24 Mark McNutt, the spokesman for the

Education Testing Service which administers the GRE, stated “There’s no question that

historically there has been a correlation between times of recession and GRE volumes.”25

As a result of the increasing number of applications, qualified candidates are being

rejected by graduate schools. According to Brian Burnsed of the U.S. News, although many

schools have responded to the rise in applicants by admitting more students, many schools are

simply having to say no more often and turn away qualified students that would be admitted if

fewer applications were submitted.26 For example, Olin Business School at Washington

University in St. Louis has seen their application rate double in the past four years.27 The school

20 Pilon, Mary. “College Graduates Face Mounting Debt, Rising Unemployment.” WSJ. 5 Apr. 2011. 21 Chaker Ann Maire. “Students Borrow More than Ever for College.” WSJ. 7 Apr. 2011. 22 “Your Future Starts Here.” MBA.com. 2011. 23 Heller, David. “Grad school applications increase.” Hatchet Publications, Inc. 29 Jan. 2009. 24 Lyme, Katherine. “Recession prompts jump in University Graduate School applications.” The Minnesota Daily. 21 Jan. 2010. 25 Ibid26 Burnsed, Brian. “Getting Into Graduate School Made Tougher by the Recession.” U.S. News & World Report. 1 Apr. 2010. 27 Ibid

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annually accepts 150 students, but saw over 1,400 applicants apply in 2009.28 The acceptance

rate of applicants was only 11 percent, compared with 25 percent the prior year.29

Dr. Taylor, a marketing professor at Marietta College, believes that the philosophy of

graduate schools will eventually change. Up until the last few years, it was very difficult for

students with undergraduate degrees to get accepted into prestigious business schools because

they lacked real world work experience.30 However, more universities, like Harvard, started to

realize that they were missing out on some of the best talent and instead accepting mostly

middle-aged people that were stagnant in their careers and looking for a change in career, or

greener grass.31 Instead of admitting 10 percent of recent college graduates with no work

experience, Harvard and many other business schools increased this percentage to 30 percent,

according to Dr. Taylor. This new trend is exciting to college graduates because no longer will

they be turned away from prestigious graduate schools due to their lack of work experience.32

Employment Opportunities Overseas

With employment rates around 9 and 10 percent in the U.S., more unemployed workers

are looking for opportunities to work abroad. The job application process can be long and

tedious. The Association of Graduate Recruiters found that there is an average of around 70

applications for one graduate job in the United States.33 Graham Snowdon, a writer for the

Guardian in the United Kingdom, suggests that unemployed graduates look for jobs in countries

that do not have negative outlooks such as Netherlands, Poland, China, and Singapore.34 Figure 1

28 Ibid29 Ibid30 Dr. Taylor. Office Interview. April 2011.31 Ibid32 Ibid33 Snowdon, Graham. “Graduates looks overseas as jobs dry up.” Guardian News and Media. 10 July 2010. 34 Ibid

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below shows the unemployment rate of ten large international economies. The chart shows that

the U.S. unemployment rate is much higher than many of its peers.

FIGURE 1: Unemployment Rates of Countries with Large Economies in 201035

U.S.

Canad

a

Australia

Japan

France

German

yIta

ly

Netherl

ands

Swed

en

U.K.0

2

4

6

8

10

Unemployment Rate (%)

Searching for a job overseas is not an easy process. Therefore, Forbes Magazine has five

recommendations on finding a job overseas:

Research thoroughly

Build a network of contacts

Prepare for the application process

Interview preparation

Consider practicalities36

When conducting international research, factors to consider are economic and political stability,

as well as the culture of the desired work location.37 Forbes Magazine recommends building a

network of contacts through taking advantage of social networking tools, such as Facebook and

LinkedIn, to meet professionals working in the area.38 Due to the different application processes 35 International Unemployment Rates and Employment Indexes, Seasonally Adjusted, 2007-2011 . Bureau of Labor Statistics. 2011.36 Morgan, Diane. “Five Steps To Finding A Job Abroad.” Forbes.com. 25 Sept. 2009. 37 Ibid38 Ibid

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in different countries, Forbes recommends conducting research on how to effectively organize

the resume and find what information will be needed.39 For example, in France the resume, or

C.V., includes a picture, date of birth, and marital status.40 It is also beneficial to learn more

about the country in which the job is located and the values of their people, which will be helpful

during the interview process. Finally, Forbes Magazine stresses the importance of considering

the practicalities, such as language barriers.41

Value of International and Internship Experience

Before graduating and exploring opportunities in the labor market, there are ways to

become more marketable to potential employers. Future college graduates should seek

opportunities to gain international experience. According to Bovee and Thill, “businesses

increasingly reach across international borders to market their products, partner with other

businesses, and employ workers and executives.”42 When working for a corporation, cross-

cultural communication is one of the biggest challenges. Aislinn Goldbach, a Corporate Staff

Auditor for General Electric, believes that globalization and the mixing of cultures has made

international experience of great importance.43 Ms. Goldbach said her study abroad experience in

Germany “allowed [her] to immerse [herself] in a different culture and become more cognizant

of the cultural differences between countries.”44 Studying abroad will provide the unique

opportunity to experience a different culture for an extended period.

In addition to studying abroad, college students will benefit from participating in an

internship by gaining on-the-job experience. Internships are advantageous because they enable

39 Ibid40 Ibid41 Ibid42 Bovee, Courtland L., and John V. Thill. Business Communication Today. 9th. Upper Saddle River: Pearson Prentice Hall, 2008. 43 Goldbach, Aislinn. Telephone Interview. 18 Jan. 2011.44 Ibid

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the intern to build a communication network, acquire transferrable skills, and prepare for the

transition from student to full-time employee.45 Drew Dixon, an intern with Plante & Moran,

believes his experience has helped him to better understand his field of study and has put him a

step ahead of other graduates.46 According to the employees that participated in the 2010

National Association of Colleges and Employers survey, forty-two percent of college seniors

who had an internship during college and applied for a job received at least one job offer.47 There

is no substitute for the experience gained from an internship when compared with classroom

learning.

Important Interviewing Tips

While in college, it is important to build resume content through internship experience,

studying abroad, community service, and being active on campus. These experiences will make

each student more marketable when applying to jobs upon graduation. One of the most

challenging steps in securing a job is the interview process. Companies have changed

interviewing strategies.48 Years ago, companies would do short telephone interviews and then

bring numerous candidates on-site for an in-person interview.49 Now, more companies are doing

more demanding and challenging phone interviews, while inviting fewer candidates for in-person

interviews in order to save costs.50 “I thought it was never going to end”, said Robyn Cobb, a laid

off Atlanta worker who went through a grueling hour and a half interview, according to the Wall

Street Journal.51 When applying to a job, the first step after resume submission is the phone

45 Veronnica, Tam. “Internship: Riding the Waves and Cleaving the Winds amidst the Financial Tsunami.” Journal of Youth Studies 12.2 (2009).46 Dixon, Drew. Telephone Interview. 2 Feb. 2011.47 Neill, Nancy O. "Internships as a High-Impact Practice: Some Reflections on Quality." Peer Review 12.4 (2010).48 Needleman, Sarah E. “The New Trouble on the Line.” WSJ.com. 2 June 2009.49 Ibid50 Needleman, Sarah E. “The New Trouble on the Line.” WSJ.com. 2 June 2009.51 Ibid

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interview. Hilles Hughes, Director of Marietta College’s Career Center, believes “the phone

interview is the most difficult, but it is a great way to sell yourself to the company.”52

The first step in preparing for an interview is to write down any questions, topics, or

important points beforehand.53 Once a conversation starts it is easy to forget important points.54

When responding to questions posed by the interviewer, the Marietta College Career Center

recommends using the S.T.A.R. approach. The S.T.A.R. approach is aimed to help the

interviewee effectively answer behavior based interview questions.55 S.T.A.R. stands for

situation, task, action, and result.56 The first step is to explain the situation that occurred, what

needed to be accomplished, and the candidate’s involvement. Next, describe the tasks that were

involved and how the situation was handled. Third, talk about the action taken and the purpose of

these actions. Finally, explain the result or outcome and why it was positive. Remember to be

specific and emphasize the positive outcomes when using the star approach. Appendix B shows

an example of the S.T.A.R. approach from MIT’s Career Center. Excellent interview technique

will help a candidate to obtain a job when going through the job search process.

Choosing a Major

Although unemployment rates are high for recent college graduates, some majors have

fared better than others. Figure 2 below shows unemployment rates of the four major business

fields of study.

FIGURE 2: Unemployment Rate by Major, 201057

52 Hughes, Hilles. Personal Conversation. Jan. 2011.53 Post, Peggy, and Peter Post. The Etiquette Advantage in Business. 2nd. William Morrow, 2005. 223-235. Print54 Ibid55 “Interviewing for Success.” Career Center. 2011. 56 Ibid57 “Rate of Unemployment by Major.” Student Review, Inc. 2011.

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Accounting Management Economics Finance0

1

2

3

4

5

6

7

Unemployment Rate by Major (%)

Figure 2 shows management majors have a slightly higher unemployment rate than accounting

majors. Economics majors have the lowest unemployment rate when compared to the other

three. Although these four unemployment rates may seem high, business fields of study have

actually done well compared to fields of study outside of business. For example, architecture and

industrial design have unemployment rates of 21.1 and 27.3 percent respectively.58 It is likely

these majors have suffered because fewer businesses are expanding and building during the

recession.

Choosing a major in college is difficult, especially when unemployment rates are so high.

It is important to choose a major that will thrive and present numerous job opportunities upon

graduation. Forbes.com, with the help of the National Association of Colleges and Employers

(NACE), did a study to find out which majors will have the most job offers in 2009.59 Four out of

the top five majors with the most job offers were business related: accounting, management,

economics, and marketing.60 This encouraging study should give students more confidence when

58 Ibid59 Lee, Joyce. “College Majors With The Most Job Offers.” Forbes.com. 5 Aug. 200960 Ibid

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selecting different business majors. When choosing a major, selecting one in the field of business

is a smart and safe decision.

Frequently Asked Questions

1. If the conditions in the labor market do not improve and a college graduate is accepted

into an MBA or graduate program, what are the benefits?

After graduation, the option will present itself to attend graduate school and obtain an

MBA. Students that obtain MBA’s on average have a 56 percent higher salary in their first job

than students with bachelor’s degrees.61 Individuals with MBA’s will see their salaries increase

more progressively than those without.62 The benefits of an MBA extend beyond numbers to

opportunities to have greater career flexibility and security.63 Graduates with MBAs have a 25

percent lower unemployment rate than those with undergraduate degrees.64 Appendix C shows an

example of a typical course workload for a student pursuing an MBA in corporate finance.

2. What are some challenges 2011 college graduates will face and what is the job market

outlook from them?

The greatest challenge a graduate will face is the increased competition in the labor

market from other college graduates. The National Center for Education Statistics states,

“Enrollment in degree-granting institutions rose 14 percent from 1987 to 1997, and 26 percent

from 1997 to 2007.” 65 For the first time in 18 months, however, the National Association of

Colleges and Employers reported an “absolute majority” of the companies that participated in

61 “MBA Value and the Benefit of an MBA.” MBA 360. 2009. 62 Ibid63 Davies, Antony. "The ROI on the MBA." BizED 4.2 (2005): 44. EBSCOhost.64 Ibid 65 United States Department of Education. Fast Facts. Washington DC: Institute of Education Sciences, 2008.

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their monthly hiring survey intend to hire spring 2011 graduates.66 NACE predicts that 2011

graduates will see a 13.5 percent increase in hires over the reported 2010 levels.

Conclusion

College graduates in the upcoming years will face problems with unemployment, lower

starting wages, higher debt, and companies hiring fewer workers. However, following the

recommendations mentioned in this paper will be beneficial. Remember to perfect interview

skills and obtain internships and international experience during college. Also, be open to

employment opportunities overseas. Working overseas after graduation is a great way to

accelerate a career and differentiate from other employees. Sophocles, a famous Greek poet,

once said “Success is dependent on effort.”67 The Association of Graduate Recruiters found that

there are about 70 applications sent for every one graduate job.68 Many graduates become

discouraged after sending out numerous applications and hearing no feedback. Through hard

work and perseverance, every college graduate will eventually find their niche in the workplace,

even if it means sending hundreds of applications.

Appendix A: Wage Comparison Chart

Appendix B: S.T.A.R. Example

MIT Career Development Center

Situation: During my internship last summer, I was responsible for managing various events.66 Giegerich, Steve. “Stronger job outlook for college grads.” STLtoday.com. http://www.stltoday.com/business/columns/job-watch/article_847e38ec-3e0d-11e0-997e-00127992bc8b.html67 “Success Quotes.” BrainyQuote. 2011.68 Snowdon, Graham. “Graduates looks overseas as jobs dry up.” Guardian News and Media. 10 July 2010.

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Task: I noticed that attendance at these events had dropped by 30% over the past 3 years and wanted to do something to improve these numbers.

Action: I designed a new promotional packet to go out to the local community businesses. I also

included a rating sheet to collect feedback on our events and organized internal round table

discussions to raise awareness of the issue with our employees.

Result: We utilized some of the wonderful ideas we received from the community, made our

internal systems more efficient and visible and raised attendance by 18% the first year

Source: MIT Career Development Center

Appendix C: Course Workload for an MBA

Fisher College of Business at Ohio State UniversityCourse Options for an MBA in Corporate Finance (including number of credit hours)

Required:FIN 811 Financial Decision Making (4)FIN 821 Advanced Corporate Finance (4)

Minimum of four of the following elective courses:

FIN 822 Securities Markets and Investments (4)FIN 825 International Finance (4)FIN 826 Financial Institutions (4)FIN 827 Fixed Income Securities (4)FIN 828 Strategic Cases in Finance (4)FIN 829 Risk Management (4)FIN 834 Insurance and Risk Management (4)Fin 844 Entrepreneurial Finance (4)FIN 845 Private Equity (4)FIN 846 Fundamentals of Venture Capital (4)FIN 872 Real Estate Investments (4)

 A maximum of one of the following courses can be applied to this major:

AMIS 824 Corporate Financial Reporting (4)

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AMIS 827 Information, Incentives and Control (4)

AMIS 829 Financial Accounting Analysis (4)AMIS 842 Financial Statement Analysis(4)Source: "Corporate Finance MBA Workload at Ohio State University."