What Employment Statistics Really Mean

For the last week or so, I have been exchanging Linked In messages with a young college graduate who is very upset because he cannot find a job. His questions and statistical misunderstanding are common, so I thought I would address some of his questions here.

Here are his comments after looking at the Baccalaureate and Beyond Longitudinal Study (B&B), published by the National Center for Education Statistics:

“The things I zeroed in on were that regardless of race, major, or family status, however they grouped college graduates, at least 3/4 were employed full-time and the study said that full-time employees made on average $52000. Even social science and humanities graduates, the “useless” degrees, were employed on average at 3/4 full-time and the full time employees made over $40000 on average.”

Here he quotes the study, points out that ¾ of recent graduates found full time jobs and the average annual wage is $52,000.

He thinks this is a good thing, but he is wrong.

Here’s why:

First if ¾ of recent graduates are employed full time that means that ¼ of them are not.

Wait a minute!

One quarter of recent college, graduates cannot find a full time job? That is encouraging? After spending four years and $50,000 on an education to increase employability fully 25% of graduates have something other than a full time job? In an economy, claiming a 4% unemployment rate?

That is nothing to celebrate. It’s dismal. Embarrassing. Discouraging. It says something really bad about the value of an education and the state of the economy.

Numbers like that should motivate us to find about more about how job markets and economies are working in the aftermath of the Great Recession.

Next, he cites $52,000 as the average annual wage for a recent college graduate, but he does not seem to understand what that means.

Time for a short stats class. I promise it won’t hurt.

True, $52,000 is commonly cited as an average annual income for a college graduate.

But that is an average, or mean. The mean is just all the data points added up and divided by the total number of data points. Very similar to figuring fuel mileage — add up the miles; divide by gallons of fuel, and you get average mileage for that tank of gas.

The problem with using the mean is that extreme scores have an exaggerated effect on the final answer.

For example…

There is something called wage inequality. That means an awful lot of people are making next to nothing, and a few people are bringing in tons of money. Because of this, the mean is misleading.

We need to look at the median annual income instead. The median is the number right in the middle of a distribution, the point dividing the upper 50% from the lower 50%.

Annual median income from wages has been hovering around $30,000 for the last few years.

That’s right…

HALF OF WORKING AMERICANS MAKE LESS THAN $30,000 A YEAR!

If the mean and median are very different we know that the distribution is “skewed,” that is, extreme scores are making the mean or average deceptive. That is exactly what happens with measures of income. Many people make very little, and a few people make a lot.

You can find out more about median and mean, (or average) wages at this very informative Social Security Administration site:

Measures of Central Tendency for Wage Data

Next, he asks this:

“How can someone be highly educated and unemployable? Being educated means that you either have skills that can be put to use immediately, or you are able to learn new skills fast in order to begin contributing soon after being hired.”

Here is why:

Now that we know a little about the numbers, the employment picture does not seem as rosy as it did but other things start making sense.

One of my gigs is teaching business, psychology and statistics at a community college. I love working there and a full time position would be a dream job. However, the school is not hiring full time teachers and they have not for years. Instead, they use “adjuncts” — fully qualified teachers limited to working only about half the time of full time teachers at about one third of the pay, and no benefits.

At my school, adjuncts outnumber full time instructors three to one, teach the majority of classes and carry twice as many teaching hours.

This is nothing new or unusual.

Admissions have been going down for years as people figure out that the Return on Investment for education is not very encouraging. Adjuncts are the personification of that poor ROI, and they are on display at the front of most classrooms.

Adjuncts are highly educated people who cannot find a job and are trying to avoid homelessness by working part time at a college or university.

Here is a CNN story about the issue:

University teachers are exploited, too

Now maybe you get the idea that there are a huge number of people looking for work, and education level does not seem to make much difference.

That means employers can demand exactly what they want. The days of “transferable skills” and “on the job training” are over.

If you have not already done the job for which you are applying you probably will not be hired. Odds are very good that someone else has done the job for a year or more and they will be the one hired.

Here is a real life example of how the glut of skilled and educated people results in hyper competition for entry level positions:

A couple of years ago I saw an announcement for a marketing assistant. It was an entry-level position.

A bachelor’s degree in business was required, but there was something more…

The announcement listed the specific classes candidates had to have taken.

Yes, there was a list of courses like this:

MKT 310 Marketing Principles

MGT 481W Strategic Management

FIN 300 Financial Management

Being that specific struck me as outlandish so I was curious about how stringent these requirements really were and called the hiring manager.

I told him that I had and advanced business degree, a Master in Business Administration, (MBA) and that I had taken graduate level versions of the same courses listed on the announcement.

Would he accept my application?

“NO!”, he said. I was “overqualified.”

Wait a minute, I said…

“…In order to be overqualified I had to be qualified first, so what was the problem? I don’t care if I am overqualified, why should you?”

He said that every time they posted a job announcement they were overwhelmed with applicants, and the course requirements were actually a screening mechanism to keep the number of applicants manageable.

Nothing to do with the skills the job required. A screening mechanism.

Employers can ask for exactly what they want and are confident they can get it.

If you liked this post and would like to explore further, consider reading these fine books:

Alpert, D. (2013). The age of oversupply: Overcoming the greatest challenge to the global economy. New York: Portfolio/Penguin.

Cappelli, P. (2013). Why good people can’t get jobs: The skills gap and what companies can do about it. (Kindle ed.). Philadelphia: Wharton Digital Press.

Florida, R. L. (2010). The great reset: How new ways of living and working drive post-crash prosperity (1st ed.). New York: Harper.

Neuwirth, R. (2011). Stealth of nations: The global rise of the informal economy. New York: Pantheon Books.

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