Post-college Underemployment; Perspective on the Past and Future

Q4 | December 2018

stack of old newspapers, pile of old newspapers

Topic: Pearls of Wisdom

Devin Crago, CFA

December 17, 2018

Image used with permission: iStock/hanohiki


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Post-college Underemployment; Perspective on the Past and Future

Q4 | December 2018

Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some serious and some light-hearted – rise to the surface. We attempt to share a few of those with you in each of our issues of Nexus Notes.

Post-college underemployment

The facts are stark: 43% of U.S. college grads are “underemployed”, meaning that their job doesn’t require a college degree. Think of the unfortunate holder of a bachelor’s degree who winds up working at Starbucks for their first job. This can be hugely disappointing for those who put in the hard work to attain a degree, only to find that the time, toil and expense required go unrewarded in the job market. In financial terms, this matters because the average starting salary for a job that requires a degree is $46,000 versus only $36,000 earned by those in the underemployed category. To avoid disappointment, college applicants may want to avoid majors in Homeland Security and Law Enforcement, which had a 65% probability of underemployment. Conversely, and perhaps not surprisingly, Engineering majors fared best, with only a 29% chance of winding up underemployed. (Burning Glass Technologies, “Choosing the Right Major with the Underemployment Risk Indicator”, October 26, 2018)

Perspective on the past and future

You’ve often heard us discuss the importance of behavioral biases in determining investor success or failure. One common pitfall, known as the “recency bias”, is the tendency to recall and emphasize events that happened in the recent past over older information. This error is compounded when investors wrongly forecast that the future will closely resemble the recent past. In our reading, we came across an eloquent and insightful summary of the pitfalls of interpreting the past and predicting the future: “In reality, the future and the past are false constructs. The future is little more than our faulty guesses about one outcome out of many possibilities; the past is an error-riddled set of recollections, filled with selective retention and ego-driven biases.” (Bloomberg, “The Next Financial Crisis Is Staring Us In The Face”, October 8, 2018)

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