May 22, 2009

The Mercado Report:

The horrible dilemma of new graduates

By Humberto Caspa

We are at a time of college graduation ceremonies. Parents will be experiencing a sense of pride after seeing their sons, daughters and friends receiving a university degree, which, by all means, has a moral and an economic value in society. A college degree is an indicative of many years of sacrifice, perseverance and working hard during days and nights. One hopes that a university degree will help us maneuver better during hard economic times. Is that right?

A few weeks ago, First Lady Michelle Obama delivered a compelling speech at the University of California Merced highlighting the need to give back to our own communities after graduation. “We need your ideas, graduates. We need your resourcefulness… Dream big… and please make giving back to your community a part of that vision,” she said.

In the meantime, President Barack Obama went to Notre Dame University, where many anti-abortion activists protested his visit. As usual he cooled down tensions with a melodramatic speech and then challenged the new graduates to seek opportunities in the labor market, though he warned them to be cautious and not to get too excited. “Now, you, class of 2009, are about to enter the next phase of your life at a time of great uncertainty,” he said.

Many of those new graduates will try to insert themselves in the labor market. This time their resume will show off either a BA or an MA degree. Some might even highlight a Ph.D. degree. The most accomplished graduates and those having –especially from private elitist universities— direct ties to politicians, business owners, financial tycoons will probably find a nice paying job.

However, the majority will return home with their heads down, disappointed and empty handed. No jobs for them. Then, some of them will begin to question whether four years –ten or twelve in the case of a Ph.D. program— of diligent academic work was worth the time and effort.

Not to mention the financial burden it means to get a college degree. The average debt of students graduating in 2006 (private and public universities) was $19,976. In 2007, graduates from public universities owed in average of $19,400, while in private university $25.700. According to the Association of American Colleges (AAMC), in 2008 the average debt of medical students in both public and private universities was $141,751. Also, graduates need to consider paying interest rates, which could claim up to 6% or 7%, depending on the financial agency involved in the loan.

In the end, student debts get stratospheric numbers that are difficult, and sometimes impossible to pay them back.

Because of the economic downturn, many college graduates have been willing to accept underclass jobs in the labor market. Their wages are only good enough to pay their meals, car mortgages, rent, credit card bills, but these jobs aren’t capable of creating a surplus to pay down their debts or to open up saving accounts. The job market looks a lot gloomier than President Obama suspected.

However, with all the problems and troubles facing education, having a vocational or professional degree pays off better than relying solely on pure labor force. The competition is stiff, and the more human capital the better to find a job.

Since markets need more sophisticated human resources and capital, schools must provide and seek other new venues to fit in the always changing labor environment.

Humberto Caspa is a bilingual writer on Latino business and economics. E-mail:

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