Student debt weighs on job seekers in otherwise favorable labor market
With monthly job gains falling to their lowest level in nine years and several recession indicators beginning to flicker, some people say we could be heading towards a downturn. Policy uncertainty is a drag on global growth, and it does not seem as though businesses will get much clarity about the trade war or Brexit any time soon.
Yet the U.S. consumer is stubbornly resisting the recession narrative, and the job market overall is doing well. A new survey of more than 30,000 U.S. job seekers and 500 U.S. employers in our online employment marketplace reveals that most job seekers and employers are optimistic about the economic outlook and confident that they will be prepared for the future of work.
One surprising finding is that job seekers with more education, who should theoretically be thriving in the tight labor market, are less satisfied with key aspects of the job search process than those with less education. The result is largely driven by student loan debt, which is a significant source of economic anxiety and unrealistic pressure on job seekers.
Highlights of the 2019 survey
1. U.S. job seekers and employers remain optimistic on economy, jobs
Job seekers and employers are substantially more likely to say that the economy has improved since 2016 than to say it has declined. They are also largely optimistic that the economy will continue to improve. Employers are more confident than job seekers that the economy will be good to them in the near future, whereas job seekers are more optimistic that the economy will be good to them in the long term.
There is a clear partisan divide in views of how the economy has performed since 2016, however. Job seekers from demographic groups that are more likely to support Republicans are also more likely to say that the economy has improved since President Trump’s election. Women are 67% more likely than men to say that the economy has declined since then, and blacks and Hispanics are 57% and 20% more likely than whites to say so, respectively.
In addition, job seekers’ views of the economy appear to be closely associated with their personal experiences of the labor market. Job seekers who say that the economy has declined are 19% more likely to be unemployed, 25% more likely to say their job search is taking longer than expected, and 85% more likely to say they are struggling to make ends meet.
2. U.S. job seekers are confident that they have the skills to succeed in the future
At a time when many people worry that automation, robotics, and artificial intelligence will destroy jobs, U.S. job seekers are optimistic that they will be ready for the future of work. 77% of job seekers overall say that they have the right skills for what work will be like in the future. And even among high school graduates with no degree, 72% say they are confident they have the right skills. Confidence is slightly lower among the youngest and oldest job seekers.
Positive sentiment among job seekers largely reflects the fact that we have now experienced 109 straight months of job growth–a period in which job seekers have seen their opportunities expand and their wages rise. Those wins have also delivered a psychological boost.
3. U.S. employers are taking bold steps to hire in a tight labor market
While employers are broadly optimistic regarding the economic outlook, they do report difficulty filling vacancies. 73% of employers say they are finding it difficult to fill open positions, with 64% saying it is more difficult now than it was a year ago.
To attract and retain talent in a tight labor market, 68% of employers say they have raised wages in the last year and another 9% say they plan to do so soon. 23% say they have increased benefits. 21% say they have started offering job training and 15% say they have reduced education or experience requirements–steps that mean more opportunities for young people and those with less education and training.
4. Surprisingly, job seekers with less education appear more satisfied with their job prospects
The recent period of job growth has pushed unemployment rates for blacks and Hispanics to all-time lows of 5.1% and 3.9%, respectively (reached in September, 2019). High school graduates with no college have also seen their unemployment rate fall to a recent low of 3.5%, well below its pre-recession level. According to data from the Bureau of Labor Statistics, wages are growing fastest in low-wage industries and for non-managers.
In many ways, then, the tight labor market has ushered in a blue-collar recovery. One surprising result is that job seekers with less education appear to be experiencing less difficulty and disappointment in the job search process.
We asked job seekers about some of the most common pain points in the job search process, and were surprised to learn that job seekers with only a high school diploma or GED are:
- 26% less likely than college graduates to say that they do not hear back from employers most times when they apply for a job.
- 25% less likely than college graduates to say they’ve lowered their salary expectations in the past year to enhance their chances of finding a job.
- 8% less likely than college graduates to say that it is taking more time than they expected to find a job.
- 5% more likely to be interested in the job when they do hear back from an employer.
These findings suggest that more highly educated job seekers may begin their job search with unrealistically high expectations and then experience inevitable disappointment. At the same time, less-educated job seekers are entering a job market where the opportunities available are more likely to meet or exceed their expectations.
5. Student loan debt may be a major source of the job search woes experienced by more highly educated job seekers
Our survey finds that student loan debt is a significant source of financial pressure for more-educated job seekers and the likely driver of the differences in job search experiences described above. The burden of student loan debt may cause job seekers to feel greater financial pressure to land a dream job with high pay, and to do so unrealistically quickly.
16% of job seekers with a Bachelor’s degree or higher say that student loan debt is their primary source of economic anxiety. College graduates with college debt express less satisfaction with the current state of the economy, and less optimism about the economic outlook. They are 33% more likely to think the economy has declined since 2016, and 18% less likely to say the economy will be better for them one year from now.
Compared with college graduates who did not take out loans, college graduates who are currently paying off student loan debt are:
- 6% more likely to say that their job search is taking longer than expected.
- 5% more likely to say they’ve applied to more than 10 jobs.
- 20% more likely to say the primary reason they are still looking for a job is that they were not satisfied with pay offers received so far.
- 31% more likely to say they are not able to make ends meet in their current job.
In the ZipRecruiter survey, college debt is associated with greater dissatisfaction in the job search process. Furthermore, 32% of respondents with college debt say it has affected their career choices, often by causing them to choose college majors and careers with greater earning potential, even when they would have preferred a different path. Another recent ZipRecruiter survey found that college graduates often later regret choosing college majors that they love but that are associated with lower earnings. Those results align with a recent study by the National Bureau of Economic Research that found that higher college debt causes graduates to accept jobs with higher wages but lower job satisfaction.
While student loan debt causes hardship for many college graduates, it is, of course, even more burdensome for people who incur debt but fail to complete a degree. Of all survey respondents who are currently paying off student loan debt, a staggering 22% have neither a degree nor an occupational license or certificate.
New college financing models and pathways to skills development could benefit both sides of the labor market
Both job seekers and employers could benefit from changes to college financing models. 40% of employers in our survey say they believe free public college or free community college would have a positive effect on hiring, compared with only 28% who say it would have a negative effect. (32% foresee no effect.) When asked which policy would make them more likely to expand hiring, 22% of employers selected a government subsidy for employer investments in employee training, making it the second-most popular option behind further business tax cuts (selected by 32%). Expanded subsidies could conceivably increase the number of apprenticeships, internships, and workplace training programs.
Solutions emerging in the private sector could also be an improvement over the traditional student loan model. Income-share agreements (ISAs), for example, have already been introduced by some colleges. In an ISA, students borrow money from a university to fund their education. In exchange, they agree to pay the university a percentage of their salaries after graduation for some number of years, whenever they are earning. ISAs could alleviate some of the anxiety and pressure job seekers feel and give colleges a greater stake in ensuring that students graduate and succeed in the labor market.
Methodology: ZipRecruiter surveyed 31,765 active job seekers and 585 active employers in the United States in September of 2019. Active users are defined as logged in, registered users who visited ZipRecruiter’s job marketplace during that time period.
Job seekers surveyed ranged in age from younger than 18 to older than 65, with the most common age category being 45 to 54 years. 44% said they hold a bachelor’s degree or higher. 49% of respondents identified themselves as women and 50% as men, while 1% either selected “other” or chose not to answer. Compared with the wider U.S. population, our survey slightly over-sampled blacks and under-sampled Hispanics, with 60% of respondents identifying as white or caucasian, 18% as black or African American, 11% as Hispanic or Latino, 4% as Asian or Asian American, 1% as American Indian or Alaska Native, and about 5% as another race. Of the 51% of respondents who were not employed but looking for work, 13% were retired and 5% were stay-at-home parents. Of the 48% of respondents who were employed, 74% were working full-time and 26% part-time. The remaining 1% were monitoring the labor market but not looking for a job right now, either due to a disability or other reasons.