Building Social Capital to Reduce Underemployment

​Labor market data shows that as of June, 41 percent of college graduates ages 22 to 27 were underemployed, defined as "working in a job that typically does not require a bachelor's degree."

Another recent report issued by Burning Glass Technologies and the Strada Institute found that two-thirds of underemployed grads are still underemployed after five years, and just over half remain so after 10 years. By contrast, just 1 in 10 graduates who land a first job appropriate to their skill level slip into underemployment after five years. 

A graduate's first job is critical in setting the pace for career potential and income, said Kalani Leifer, the founder and CEO of COOP Careers, a New York City-based nonprofit focused on overcoming underemployment for lower income college graduates by providing digital skills and peer networks. That's especially true for first-generation students—those students who are the first in their families to attend college—because these students generally have less-established networks and mentors or career guidance.

Leifer discussed the issue with SHRM Online.

SHRM Online: Why is the first job out of college so pivotal?

Leifer: A good first job is the most important step toward achieving upward mobility for first-generation college grads. Those who secure well-paying, upwardly mobile first jobs not only earn salaries that put them on track to achieving the American Dream, but, more importantly, they build the peer professional network that will help them get their second and third good jobs. These relationships are the most essential part of building a meaningful career, maybe even more than specific skills or credentials.

Those who don't will most likely never achieve upward mobility. For most, underemployment is not a steppingstone on the way to a meaningful career. It's quicksand, harder and harder to escape with every passing year.

SHRM Online: What are the costs of underemployment?

Leifer: For first-generation college grads, underemployment shatters the dream of upward mobility and economic security for themselves and their families. The pervasiveness of underemployment fuels downward mobility. People who are underemployed earn $10K less per year than folks who are appropriately employed. That's half a million dollars over the course of a 50-year career.

Unsurprisingly, there are significant differences by race. Relative to their white counterparts, Black college grads are more likely to be "overeducated" and much less likely to transition into matched jobs. The uneven distribution of underemployment helps explain how college fails to close the income gap or secure Black and Hispanic wealth.

Just as significant is the emotional toll of underemployment. First-gen grads can be incredibly isolated from peers after graduation, and endless job hunting leaves many feeling demoralized and broken. Every year, millions of young people enroll, persist and graduate from college believing in the promise of higher education: that a college degree is a ticket—if not the ticket—to a good job and a meaningful career. Underemployment is leading more and more students to question if colleges can deliver on that promise.

SHRM Online: Are some college degrees more susceptible than others to underemployment?

Leifer: There are certainly in-demand bachelor's degrees—especially in STEM fields—that more effectively inoculate against underemployment. But given the very high stakes, there are surprisingly few majors that offer the level of protection most Americans might expect. We often look at median earnings to understand how a group of graduates are doing: half earn more, half earn less. To understand what it feels like to fall under that line, it's instructive to look at the 25th percentile—the average of the bottom half. And here we see that there are virtually no majors where the 25th percentile is doing well enough to live, let alone justify their investment or honor their sacrifice. That's part of why almost a quarter of college grads nationwide earns less than the average high school graduate. First-generation and low-income college grads—those with the most at stake—are also most likely to fall below the median, and frequently far below.

SHRM Online: So how can underemployment be reduced?

Leifer: Policy changes and intentional social-capital-building innovations will be key to meaningfully reduce underemployment and fuel upward mobility. Moves to raise wages, energize unions, remove degree requirements, and provide benefits to hourly and contract workers, as well as the push to lower student debt and raise Pell grants, are all substantial policy initiatives that are moving the needle for workers.

Revitalizing the promise of higher education will also require policy changes that make colleges accountable for student outcomes, especially employment and earnings. We know that many underemployed grads have the skills and drive to succeed, but they don't have someone to pull them into a meaningful career. Even in the digital economy, a bachelor's degree is not enough. We need social capital—connections, casual favors, timely referrals—as much as we need skills. Informal relationships dominate our labor market. At least a third of U.S. workers secured their current job through a referral, and some put that figure as high as 70-85 percent. According to LinkedIn, job applicants with an employee referral are nine times more likely to be hired.

To overcome underemployment, we need to emphatically and intentionally facilitate peer connections. Colleges should weave social-capital programs throughout the educational experience. By connecting peers with one another and with near-peer alumni, all grads—but especially first-gen college grads—will have the skills and network to access good jobs.