New college graduates take advantage of labor shortages

  • The labor market is still tight, but employers are ready to hire from the pool of recent college graduates.
  • A survey of employers found they plan to hire 14.7% more 23-year-old graduates than the previous class.
  • Roles in industries that were hit hard by the Great Resignation are also easier to obtain.

If you graduate from college in 2023, companies have something they’d like to offer you: a job.

Future graduates can thank persistent labor shortages for the willingness of employers to recruit them, as well as the fact that they cost less than courting someone from another company.

“The ongoing labor shortage may prove to be an advantage for the Class of 2023 and those entering the workforce for the first time,” said Society for Human Resource Certified Professional Jennifer Chang. Management and knowledge advisor at the Society for Human Resource Management, Insider said in a statement. “Employers are struggling to fill vacancies because the labor pool is weak, which means there is less competition for the Class of 2023 when it comes to being selected for a job. job.”

Companies are eager to hire 2,023 graduates, according to a recent survey of 246 responding companies from Aug. 3 to Sept. 16 from the National Association of Colleges and Employers (NACE).

NACE found that respondents plan to hire 14.7% more graduates of 2023 than the Class of 2022. Nearly half of surveyed employers believe the Class of 2023 is entering a very good job market to great.

This is a stark contrast to their peers a few years older. The pandemic has thrown the Class of 2020 into labor market chaos. When the coronavirus hit, Gen Z workers were disproportionately laid off, with one in four young workers losing their jobs.

But, paradoxically, the same conditions that led 2020 and 2021 graduates to emerge in an unstable job market are now good news for the class of 2023. The fallout from pandemic working conditions led to the Great Resignation, which , in turn, has many employers moving towards the new generation of workers in an effort to fill their workforce gaps.

“Employers have seen a decrease in actual hires for the Class of 2020,” NACE executive director Shawn VanDerziel told Insider. “So in terms of the next two classes of 21 and the class of 2022, they’re really recalibrating their prior pre-covid numbers. And so now we’re seeing further increases from where we were pre- Covid.”

And, based on the NACE results, VanDerziel said about “50% plan to increase their hires, while 43.6% plan to maintain the number of hires from last year.”

“Employers right now are really concerned about the future of their workforce, especially given the historical number of job postings and the continued turnover and movement of employees as well as the low unemployment,” VanDerziel said. “And so employers see new college graduates as a way to gain a competitive edge.”

All of this bodes well for the Class of 2023, who may not have to deal with the same concerns that other recent graduates have encountered. A hiring boom may seem at odds with fears of a slowdown. But the effects of the pandemic on the labor market are considerable and new graduates are spending their day in the sun.

Companies still need more workers

The post-vaccine job market has been shaped by a lack of workers. For more than a year, companies have been scrambling to hire and retain employees. In September, even with recession fears looming and inflation still high, an additional 4.1 million workers left their jobs. Job offers have picked up again.

“Many economists have been a little surprised by the strength of the labor market,” Evan Riehl, assistant professor of economics at Cornell University’s School of Industrial and Labor Relations, told Insider. “The pandemic has revealed the value people would derive from working remotely and as a result they may be more difficult to choose jobs.”

This is good news for workers, especially recent university graduates. Companies that are desperate to hire — and don’t want to have to pull someone else out of the Great Resignation when a more experienced worker quits — could gravitate toward a new generation of workers entering the workforce.

With large numbers of Americans retiring and changing roles, VanDerziel said, “employers really see these recent college graduates as this new pool of talent that they can really tap into in a time when they’re really scrambling to find the talent they need to fill their businesses.

This could be good news for companies facing high turnover, as it takes time and money to train new hires. According to the Society for Human Resource Management, this costs an average of $4,700 per hire. However, it can potentially cost less to hire a recent graduate than a worker with years of experience.

“Generally, the average cost per hire differs based on years of experience,” Chang said. “For example, in many cases, it costs less to hire a recent college graduate compared to a mid-career or higher-level professional.”

Chang added that salary contributes to this, adding that “the more experience a position requires, the higher the salary tends to be.”

But as employers face challenges finding and retaining talent, graduates may have the bargaining power to negotiate a good starting salary.

“Many employers offer higher salaries to incentivize and attract applicants, so people entering the workforce may be able to start their careers with a higher base salary,” Chang said.

Of course, there is always competition for many roles, but the lasting effect of labor shortages is causing some companies to be even more interested in new graduates.

Jacqui Barrett, an economist and data scientist who works with Handshake, a recruitment platform for students, said some industries, like media, marketing and technology, are seeing more competition among new graduates for fewer positions. At the same time, some industries particularly hit by the big quit are becoming less competitive – food and drink jobs, for example, have a lot of positions.

Another advantage: young graduates are more mobile than older workers. They are less likely to be attached to a particular city or have families to stay home with. Riehl said that could mean it’s easier for a company to attract a younger worker because they can search more broadly.

This may not be good news for everyone

Even though the number of Americans quitting remains high, the economy is cooling and layoffs have begun. Although not widespread, they are disproportionately concentrated in one group: millennials.

Labor data provider Revelio Labs analyzed layoff demographics, looking at 17,000 workers who had been laid off, as reported by Insider’s Aki Ito. They found that the highest earners and new hires were usually on the chopping block. But the layoffs were particularly concentrated among millennials, especially in the 30-34 age bracket. Previously, millennials had finally turned their economic fortunes by dominating the Great Resignation and finally healing the scars of the Great Recession. The latest downturn has already put that in jeopardy — and could position new graduates as a solution for newly missing workers.

Admittedly, it can still be difficult for new graduates to find work. According to an analysis by the Federal Reserve Bank of New York, month after month the unemployment rate for recent graduates has been higher than for all workers. In September 2022, for example, the unemployment rate for recent graduates was 4.0%, higher than the rate of 3.4% for all workers.

But even so, “this recession – if you can call it that – is not comparable to previous recessions,” Riehl said. “As a result, the outlook for recent graduates is much more positive than a typical recession.”

If there’s a recession, it might not hit new grads too hard looking for their first job after college. According to the NACE results, “20% of organizations surveyed predict a recession,” according to the press release. But he noted that “only 6% expect to reduce the hiring of new college graduates.”

“Companies are really struggling to find these entry-level employees and entry-level professionals, and so they’re looking to this pool to fill those needs,” VanDerziel said.

Are you a recent graduate or future graduate who is struggling to find a job or has just landed a job and want to share your story? Contact these journalists at jkaplan@insider.com and mhoff@insider.com.

November 9, 2022: This story has been updated to clarify Jennifer Chang’s title as Knowledge Advisor at the Society for Human Resource Management.

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