Occupational marginalization, underemployment, and earnings inequality among college graduates

Abstract

A longstanding literature asserts that many bachelor’s graduates in the US are underemployed, working in jobs that do not require a degree, earning little more than high school graduates. Our analyses of American Community Survey data paint a different picture. The most common form of underemployment finds college graduates working alongside individuals who have attended college but who have not completed a baccalaureate, rather than working in occupations dominated by employees with high school diplomas or less. Underemployed college graduates retain an earnings advantage compared to their non-graduate occupational workmates. However, selection into underemployment reflects large inequalities along socio-demographic dimensions. We document that women, racial-ethnic minorities, and foreign-born individuals are much more likely to be underemployed, after controlling for their college majors, and less likely to be employed in the most sought-after graduate occupations. We describe this pattern as occupational marginalization: a sorting of graduates on social attributes into less lucrative jobs and show that this social segregation across occupations is substantial even among bachelor’s graduates after controlling for their college major. We consider these findings in the light of Human Capital Theory, Credentialism, and theories of Social Exclusion.