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My Two Cents

Short sighted management?

Chris Farrell Jun 10, 2009

Here is my puzzlement. First, we live in an era when everyone from the President to the head of the local Chamber of Commerce realizes that human capital is the most valuable resource. It’s knowledge, skill, hustle, risk-taking that create value in a competitive marketplace. The future belongs to brains, not brawn. There’s nothing conroversial in this insight.

Second, from Warren Buffett to David Swensen good investors pick up valuable assets on the cheap during bad times so that they can pocket outsized profits when the good times roll.

So, wouldn’t you think that companies would be loading up on newly minted college grads that can be had for cheap, as well as out of work engineers, high-tech workers, etc? Apparently not, according to the Economic Policy Institute.

The latest unemployment data for young college graduates–workers with a bachelor’s degree or higher who are under 27 years old–show that 2009 is the second worst year on record at 5.9%, barely behind 1983’s 6.2%. Workers with higher education are generally better insulated from downturns in the labor market and the economy than those without a college education. Historically, they have lower unemployment rates than the total population. However, the unemployment rate among college graduates aged 23-27 has jumped up significantly during this recession. Layoffs and hiring freezes continue as employers try to weather the recession and entry-level openings are hard to find.

Of course, college grads are doing better in the job market than those with less education. The rewards to education remain high. Nevertheless, it seems that an investment opportunity is being lost by companies.

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