Class of 2023 rejoice: Companies are ramping up hiring of new college grads as experienced workers are harder to find amid the labor shortage
- The labor market is still tight, but employers are ready to hire from the pool of new college graduates.
- One survey of employers found that they plan to hire 14.7% more '23 graduates than the preceding class.
If you're graduating college in 2023, companies have something they'd like to give you: A job.
Soon-to-be graduates can thank persistent labor shortages for employers' willingness to snap them up, along with the fact that they cost less than wooing someone from a different 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," Jennifer Chang, a Society for Human Resource Management certified professional, told Insider in a statement. "Employers are struggling to fill positions since the labor pool is low, which means there's less competition for the Class of 2023 when it comes to being selected for a position."
Firms are eager to hire 2023 graduates, according to a recent survey with 246 responding companies from August 3 to September 16 from the National Association of Colleges and Employers (NACE).
NACE found that respondents plan to hire 14.7% more 2023 graduates compared to the class of 2022. Nearly half of employers surveyed think that the class of 2023 is entering a very good to excellent job market.
That's a stark contrast to their peers just a few years older. The pandemic plunged the class of 2020 into labor market chaos. When 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 to 2020 and 2021 graduates emerging into a shaky labor market now spell good news for the class of 2023. The fallout from pandemic working conditions led to the Great Resignation, which, in turn, led a lot of employers towards the newest crop of workers in an attempt to plug their labor holes.
"Employers had a decrease in the number of actual hires for the class of 2020," Shawn VanDerziel, executive director at NACE, told Insider. "So when it came to the next two classes of '21 and the class of 2022, they're really recalibrating back to their earlier numbers pre-covid. And so now, we're seeing additional increases to where we were pre-covid."
And, based on the results from NACE, VanDerziel said roughly "50% plan to increase their hires, while 43.6% plan to maintain the number of hires from last year."
"Right now, employers are really concerned about the future of their workforce, especially considering the historic number of job openings and the continued employee turnover and movement of employees as well as low unemployment," VanDerziel said. "And so employers see new college graduates as a way to gain a competitive edge."
All of that bodes well for the class of 2023, who might not have to contend with the same concerns that other recent graduates encountered. A hiring boom might seem contradictory to fears of a downturn. But the pandemic's effects on the labor market are far-reaching, and new graduates are getting their day in the sun.
Companies still need more workers
The post-vaccine labor market has been shaped by a lack of workers. For over a year, companies have been scrambling to hire and retain employees. In September, even with recession fears looming and inflation still high, another 4.1 million workers quit their jobs. Job openings ticked back up.
"A lot of economists were a little surprised by how strong the labor market is," Evan Riehl, an assistant professor in economics at Cornell University's School of Industrial and Labor Relations, told Insider. "The pandemic revealed the value that people would get out of remote work, and as a result they may be pickier choosing jobs."
That's good news for workers, especially recent college graduates. Firms who are desperate to hire — and don't want to have to go pluck someone else out from the Great Resignation when a more experienced worker quits — might gravitate toward a fresh crop of workers entering the labor force.
With a large number of Americans retiring and shifting roles, VanDerziel said, "employers really are seeing these recent college graduates as being this new pool of talent that they can actually pull from in a time in which they are really scrambling to find the talent they need to fill in their companies."
This could be good news for companies dealing with high turnover, since it takes time and money to train new hires. According to the Society for Human Resource Management, it 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.
"Typically, the average cost per hire does differ based on years of experience," Chang said. "For instance, in many cases it costs less to hire a recent college graduate compared to a mid-career or senior-level professional."
Chang added that salary contributes to this, adding that "the more experience required for a position, the higher the salary tends to be."
But as employers deal with issues finding and retaining talent, graduates may have bargaining power to negotiate good starting pay.
"Many employers are offering higher pay to incentivize and attract candidates, so individuals just entering the workforce may be able to jump-start their career with a higher base salary," Chang said.
Of course, there's still competition for many roles, but the lasting effect of labor shortages has some companies eyeing new graduates even more.
Jacqui Barrett, an economist and data scientist who works with Handshake, a hiring platform catered towards college students, said that some industries, like media, marketing, and tech, are seeing more competition among new graduates for fewer postings. At the same time, some particularly Great Resignation-stricken industries are growing less competitive — food and beverage jobs, for instance, have a lot of postings.
Another plus: Recent graduates are more mobile than older workers. They're less likely to be attached to a particular city or have families they need to stay at home with. Riehl said that that might mean it's easier for a firm to attract a younger worker, because they can search more widely.
That might not be good news for everyone else
Even while the number of Americans quitting remains high, the economy is cooling, and layoffs have begun. While they're not widespread, they are disproportionately concentrated among one group — millennials.
Workforce data provider Revelio Labs analyzed the demographics of layoffs, looking at 17,000 workers who had been cut, as Insider's Aki Ito reported. They found that the highest earners and new hires were generally on the chopping block. But layoffs were particularly concentrated among millennials, especially in the 30 to 34-year-old range. Previously, millennials had finally turned their economic luck around by dominating the Great Resignation, and finally healing the scars of the Great Recession. The latest downturn already imperiled that — and may position fresh graduates to be seen as a solution for the newly missing workers.
To be sure, it still may be tough for recent graduates to find work. According to an analysis from The Federal Reserve Bank of New York, month after recent month, the unemployment rate for recent graduates has been higher than the rate for all workers. In September 2022, for instance, the recent graduates unemployment rate was 4.0%, higher than the all workers' rate of 3.4%.
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 young graduates is much more positive than a typical recession."
If there is a recession, it may not hit new graduates looking for their first jobs out of college too much. According to results from NACE, "20% of responding organizations are planning for a recession," per the press release. But it noted "only 6% expect to cut back on hiring new college graduates."
"Companies are really struggling to find those entry-level employees and those entry-level professionals, and so they're looking to this pool to fill those needs," VanDerziel said.
Are you a recent graduate or upcoming graduate struggling to find a job or just landed work and want to share your story? Reach out to these reporters at firstname.lastname@example.org and email@example.com.
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