NICKOLE Gambrill is still paying the price for graduating college at the wrong time. She and other students who earned diplomas in the aftermath of the deepest US recession since the 1930s are experiencing an earnings hangover that could last a lifetime, even as the labour market heals.
Ms Gambrill accepted the first paralegal job she could get after finishing classes at Towson University in Maryland in December 2010, when the unemployment rate was 9.4 per cent.
"I've been here for three years, but I still consider myself entry-level," said the 27-year-old from Baltimore, who makes about US$44,000 annually. "Your raises and income are based off of your original salary. If it were a better economy, I would have started off at a higher salary."
Students entering the job market in 2010 and 2011 took a 19 per cent pay cut from what they could have expected without a recession, according to economists at Yale University in New Haven, Connecticut - about double the penalty in prior downturns.
Many of the estimated 3.37 million graduates earning baccalaureate degrees in those two years accepted positions they were overqualified for out of desperation.
Those entering the workforce in the shadow of the recession were 2.2 per cent of an approximately 154 million-member labour force competing for fewer jobs and now may have eroded skills and sparse resumes.
As the labour market improves, new graduates may outshine them. "If you come out now, it really is a much better world, you'll have much better success," said Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce in Washington, who said those who got diplomas closer to the recession will experience lasting disadvantages.
"The employer looks at the one who just graduated and the one that's five steps back, and they think the new one is better."
Recent college graduates "were and continue to be hit hard", during and after the recession, two researchers for the Federal Reserve Bank of San Francisco wrote in a study dated July 21. They experienced low wage growth across almost all occupations compared with other full-time workers.
While the pattern is consistent with the period after the 2001 slump, "earnings growth following the most recent recession has been held down longer than in the past, which reflects the depth and severity of the recession", they said.
That reality is haunting a segment of millennials, the 82 million people born between 1981 and about 2000.
Full-time 25- to 34-year-old workers saw income erode to a median of US$38,000 in 2012 from US$38,760 in 2007, based on National Center for Education Statistics data. Salaries for bachelor's degree-or-higher grads fell to US$49,950 from US$52,990 in 2007.
Many of these recession grads are stuck - either unemployed, working part-time or in jobs that don't require the education they have - and lack skills or opportunities to switch to higher-earning positions or bargain for more pay.
Joblessness for 25- to 34-year-olds is down from 10.6 per cent in October 2009. Yet at 6.5 per cent in June, it's still higher than total unemployment, which fell to a six-year low of 6.1 per cent, and the age group's 4.9 per cent level when the 18-month recession started in December 2007.
Pay penalties from entering a difficult labour market are long-lasting, research from prior contractions shows. Earnings shortfalls have persisted for 15 years, University of Maryland at College Park researcher Shu Lin Wee reported in a paper last December. That's because early years are critical to lifetime income growth, with half of gains between 18 and 46 occurring by age 30 as workers switch jobs and climb corporate career ladders.
The effects of graduating during a stockmarket shock for Stanford Business School graduates have lasted about 20 years, Paul Oyer, an economist at the California university, reported in a 2008 paper. For the 2007-2009 recession, "the hit will be significant on average", he said.
"The evidence indicates long-term scarring, not just short-term effects that go away as soon as the recession ends," said Jesse Rothstein, a former Labor Department chief economist now at the University of California at Berkeley.
Ben Henderson has experienced the cost firsthand. After graduating from Winthrop University in Rock Hill, South Carolina, with a bachelor's degree in business in May 2009, he searched for months, only to land work as a substitute teacher paying US$9.53 an hour with no benefits near Tampa, Florida. Five years later, after moving from one part-time job to another while also pursuing coaching positions, Mr Henderson, 27, earns US$11.81 an hour as an assistant testing coordinator for an area high school.
His checkered work history is a barrier from better-paying work. "The running joke is they won't hire you if you don't have experience, and you can't get experience if they won't hire you," he said. "Obviously, this is not the plan you made."
Ms Gambrill, though she has found steady work, has reached a similar conclusion: "People want you to have a certain amount of education, a certain amount of experience, but you really aren't paid what you're worth." What's more, "once you have experience in a certain industry, it's really hard to change your career".
Tough economics has caused young people to delay big purchases. Just 36.2 per cent of households under age 35 owned a home in the first quarter, down from 41.3 per cent in Q1 2008, Census data shows.
Graduates who start on the wrong foot have fewer "training and promotion opportunities, resulting in a lasting disadvantage", said Joseph Altonji, who co-wrote the Yale paper. Those who are unemployed or take jobs that don't match their education can suffer skills depreciation, he added.
In 2012, about 44 per cent of recent grads worked in roles that don't usually require a bachelor's degree, up 10 percentage points from 2001, Federal Reserve Bank of New York researchers reported in January. They warned that such underemployment may cause "permanent negative effects on wages".
Some graduates fare especially badly. Over 60% of liberal arts and communications majors were unemployed or underemployed in 2009-2011; by contrast, 75% of engineering, education and healthcare students held jobs matching their skills. Just 33 per cent of leisure and hospitality graduates found work requiring their degree in that period - the least of any group in the New York Fed report.
Compounding the situation is the level of student debt. College loans "combined with underemployment and high unemployment among today's graduates is a fairly toxic combination", she said.
Dana Katz, 27, is watching peers from Pennsylvania State University's School of Hospitality Management in State College pay the price for graduating with the Class of 2009. "I have a lot of friends, countless kids whom I graduated with, who should have been put into a better place out of school because they were really promising, but there was nothing available," said Ms Katz, who works at Kimpton Hotels in Washington as an assistant director of finance. "Kids got put into a bad place to start, and it's been reflected in their career path."
Job-market healing is under way, so the Class of 2014 may fare better than their predecessors. Today's graduates "are entering into a stronger labour market, full stop", said Heidi Shierholz, an economist at the Economic Policy Institute in Washington.
Opportunities look brighter for Abigail Estevez, 22, and her classmates. She graduated from Penn State in December 2013 and landed a spot in the management- training program at the Waldorf Astoria in New York, turning down other offers. Many of her friends are in similar jobs.
"Right now, the market is fairly strong," she said. "I definitely think I'm in a good place." Bloomberg