College: important, but not magic bullet

Original Reporting | By Greg Marx |

Income inequality rising among college graduates

One explanation for this lackluster performance is that there is increasingly polarization not just between groups of workers, but within them. In other words, as the number of college graduates grows, there is greater variation in their experiences in the labor market.

Andrew Sum, director of the Center for Labor Market Studies at Northeastern University, has identified what he calls rising “malemployment” among the college-educated: essentially, degree-holders who are employed in jobs below their skill level, because the economy has not produced enough jobs in the “college labor market” — which Sum and his colleagues define as including “professional, technical, managerial, and high-level sales occupations” for which a degree is a necessary qualification. (Employers in other areas often prefer to hire college graduates when they are available, Sum said, but that does not make those jobs ones where employers treat having a college degree as a threshhold element of any application to be considered.) Turning a bachelor’s degree into a middle-class career, Sum has found, is almost entirely dependent on landing a job that is genuinely part of the college labor market. Graduates who manage that feat, on balance, are still doing fine; those who do not, earn scarcely more than a high school graduate while shouldering a rising debt burden.

“There are no safe haven positions, except for tenured faculty members and federal judges. Everybody else is at risk, or needs to be responsive to this change.” — Carl Van Horn

And at present, an alarming number are failing in the latter camp. In 2010, according to figures compiled by Sum and his colleagues from government data, only about six in 10 employed college graduates under age 25 — and about half of all graduates in that age group — were in the college labor market. (African-American and Latino graduates are faring especially poorly; for African-Americans, one reason may be steep cutbacks in state and local governments, where more than one-quarter of black college graduates are employed.) Older workers do better, but even there, about one-quarter of employed bachelor’s degree-holders from ages 30 to 54 were not in the college labor market last year, according to the researchers at Northeastern.

While the Great Recession bears much of the blame for the economic struggles reflected in these data, Sum said, it doesn’t tell the whole story: young college graduates never fully regained the ground they lost during the last recession, which began in 2001. (He and his colleagues do not have malemployment data prior to 2000.)

Like others who study the labor market, Sum believes universities and students can both do better in terms of identifying and preparing for job opportunities. But the more fundamental problem, in his account, is a simple shortage of jobs in the college labor market. “There’s nothing that guarantees that supply [of college graduates] creates its own demand,” Sum said. “You’ve got to have more demand growth.”

The analysis of the Northeastern University center is not universally accepted. And while official projections from the Bureau of Labor Statistics show that the greatest job growth over the next decade is likely to be in occupations that don’t require a degree, some other researchers expect the economy’s demand for college graduates to be strong.

But it would be hard to argue with the basic point that a college degree is a less certain (and far costlier) investment than it was a generation ago. “There are no safe haven positions, except for tenured faculty members and federal judges,” said Carl Van Horn, director of the Heldrich Center for Workforce Development at Rutgers University. “Everybody else is at risk, or needs to be responsive to this change.”


Is an innovation shortfall leading to a lack of jobs?

While the numbers indicate that college graduates are becoming more vulnerable — and so the “the education answer” is incomplete — those numbers can’t explain why that has happened, and what broad-based gains, if and when they return, will look like.

No consensus answer to that puzzle exists. One possibility is that changes in the structure of the economy have been so rapid that the demand for educated workers has steepened and sharpened — that, in effect, the advantages yielded by yesterday’s bachelor’s degree are today only derived from a master’s or Ph.D. In fact, advanced degree holders are the only class of workers who have seen consistent gains in real wages over the last decade (though there is increasing variation within that group, too).

Mike Mandel, an economist and blogger who is a senior fellow at the Progressive Policy Institute and Wharton’s Mack Center for Technological Innovation, has a different reply. In addition to technology and global trade, he points to another factor to explain sluggish wage growth: a shortfall in jobs-producing innovations.

“We need to get away from the claim that low wages are the result of insufficient human capital.” — Michael Lind

The process of job creation in an industrial economy, Mandel said, is “a war,” with technology playing a dual role: technology-driven productivity gains squeeze out workers in existing industries, while innovations create new industries that demand higher-level skills. Since the 1990s, Mandel said, America has placed a bet that this job growth would come from biotechnology, genomics, and other advances in health — the U.S. government spends more on research and development in health than any other developed country, despite spending less on R&D overall — but that bet has yet to pay off. The result, he said, has been “an inexorable process… of squeezing.”

Mandel has some ideas on how to spur along innovation, such as applying a light regulatory hand to young industries like biotech. (He also has ideas for reducing the cost of higher education, and is the founder of a company that produces news and education videos designed to be used in online courses.) But his message is essentially one of patience and persistence, until the bet pays off. “Give me one blockbuster product,” he says, “and I’ll give you a much different labor market” — one that will reward workers with everything from an associate’s degree to a Ph.D.


“What’s left out of this in the journalistic accounts is sheer, naked power”

There are other ways to think about the role of technological innovation, however. Michael Lind is policy director of the Economic Growth Program at the New America Foundation, a nonpartisan think tank. Lind sees productivity gains from technology, rather than rising education standards, as the key source of economic growth, and a shortfall in such productivity gains as one of the causes of stagnation in recent decades.

But it is a mistake, he said, to expect large numbers of jobs ever to be created in the biosciences — or, for that matter, in information technology, our last great innovation. Rather, as technology continues to drive down the cost of basic goods and money is freed up for use in other areas, people start shifting their spending to a range of public and private amenities — everything from better health care, or more expansive public services (from enhanced after-school programs to nicer parks) funded by taxes, to simple quality-of-life gains like eating out more often.

This is part of the reason why health care, education, and government are increasingly large parts of the American economy and labor market, Lind said. And as businesses learn to make better use of the Internet, and existing business sector jobs are eliminated by the resulting productivity gains, the shift toward those fields will only continue, accompanied by growth in “high-touch” areas — he pointed to the latest BLS projections, which forecast the biggest gains in jobs like home health aide and carpenter — that are resistant to automation or outsourcing. 

Some of these jobs will require substantial higher education; many others will not. But Lind is not troubled by that prospect — because he believes many factors beyond education shape an individual’s earning potential.

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