Education, the False God of Economic Recovery
Saturday, February 9, 2013 at 03:42PM No matter how much education your group has, or how little, your group's money income has been declining for 12 years, not just since the start of the Great Recession.
Yes, you need a good education to get a good job, but in the 21st Century you also need a good education to get a bad job. A recent study found that 46.3% of the projected beneficiaries of an increase in the Maryland minimum wage from $7.25 to $10.00 per hour have at least some college education. Yes, college educated people working for minimum wage, many of them full time. See the comments on Mark Thoma's post What's the Cost and Financial Value of College.
For plutocrats and employers, declining wages is a feature, not a bug. They want taxpayers to train their workers so they don't have to, and they want labor costs to keep going down. They are apparently not even embarrassed by this assault on American workers. Lumina Foundation and the Bill and Melinda Gates Foundation funded a study at Georgetown University's Center on Education and the Workforce d[link updated 19 February 2020] to calculate how many more college graduates the US would need to turn out in order to drive down the college-versus-high-school wage premium from 74% to 46%! That's the goal—reduce the value of a college education by churning out an even bigger glut of degree holders. Even the study's authors question whether it will be feasible to get more Americans to complete college when they have to pay/borrow more as the incremental value of the degree is declining.
So here's my modest proposal: Declare a moratorium on hand-wringing about how to improve our educational system and instead focus serious national attention on creating tens of millions of jobs. Then we'll have the money to pay for more education for more people and a rising financial incentive for people to pursue higher education.
Why have we had for 12 years a chronic shortage of jobs up and down the education scale? Recently there has been a spate of punditry to the effect that American workers are being displaced by robots (shorthand for all sorts of automation). Well of course they are, and have been since the beginning of the industrial revolution, but I'm willing to bet that in the last 12 years many more American workers have been displaced by ill-treated Chinese teenagers than by robots.
Hat tip to Anne for the link to Census data.
Skeptic
Nancy Folbre has a post on Economix that discusses much of this same subject matter and comes to similar conclusions:
As the economist Richard Freeman points out, developing countries have invested heavily — and successfully — in their higher education systems. In 2005 Chinese universities awarded five times as many bachelor’s degrees as they did in 1999.
This global expansion of the educated labor force is likely to put downward pressure on the college premium in the United States.
. . . .
Certainly students are now encouraged to think more strategically about their majors and to specialize in more technical fields. This is good financial advice, but it won’t guarantee success. Unlike financial capital, which can be easily moved from one investment to another, investment in human capital represents a sunk cost.
. . . .
The evolution of the global human capital market has momentous political implications. Like many Democrats, President Obama is bullish on human capital. He favors increased public investment in education, ranging from early childhood to post-secondary programs. The assertion that such spending will generate a high individual and social rate of return is based on the optimistic expectation that demand for better-educated workers will remain strong.
On the other hand, many critics of public-education subsidies are bearish on human capital. The economist Richard Vedder, for instance, warns against both private and public overinvestment in education, pointing to the growing tendency for college graduates to land in jobs that don’t actually require the credential they hold.
. . . .
Those who believe, as I do, that education has intrinsic value both to individuals and to society as a whole should reconsider their habit of relying on market-based private rate-of-return rhetoric.
Rather than bowing to market forces, an intelligent, well-educated citizenry would bend those forces toward better ends, including the best possible development of human capabilities.
Well, the last sentence is pretty subtle, but I think she is calling for policies that create domestic jobs and protect them from the worst possible outcomes of pure laissez faire global labor markets. Even if she isn't calling for that, I am.
Skeptic
It’s working. An excess of recent college grads is driving down their wages and forcing about half of them into jobs for which no college is required. https://www.bloomberg.com/news/articles/2020-02-14/in-hot-u-s-jobs-market-half-of-college-grads-are-missing-out
For the first time in decades, recent college graduates are more likely to be out of work than the population as a whole, according to the New York Federal Reserve. And for the lower-earning half of college grads, the wage premium is shrinking fast.
. . . .
But in recent years, while high-school graduates have seen a sharp pickup in earnings, the lower-earning half of college graduates haven’t -- and the gap between them is now the smallest in 15 years.
While a lot of low-wage jobs are being created, there are not enough good-wage jobs to absorb the bottom tier of college grads.
More than four in 10 recent graduates are working in jobs that don’t usually require a college degree, the New York Fed says. And roughly one in eight is working in a field where typical pay is around $25,000 a year or less.
The economy is creating a lot of jobs like that -- and it’s expected to create even more. In the occupations that are forecast to grow fastest over the next decade, according to the Bureau of Labor Statistics -- from home care to restaurant cooks -- typical salaries range from $24,000 to $26,500.
Reader Comments (1)
Good post Roger. I can't believe there hasn't been more attention to that Georgetown study.