“Necessity is the mother of invention,” Plato allegedly said. The “necessity” of changing economic circumstances will, in my opinion, force universities and policy makers to reconsider the way we certify that people have achieved any given level of competence and skill. One “necessity” that colleges will soon have to face is that the economic advantages conferred by their bachelor’s degrees are starting to erode.
Take employment security. In 1970, in the era before Pell Grants, large scale federal student loans or the idea that “everyone should have some post-secondary education” was fashionable, the unemployment rate among four year college graduates was only about one-fourth that of the general population. If you were a college graduate, you had relatively few worries about not obtaining or losing a job — the unemployment rate was a paltry 1.3 percent.
Fast forward four decades to today. In April 2010, the Bureau of Labor Statistics tells us that the unemployment rate for individuals with at least a bachelor’s degree was 4.9 percent –about one-half the overall unemployment rate. About one-third the job security advantage, as measured by unemployment rates, of going to college has been wiped out. And this is not an artifact of the current weak state of the economy. In the 1982-93 downturn, when overall unemployment rates were actually slightly higher than today, the college unemployment rate was sharply lower (well under four percent).
This should not be surprising. Suppose we had a world where every adult had a bachelor’s degree or more. The unemployment rate among college graduates would, by definition, equal that of the general population. Rising college attainment mathematically almost assures that the college graduation job security advantage will diminish if not disappear. This leads to still more credential inflation as individuals seek to demonstrate their distinctive qualities: will garbage workers in 2050 need a Ph.D. in sanitary engineering to get a job?
The standard argument is that “college graduates are more productive persons, and the income differential associated with four year degrees has risen over time.” That argument’s validity is increasingly questionable, again I think a consequence of college degrees losing their distinctiveness. Historically a bachelor’s degree was a measure of extraordinary or at least above average career potential. That view may be undergoing revision. For example, the mean annual pay of females with bachelor degrees was 79.4 percent higher than their high school graduate counterparts in 2000, but that differential actually declined, albeit modestly, to 76.7 percent, by 2008. At the same time the cost of college education was rising in real terms and as a percent of family incomes, the financial advantages for women associated with a degree were stagnant, implying a falling rate of return on investing in a bachelor’s degree.
We are engaging in massive credential inflation. Whereas in 1940 it was perfectly respectable for persons with less than a high school education to deliver the mail and unknown for college graduates to do the same, by 2010 almost all mail carriers had a least a high school education and probably close to one in five has a four year degree (we are awaiting the 2010 Census data for the exact figure). Moreover, as more go to college, standards inevitably suffer, as the results of the National Literacy Survey conducted roughly decennially indicate.
We are spending ever larger amounts of money as a nation trying to demonstrate that we are good, bright, disciplined, and hard working — qualities traditionally associated with college graduation. The costs are becoming so large that entrepreneurs and others may look for alternative ways of certifying competence and skills. Some possibilities include:
· Making more use of non-college testing of skills, perhaps including standardized exams akin to those used to confer the Certified Public Accountant designation;
· More use of formal short training programs run by private firms or employers that certify competence in specific areas of expertise — trade schools if you will;
· The use of a national examination similar to a governmental civil service examination to measure general intellectual abilities and knowledge;
· Increased use of college-level courses for able high school students, perhaps eliminating the senior year in high school completely for the most qualified, trying to make the college degree cheaper;
· The reduction in the bachelor’s degree to three years similar to European countries (although Europeans probably have better pre-college training than Americans).
These ideas all have their problems. For example, the use of employer testing, which I find a highly efficient of screening workers for competence, potentially dramatically lowering the cost to society of skill certification, was severely circumscribed by the Griggs v. Duke Power (1971) Supreme Court decision and subsequent legislation. Perhaps it is time to revisit legislation in that area. Yet doing so would reopen old wounds relating to civil rights, governmental intrusion into hiring decisions, etc.
But let’s face it. Our population is aging, and given our highly inefficient third party payment method of financing health care, those costs are soaring, crowding out public spending on higher education. Our nation is deeply in debt, with investors openly wondering if the sovereign debt of the U.S. government may ultimately be downgraded as to credit quality. The costs of certifying competency of young Americans are rising too fast for too many people for too long of a time period. In this type of environment, innovations designed to lower college costs or define alternative ways of certifying skills are increasingly needed and economically nearly an imperative.
22 Responses to The Diminishing Economic Advantage of a College Degree
garden - June 2, 2010 at 11:50 am
In the article you state:”Whereas in 1940 it was perfectly respectable for persons with less than a high school education to deliver the mail and unknown for college graduates to do the same, by 2010 almost all mail carriers had a least a high school education and probably close to one in five has a four year degree (we are awaiting the 2010 Census data for the exact figure).”It is not clear what dataset you intent to use but I wanted to clarify that the Census 2010 was short form only and did not collect occupation and educational information. The long form questions, which include occupation and educational attainment, are being collected yearly (starting in 2005) by the American Community Survey (ACS). You can access ACS data through the Census Bureau’s online data access tool, American FactFinder, at http://www.factfinder.census.gov
rbutler99 - June 7, 2010 at 7:03 am
“Credential inflation”, as used in your article, assumes that college education is primarily for career — hence a mailman or sanitation worker who engaged in a college education, and received a degree, is a sign of societal failure. This seems an increasingly common view, related to “framing” the issue, one that ought not to be unquestioned.
ronwf - June 7, 2010 at 4:26 pm
Perhaps the reason that unemployment is higher for holders of bachelor’s degrees is that there are more of them that are unemployable. Consider the difference between your baseline of 1970 and today with regards to what kind of majors people get degrees in.Recently there was an article about a young woman who had a B.A., was employed at about $23,000/year and had about $100,000 in college-related debt. It was given as proof that the value of a college degree was not what it had been represented to her and her family when she was a high school senior.It isn’t until 8 or 9 paragraphs into the story that we find that her degree was in interdisciplinary studies in religion and women’s studies.”The costs are becoming so large that entrepreneurs and others may look for alternative ways of certifying competence and skills.”What competence and skill does that young woman have that an employer would want to hire? Sure, you can say that she’s shown an ability to master a particular field, but if I’m employing someone I’d just as soon have someone who has that skill and additionally has mastered a field that’s relevant to what my business requires.Why ever would that young woman have thought that getting such a degree would prepare her for employment in a field in which she could reasonably expect to earn a salary that would enable her to pay off those loans?My point, then, is that over the last 40 years there has been an explosion of degrees given in fields of study that have little applicability to the real world (not to mention little rigor). Not to mention those that stand out like a red flag and tell an employer “this one could be trouble”. Universities are not, in fact, trade schools. But their graduates need to be able to earn a living once they graduate. If both the schools and the students ignore that fact, as they have increasingly done in the last 40 years, then this kind of thing will simply continue.
arrive2__net - June 7, 2010 at 8:38 pm
Although there are gradations and variations in ability among college grads, in general they have demonstrated the ability to maintain a log term effort toward a major goal; have the intellectual development to understand the complex context of modern work and life; are able to read and understand complex ideas; can take relatively abstract directions and work to develop a product in relative autonomy; etc. These abilities are good matches for jobs that require complex judgment and adaptability, which I think the economy will require more of in the future. College grads also usually have gained confidence, and pride in their achievement, which I think also serves employers well. I think these types of traits will continue to be in demand, and that college grads, in general, bring more to the table than just “certifiable skills”. Bernard SchusterArrive2.net
tsb2010 - June 8, 2010 at 9:30 am
Could not agree more with ronwf. Having a degree in “interdisciplinary studies in religion and women’s studies” seems at best ridiculous, at worst a sham on part of the college she went to. Yes, you can be interested in these issues, but why short-circuit your career (and waste your money) by officially studying them as a 4-year bachelor? It seems irresponsible on the side of the faculty and the administration of colleges in general to offer hundreds of degree options that, while “trendy”, do not offer any real-life advantage outside of a few non-profits…
jffoster - June 8, 2010 at 9:57 am
Concur I do in general with 4 and in particular with No’s 5 and 3. Most “interdisciplinary” majors for undergraduates and most ___Studies, while they may attract intelligent and interested students, are havens for the intellectually undisciplined &/or incompetent and traps for the unwary.
ronwf - June 8, 2010 at 11:12 am
arrive_2net says:”in general they have demonstrated the ability to maintain a log term effort toward a major goal; have the intellectual development to understand the complex context of modern work and life; are able to read and understand complex ideas; can take relatively abstract directions and work to develop a product in relative autonomy; etc.”That may be your impression. But what makes someone employable is a) the skills they have acquired and b) any prospective employers’ impression. There are few employers who have the impression that someone with a batchelor’s degree in “interdisciplinary studies in religion and women’s studies” will have those qualities you cite.I have just attended the graduation party of a niece. She got a degree in English from the University of Illinois. She is now working at an American office of a large Asian shipping firm, dealing with customers. She had to read, analyze and intelligently discuss and write about numerous classics of the English language. The body of work and the curriculum to study it are both well established and respected. It’s reasonable to expect that she’ll be able to figure out complicated documentation and communicate well with customers.On the other hand, a curriculum and body of work for “interdisciplinary studies in religion and women’s studies” is almost by definition not well established and outside of a few isolated academic circles is certainly not well respected. Employers are not going to presume that she can communicate well outside the academic environment.”These abilities are good matches for jobs that require complex judgment and adaptability, which I think the economy will require more of in the future.”If the employer thinks the application actually has those abilities, yes. But in this case, and many others, such as ” Studies”, few employers will think so. Good luck getting a job. And frankly, they sound like someone who might be predisposed to file an EEOC lawsuit if they find something offensive. It’s a lot less risky for an employer to hire an English or marketing or business major. They understand what those majors mean and what they’re likely to get.
ronwf - June 8, 2010 at 11:13 am
Last paragraph, I should have used square brackets instead of angle ones, so that “Studies” becomes “[Ethnic/Racial] Studies]”.
anonscribe - June 8, 2010 at 2:08 pm
like swiss cheese, this article. what more do you expect from a member of the American Enterprise Institute? ad hominem arguments aside, college is still the best economic choice, regardless of major, for anyone who can do it affordably. this won’t change in our lifetimes. all that might change is the percentage of college graduates taking a 1-2 year master’s to increase marketability (which raises a concern about the unemployment stats Vedder brings up: what is the unemployment rate of master’s holders, are they included in the bachelor’s rate, and how has the percentage of master’s holders changed over time?). who cares if 1/5 of mail carriers have college degrees? 1/2 the players in the NBA have college degrees. is this a tragedy? where i live, being a mail carrier is a good job. you make a middle-class salary (about 45-50K), spend most of your time without a boss breathing down your neck, get plenty of exercise, and work from 4a.m. to the early afternoon. i’d rather do that than work in an office or sell insurance. could it be that college grads are CHOOSING this job over other, more “fitting” jobs because of the benefits? in other words, the stat doesn’t indicate that too many people are going to college; it simply indicates that union jobs are desirable and that college grads are competitive for them. the real tragedy is that too many private firms reimburse so many of their employees so poorly, providing no job security, few benefits, and few opportunities.
vincent878 - June 9, 2010 at 11:14 am
“More use of formal short training programs run by private firms or employers that certify competence in specific areas of expertise — trade schools if you will.”Vedder heads in the right direction with this prescription but (for whatever reason) doesn’t mention the apprenticeship system. The most successful large-scale programs are jointly administered by unions and employers. College degrees aren’t necessarily antithetical but highly technical (and expensive) vocational education isn’t dependent on universities or community colleges for delivery, either. Apprenticeship still demands rigorous preparation at the HS level. College is not the only option.
mbelvadi - June 10, 2010 at 6:53 am
Two factors are missing from the original article, and so far I’ve seen other commenters just touch on one of them. The first is that the “democratization” of the bachelor’s degree has brought in far more students who wouldn’t have been qualified in 1970, and colleges have dropped their standards to accommodate them. This is in part a statistical artifact, which we’ve also seen with things like SAT scores – when you push hard for lower quality students to take the test, don’t be surprised when the average test score drops. The part that isn’t artifact is where such students are succeeding in graduating – that’s a discussion for another day, but just look at the extremely long forum threads on this site where faculty trade horror stories about incredibly stupid students they have to deal with.I suspect that if you look at the portion of today’s graduates who also would have been the ones going to college in 1970, their unemployment rate is similar to what it was then (give or take a major recession, which shouldn’t be dismissed as quickly as the author does – this recession is far worse than 1983-1984).The second missing factor is that globalization combined with lax enforcement of the labor law and resulting widespread abuse of the “H” work visa programs means that today’s US college grads find themselves in deep competition in their own country with millions of college graduates from around the world. Just as with farm workers, this inevitably will depress wages and cause higher “native” unemployment – in fact, many would argue that those programs are designed to have that effect.
pnedry - June 10, 2010 at 7:04 am
If you think a bachelor’s degree in interdisciplinary studies in religion and women’s studies is a hard sell in the marketplace, try a master’s degree in interdisciplinary studies (after a bachelor’s degree in communications)! My daughter did that to salavage some credits from a failed effort at law school (having more children, employment, other responsibilities). It was an eight-month slog to find employment–and if one did get an interview, much of it was spent convincing potential employers of just what she might bring to the employment party. Those kinds of degrees are better achieved AFTER one is employed.
d_and_der - June 10, 2010 at 8:21 am
Excellent article. “have the intellectual development to understand the complex context of modern work and life” HA! Both the newly admitted and the recently graduated are so lacking in the aforementioned quote that I no longer hire them to babysit my dog let alone hold a real job. Further, I recently fired my graduate assistant. She was a moran. I told the Dean not to send me any more student assistants period.It is no wonder employers are looking for alternatives to college graduates. The blame rests with administration admitting students who do not meet the admissions requirements of the 70′s.And college costs too much. Where does all of the money go?
greendolphin - June 10, 2010 at 8:37 am
To Garden (1): Even if the author doesn’t have the statistics, we know anecdotally that college degrees or some kind of higher certification are now required for more occupations than in times past.To Ronwf (3): The difficulty in expecting a college degree to certify competence and skill relevant to specific employment is that specific job demands are now so extremely varied. One might expect that a degree in business, finance, accounting, marketing, or economics would be adequate preparation for employment in any business-related field, but as the number of graduates with those types of degrees increases, there is likely to be a corresponding increase in the specificity of employer’s requirements; the same would be true in scientific and technical fields. So how would an incoming college student know which specific field to choose in order to ensure employment four years down the road?As for the degree in interdisciplinary studies in religion and women’s studies, it is likely to have tremendous applicability to the “real world” in an age where the role of women in global societies is still evolving and where religion is a driving force behind many global conflicts. The problem is, who is hiring people with the knowledge to tackle these problems? Probably only governments and non-profit think tanks, and their funds for such endeavors are shrinking.
jovanevery - June 10, 2010 at 8:42 am
Excellent points and ones I have been arguing for a while. I think maybe all those stats on the average life time earnings of people with degrees that are routinely trotted out for potential graduates should come with the same kind of warning as those we put on reports of stock performance: historic trends are no guarantee of future performance.In addition to credential inflation and its relationship to employers needs to screen potential employees, I think there is also an effect from a view of social mobility that sees education as a key to addressing inequality. The flaw in this view is that if the society is structured with wide income inequalities, someone will always be at the bottom. Maybe for one person, getting a better education opens up new opportunities, but if everyone has that education the inequality is still there.
kkfungc - June 10, 2010 at 10:59 am
Offering access to a college degree to increase career advantage is like offering private car ownership to solve the transportation problem? What we end up with is just traffic congestion and air pollution. What we need is not college degrees, but the equivalent of public transit.
19682010 - June 10, 2010 at 3:36 pm
On a different subject: the author’s inaacuracies related to job testing astound me.Here’s the history of Griggs v. Duke Power Co. Until the day the 1964 Civil Rights Act (CRA) became effective, Duke’s policy was that blacks could only work in one of its five departments (Labor Department)– which was also the lowest paid of the departments. The other departments were; Coal Handling, Operations, Maintenance, and Laboratory and Test. Blacks were not allowed to transfer out of the Labor Department into any other department. The exact day that Title VII of the CRA became effective, Duke adopted a policy that all new hires had to have a high school diploma and pass two general intelligence tests in order to work in any department besides the Labor Department. The educational requirements and intelligence tests were not geared to the requirements of the specific jobs in other departments, but were adopted for the *sole* purpose of maintaining segregation of black workers, in the face of federal law requiring equal opportunity.Under current civil rights law it is perfectly legal to pre-test employees for jobs as long as the test is reliably related to the performance of job functions that are a business necessity for the job in question. Thus, a swim club may require that propspective life guards have a Red Cross Life Saving Certificate and pass a swim test (that is related to the work of lifeguards) — even though such a test will have a disparate impact upon people based on race — because it is a business necessity for Life Guards to have specific first aid and water rescue skills.There is no need to revisit Griggs vs. Duke Power or subsequent Civil Rights Legislation — businesses can do all the testing they *need* to do under current laws.
carlhyatt - June 10, 2010 at 5:45 pm
Instead of letting people bumble through high school and college, we should raise standards for both types of institutions. If it becomes MUCH more challenging to earn, a college degree will be worth something.
realtyannie - June 13, 2010 at 8:01 am
Vedder, you are right on in your analysis, though much of the problem is declining admission standards as pointed out by #11. One could easily go further with the grad school problem, particularly with the declining value and quality of MBA degrees.
maryelam - June 14, 2010 at 2:59 pm
In graduate school I had a professor who said that if a person who was a fool (lacked common sense)earned a college degree, he just became an educated fool.Unfortunately, because of relaxed admission standards, many colleges are accepting more “fools” and are graduating more “fools.” Such individuals, regardless of their credentials, are less likely than others to obtain and keep well-paying jobs.
amberdru - June 14, 2010 at 3:29 pm
There’s a big difference between having a job and a job that uses your degree. I would love to see a real study on how many people work in the area they studied.Universities would never cooperate with tracking grads for that.Even in science a BA/BS in almost anything is pretty useless.Job market remains a puzzle Positions go unfilled despite pool of available talent, experts say Sunday, February 04, 2007Denise Trowbridge THE COLUMBUS DISPATCH Columbus resident Darrell Rathburn is one of the many caught up in this whirlwind. Even though he has a master’s degree in computer science and decades of experience working for Fortune 500 companies, he quit his job search after two years of looking. “I decided to throw in the towel and accept the fact that I was involuntarily retired,” he said. …Louise Karl holds a doctorate in biotechnology, has years of lab experience and has had research published in prestigious journals. She’s been looking for full-time work for six years. “There is no skill shortage,” she said. “I probably know 20 people with Ph.D.s in biology, chemistry, et cetera, and none of them can even get an interview.” Karl might be on to something. Some employment experts agree that there is no skill shortage. At least not on the scale that many business and trade groups are claiming.
marka - June 16, 2010 at 8:10 pm
Aside from the discussions about the ‘value’ of a college education to getting a job & earning an income, I haven’t seen much about the ‘value’ of a college education on any other ground.Occasionally, one will see an argument that a better educated populace will lead to better civics understanding & participation — usually implicit assumption that that will lead to better public policies. However, I’ve seen NO decent research to support such an argument, and some that suggest it is false. Numerous surveys show that college students & grads do no better than high school students on civics tests, and in some cases do worse. I suspect that the longer one is away from the last civics course, the less is remembered. And as for better public policies … well, I for one haven’t seen any real improvement, and again, I haven’t seen any decent research supporting this proposition.And as to whether it makes one a better person … the question for me is whether it is ‘worth the cost.’ I’ve known many, many, formally ‘uneducated’ persons — those without a college degree, and in some cases, not even a GED — who were intelligent and well-read, and seemed to me ‘better persons’ than some of my more highly-educated colleagues. In some cases, college educated folks are more narrow-minded (specialization can do that) and arrogant (I’m a certified whatever … ). A college education is becoming more & more expensive, and now saddling many with such large debt that defaults on such debt are becoming endemic. Can’t believe that for these folks a college education was ‘worth’ it.