Higher Education in America: The Jobs Crisis Foments Another

American college attendance has had a good, long run.  Per the National Center for Education Statistics, in 1869 and 1870 only 1.3% of those aged 18 to 24 were enrolled in post-high-school educational institutions.  That did not reach 5% until 1921-1922 and 10% until 1945-1946.  The G.I. Bill, which provided funding for World War II soldiers to attend universities, along with higher prosperity in general, caused steady increases from then through the fall of 1957, when the share reached 22%.  It continued climbing almost every year, and broke 40% in the fall of 1975 and 50% 14 years later.  In 1995, the tracked data switched to those at degree-granting institutions, and attendance continued to rise, from 34.3% that year through 42.0% in 2011.  Since then it has been edging down, to 41.0% in 2012 and slightly lower, though not certainly as the data is still incomplete, since then. 

Which way will it go from here?  For several reasons, it is probable that the percentage of young adults in college will continue to drop.  The main two are the intertwined combination of ever-higher student loan debt, which has shot up from $366 billion ten years ago to at least $1.2 trillion today, and poorer job prospects for graduates; in 2012, 28% of bachelor’s-degree holders were not working, double the rate of 2000, and other studies have shown that only one third of them had positions related to their majors.  Yet at the same time, overall lifetime earnings are frequently claimed to be much higher for those with four-year degrees than those without. 

Into this growing controversy came Peter Cappelli, a Wharton business professor and author of 2012’s Why Good People Can’t Get Jobs.  In that book, he showed that what some have called the “skills gap” between employers and possible employees is actually a matter of the former refusing to either pay true market rates or to provide training, both of which were more likely in the past.  His effort from earlier this year, Will College Pay Off?, addressed what is happening between universities and the job market.  Although he does not seemingly believe in a permanent jobs crisis, neither does he see any labor shortage now, and makes some fine iconoclastic points.  Which are the best?

First, higher education is different now.  “It is less likely to be a four-year experience on a campus and more likely to be something spread out over many years, often across different colleges, and frequently delivered in office parks.”  About two-thirds of students now work.  It is also more expensive than ever, with an increasing share of that cost managed through loans, and costs more than anything else many families will ever buy, even their houses, with American students paying “about four times more than their peers in countries elsewhere.” 

Second, colleges have taken over vocational training.  In the past, most people working at skilled trades and lesser manual positions learned what they needed either on the job or in high school industrial arts classes.  Such instruction now mainly comes from community colleges.  That is also the case for many skills needed for office jobs, for which as recently as the 1990s training usually came from employers.  Overall, according to one 2011 study, only 21% of workers had received any on-the-job training, at all, for the previous five years. 

Third, despite great efforts and an enormous outpouring of new majors which, as Cappelli pointed out, sound like job titles, colleges are still not connecting well with employers.  These new lines of study – examples of majors (not courses) in the book range from “international hospitality management” and “invasive cardiovascular technology” to “casino construction management” and “pharmaceutical marketing” – are financially risky, since decisions to enroll in them are typically made five or six years in advance and thus with little knowledge of ultimate employer demand.  They also tend to overemphasize first jobs, which, with employers increasingly promoting from outside, may not lead to a true career.  Few universities have information on their graduates’ career success, and what they have is often marred by nonrespondent bias in surveys and lack of incorporating positions students already had before their studies started.  The gap between apparent educational qualifications and actually getting a job has historically been large, and is little smaller now.

Fourth, there is no surplus of STEM (science, technology, engineering, and mathematics) opportunities.  As of 2013, only 22% of majors in those fields got jobs in them.  Engineering and information technology in particular have long had notoriously cyclical demand, and often students starting college when such positions were readily available find an oversupply of candidates when they finish.  After noting also that career progression in technical fields has become less likely, Cappelli concluded that “there just is no evidence at all of a greater need for science and math grads.”

Fifth, people may need to get degrees for jobs which don’t officially require them.  At a presentation I gave this month I advocated becoming a paralegal, since they were taking over more and more work from lawyers.  A woman in the audience said she, with that job, had been losing opportunities to unemployed lawyers!  I said that would not happen with medical doctors, since their supply was kept low, but could be the case in other fields where those with the highest set of credentials were often jobless.  I personally saw that phenomenon at a lower level in college town Bloomington, Indiana in its early-1980s near-depression, when those hiring could require bachelor’s degrees even for clerks and cashiers, since plenty of unemployed people had them.  Cappelli called that “bumping,” and noted that it was especially prevalent during the Great Recession.

Sixth, the idea that college helps lifetime earnings has no fewer than four serious logical flaws.  The first is the maturity difference between people at age 18 and those 22 or older.  The second error is that universities do well at identifying applicants who have or are on course to have skills and attributes that help them in their work lives.  Relatively intelligent people who usually finish what they start tend to make more money, with or without college time.  Third, such statistics reflect people who had half or more of their careers in the past, and the worst of the problem of recent graduates is more recent.  The fourth problem, which Cappelli did not mention, is that many people at the top of the socioeconomic pyramid can obtain first-rate opportunities for children who get the proper education, a connection in which universities are more a conduit to success than a reason for it. 

Seventh, when the above is taken into account, the financial outcome of attending college for many is negative.  There is no getting around that, and, as a result, enrollment is likely to drop from here. 

Given this rather depressing but real situation, how can people make the best choices on colleges, universities, and other sources of training?  That will be the subject on December 11^th.