Friday, September 3, 2010

Education Pays: Or At Least It Once Did

The Bureau of Labor Statistics (BLS) has a web site titled Education Pays where this chart is provided.

The message is quite clear: the more education you have the more likely that you are gainfully employed. One cannot argue with that statement. I recently heard a well-known economist, an advisor to the Obama Administration, state that there is no employment problem for the well-educated, presumably basing her comment on the kind of data shown above. However, the chart refers to the past while her comment refers to the future. They need not be consistent. I fear they are not consistent.

BLS does a great job at providing all sorts of charts and tables with data and projections. They were nice enough to provide a site labeled Economic and Employment Projections where data are available on what they expect the economy to provide in terms of employment in the 2008-2018 time period. The data was apparently released or updated in December of 2009. Let us see if this data can be used to determine the result of increasing the number of bachelor’s degrees granted each year.

BLS opens their summary of the employment projections with this statement.
"Total employment is projected to increase by 15.3 million, or 10.1 percent, during the 2008-18 period, the U.S. Bureau of Labor Statistics reported today. The projections show an aging and more racially and ethnically diverse labor force, and employment growth in service-providing industries. More than half of the new jobs will be in professional and related occupations and service occupations. In addition, occupations where a postsecondary degree or award is usually required are expected to account for one-third of total job openings during the projection period. Job openings from replacement needs--those which occur when workers who retire or otherwise leave their occupations need to be replaced--are projected to be more than double the number of openings due to economic growth."The population grows at around 1% per year, so growth in employment of 10.1% at least keeps up with the population. The increase in fraction of older workers eligible to retire may also make the number of jobs available for those seeking them (now a smaller fraction of the population) effectively higher in this projection.

BLS also provides a table listing "the 30 occupations with the largest number of job openings due to growth and replacements. The news is not so good. Here are the first few entries at the top of that list in order of decreasing number of expected jobs.


Retail salespersons

Waiters and waitresses

Customer service representatives

Registered nurses (associate degree required)

Combined food preparation and serving workers, including fast food

Office clerks, general

Laborers and freight, stock and material movers

Elementary school teachers, except special education (bachelor’s degree)

One has to go to the ninth entry to find an occupation that requires a bachelor’s degree. I thought a registered nurse required one also (?). Several things are worth mentioning. Most of the jobs our economy is poised to produce require what BLS refers to as "short-term on-the-job training." That is their way of saying that these are jobs that will not pay much and will have almost no job security. If you sum the number of jobs in these 30 occupations that require a bachelor’s degree you get to 12.8% of the total. Another 9.25% require an associate degree or vocational training beyond high school. Those two numbers sum to 22.05%, not close to the "nearly one third" quoted above. The positions more demanding of education are therefore spread out over many smaller occupations.

One thing I find really troubling about the numbers in this table is that if you deduct education and health care positions, areas that depend heavily on government spending, you eliminate 60% of the jobs requiring post high school education. I do not pose this as a big government issue. I pose it as a small economy issue. Our "captains of industry" grow wealthy by demonstrating the ability to eliminate jobs, or to insert lower-paid workers into existing positions. We use the phrase "race to the top" in discussing educational goals. We seem to be in a "race to the bottom" when it comes to employment. In any event, thus far I see no evidence that our economy is capable of absorbing hordes of highly-educated students.

BLS provides a table of jobs needing to be filled according to educational attainment. If you sum all the positions in that table requiring education beyond high school you arrive at 33.3%. That is exactly what was stated in the BLS summary statement. However, 10.4% of the total requires only vocational training or an associate degree. That leaves 22.9% of the jobs requiring at least a bachelor degree. The problem is that we have been graduating about 30% of our population from four-year colleges. If we continue to provide bachelor’s degrees to 30% (or more) of our new job seekers, and have an economy that provides commensurate jobs at only a 23% rate, then we have a problem.

The employment picture BLS provides is not very encouraging if you want to believe that education will solve all our problems. Handing someone a diploma from a four-year college does not create a job for that person. The economy has to be creating the types of positions that demand the sort of background and intellectual skills that one assumes will come with a bachelor’s degree. One can argue that highly educated and highly motivated people will eventually contribute to the creation of industries and technologies that will create jobs. I agree with that contention and would demand that we educate as many people as possible to the limit of their capabilities just for that reason, but that is a second-order effect. We need first-order effects.

During the eight years of the Bush administration the economy was weak and was not producing enough jobs to keep up with population growth. If we merely recover sufficiently to get back to those "good old days," we will still be in deep trouble. The country needs a well-conceived investment strategy to support industrial growth in areas that can provide jobs with living wages. We are the only country in the universe that has politicians who think the best plan is no plan.


  1. Hi Rich,
    You have touched upon another of my pet peeves. That is the cost of higher education. For at least 40 years that cost has gone up substantially faster than general inflation. That cost increase is nearly as unsustainable as health care. Thus students are graduating with crippling debt - and few job prospects that will pay off those loans. During an era of exploding information technology, one would think that universities could turn some of that into increases in the productivity (and therefore cost control) in educating students. But they have no incentive to do that and they don't. I wonder when the cost curve for university education will finally come down to normal inflation....... another 40 years?
    Steve C

  2. It is kind of hard to figure out why their costs go up so quickly. It would be intersting to get the cash flow data on someplace like Stanford and see where their money comes from and where it goes. Yet another post! Take care.


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