Capitalism and the Jobs Problem

It has become an article of faith that much of our problem with unemployment would be solved if only we had a better-educated work force. This belief leads to a call for sending ever more students off to expensive four-year colleges where they can obtain a bachelor degree and gain access to better and higher paying jobs. This position is supported by data that consistently shows college graduates are much less likely to be unemployed than those with a lesser education. Clearly it is better for any individual to pursue a college degree in order to raise the odds of employment success. But does it follow that what is good for a given individual is necessarily good for the country as a whole?

The answer to the above question might be a resounding "yes" if there was, in fact, an unmet demand for college graduates. What does the data tell us? Jordan Weissmann addresses that issue in a note in The Atlantic. He discusses a report by the Federal Reserve Bank of New York that produced the claim that as of 2012 44% of young college graduates (ages 22-27) classified themselves as underemployed. The term "underemployed" means that they were working in a job for which their college degree was not required. Weissmann also provides this chart that is presumably from the same NYFED report.

Weissmann tries to put a good face on this data (lipstick on a pig?) and claim that the current situation is similar to what has occurred in the past so we are just returning to the norm for a troubled economy.

"As New York Fed President William Dudley noted yesterday, college graduates during the 80s and early 90s were just as likely to be overqualified for their jobs as the young BA's of today. And then, as now, most grads eventually made it into jobs appropriate for their skills. Our memory of the tech boom makes the problems facing contemporary college grads seem particularly painful. But they're not entirely without precedent. And it's not clear they're a product of anything other than a bad jobs cycle."

Through good times and bad the underemployment rate for all college graduates has been between 30% and 36%. How is that in any way consistent with "most grads eventually made it into jobs appropriate for their skills?" The only way in which that chart and Weissmann’s claim can be consistent is if we are pushing a lot of people through the college experience who employers do not recognize as having college-level skills. Except for some technical areas where years of intense learning are a prerequisite, capable college graduates should be able to move from a general degree area to most others if they can convince employers they have the capability to learn and work.

There are two possible explanations for the underemployment data: we are sending the wrong people to college, and/or we don’t have as many jobs as we think for college graduates.

The Bureau of Labor Statistics (BLS) is tasked to make projections of employment data based on current trends and best-guess extrapolations. It has projected job growth or loss by occupation type for the period 2010-2020. It has provided many useful ways to look at this data. Consider this chart:

Job growth is greatest in the areas where higher education is required, and lowest for areas where a high school diploma or less is adequate. However, the difference in growth rates is not that dramatic. To recognize where the jobs are going to be one has to look at where they are now. Where the new jobs will actually be found at the end of this decade is more obvious from this chart.

Work requiring a high school diploma or less will provide 63% of the new jobs, while work requiring a college degree will contribute 24%.

We are currently seeing about 32% of students gaining a bachelor degree or greater. Would this data, coupled with the data on underemployment, in any way suggest that there is a need to ship 40% or 50% through the college mill?

This country likes to assume that free market approaches will somehow lead to the best solution. This belief is clung to in spite of example after example where markets have run amok and caused grief and havoc.

We treat higher education as a marketplace. This gives distinct advantages to those who are wealthy and those who have highly-educated parents. This is a fairly narrow distribution of people. Cognitive skills seem to be more uniformly distributed throughout the population. Our approach means that many less-capable people will have access to educational opportunity and many more-capable people will be denied that opportunity.

Our system is at best wasteful and inefficient. If we do have a need for more skilled people with a higher level of educational attainment, we should take greater pains to match the correct people with the appropriate opportunity. The market approach we have been following has not worked. In such a situation it is necessary for government intervention of some sort. What form that intervention might take is a long-term and complex issue that will have to be addressed elsewhere.

There is a major issue associated with job creation. There is no economic law or principle that suggests that a free market economy will provide a job for every person. And there is definitely no way to insure that jobs will be created at the appropriate skill level to match each individual’s capabilities.

Unfettered capitalism seems best at accumulating wealth in the hands of a few and at converting semi-skilled and low-skilled work into even lower-skilled work. The employment projections suggest a nearly two-tiered economy with most people dropping into the lowly-paid bottom tier.

Capitalism has always been a collaboration between business and government. What our society is lacking at this moment is a means of creating (recreating) the type of semi-skilled and craft jobs that have traditionally been appropriate and satisfying for a large segment of our workers. If business cannot create them it is necessary for government to step in.

Every year we hear a new estimate of the trillion or so dollars worth of effort we are behind in maintaining our current infrastructure. This issue must be addressed eventually if we are to maintain a healthy economy. If we are to seriously try to contain global warming, a large investment in infrastructure will be required. If we are to seriously respond to inevitable global warming, a large investment in infrastructure will be required. The need for this type of effort is unending.

Infrastructure investment provides work in the crafts and in semi-skilled tasks that supported a middle class in the past. If we, as a society, decide we want jobs, income, and wealth more uniformly distributed, initiating a commitment to providing world-class infrastructure within which to work and live is a place to start.