The Overselling of College Education

The American Prospect carries an article by Lawrence Mishel: The Overselling of Education. A discussion of education strategy is particularly timely. It is becoming clear, worldwide, that colleges are generating more graduates than their economies can accommodate. From China to Tunisia, to Egypt, to the European Union, and to the United States, there is evidence that college graduates are frustrated by either the inability to find a job at all, or by the need to accept one that is not commensurate with the expectations of one with a college degree. The uprising in Tunisia began with the self-immolation of a frustrated college graduate.



Mishel begins by detailing the conventional wisdom with regard to education and unemployment.

“A better-educated workforce is widely touted as the panacea for every economic problem. Education is said to be the cure both for unemployment and income inequality. To hear leaders of the financial sector talk, the underlying problem with the economy has not been a runaway financial sector but an unqualified workforce. In a recent Reuters special report on the U.S. economy, Diane Swonk, an oft-quoted financial-sector economist, said, ‘The recession merely revealed a reality that has been with us for a long time. We faced a growing gap in education and skills that we tried to fill with debt and credit, which gave us the illusion of growth’."

“This is very comfortable reasoning for the very comfortable class. It identifies ‘failing’ schools and dumb workers for the economic calamity actually caused by a deregulated financial sector following a massive redistribution of income and wealth.”

He then argues that the data does not support the notion that we are in the midst of a skills shortage.

“It is remarkable that anyone can claim that today's high unemployment is primarily due to a mismatch between the skills of the unemployed and the available jobs. After all, most of those who are unemployed today were productively employed just a year or two ago“

“The shortfall in job openings relative to the last recovery is apparent in nearly every industry, indicating that the problem is across the economy rather than rooted in particular sectors. Nor do the unemployed appear "unqualified." Unemployment over the recession has doubled for every educational grouping, including college graduates whose unemployment is far higher than anytime since 1979 (the earliest year for monthly unemployment data).”

“Moreover, the percentage of unemployed who have been out of work for at least six months is the same across all education groups. In other words, unemployed college graduates bear the same risk of long-term unemployment as those with high school degrees. In sum, we do not have unemployment because of weak skills or poor schools: Rather, we have a serious shortfall in demand due to a loss of housing and stock wealth and recession-caused income losses compounded by the de-leveraging of our household and business sectors.”

Mishel next takes up a crucial question: “Is there a looming shortage of college graduates?” No one would argue with the notion that we need the strongest possible K-12 education, and that it must be made available to all children. However, a policy that encourages as many as possible to randomly attend four year institutions and obtain degrees, demands some discussion. It is not necessary to spend four years and tens of thousands of dollars in order to get a job waiting on tables. Producing educated people does not create jobs. Society and the government need to stop and consider carefully where the country and the economy are headed—and perhaps even do some planning.

“Despite frequent claims, it is simply untrue that we have seen a three-decades-long radical increase in employers' demand for four-year college graduates. The widespread (even before the recession) utilization of college students and graduates working as unpaid (many unlawfully so) "interns" is evidence enough--if employers desperately needed these workers, they would pay them.”

“In fact, the trends of the last 10 years contradict this story. The wages and benefits received by young college graduates fell over the 2000-2007 business cycle and in this recession. Moreover, the wages of all college graduates have been flat over the last 10 years, with those for men having markedly declined. This should not be surprising as the relative demand for college graduates, according to Harvard's Claudia Goldin and Larry Katz, grew more slowly in the 2000s than in any postwar decade, following relatively slow growth in the 1990s. A major increase in the supply of college graduates would further erode the wages and benefits new college graduates obtain and drive down the wages of all college graduates, especially among men.”

Mishel blames the weakness in demand for workers on the gross inequality in income that has developed over recent decades.

“....the challenge we face with persistent unemployment exceeding 9 percent is not better education and training for those currently unemployed. Rather, we need more jobs.”

“The huge increase in wage and income inequality over the last 30 years was not caused by a skills deficit. Rather, workers face a "wage deficit." The key challenge is to provide good jobs and re-establish the basis for wages and compensation to grow in tandem with productivity, as they did before 1979.”

The association of low employment with income inequality is arguable. What is not arguable is the concept of what Mishel refers to as an “active labor-market policy.”

“We also need what Europeans call an active labor-market policy, so that the money we invest in training is directly connected to re-employment at good wages, rather than operating in a vacuum.”

If one wishes to include a college education as “training,” then developing some mechanism for insuring that an appropriate number of students get funneled into curricula that will provide them with a career seems like a goal worth striving for.