Education is not the filling of a pail, but the lighting of a fire. ~ William Butler Yates
Social, cultural and educational forces have reinforced the idea that success and a college degree go hand in hand. College is the academic coda to the American Dream, since in many people's minds college graduation can make the Dream inter-generational. In 2010, 5.9 million Americans between 25 and 34 years old have post-secondary degrees. Looking forward, however, I'm not so sure this educational mantra will remain true for every high-school student now considering college.
President Obama, like every politician worth his salt, rightly states that getting a good education (with emphasis on a college education) is a ticket to a brighter future. He's correct in many ways. Currently, US unemployment is a historically-miserable 7.7%. However, for folks with a BA or more, it's half the national number, 3.8%; and for those with less than a high-school degree it's a wretched 12.2%. College graduates earn during their working lifetime, on average, nearly $1 million more than people who don't go to college.
However, the popular perception that a BA creates an ever-increasing monetary bonus is no longer true. Over the past decade, the wage premium from receiving a BA has been a steady 60% more than people without a BA. Impressive and meaningful, but this premium has not grown as it has in the past; it's been constant. The BA wage premium has been maintained in no small part because the wages offered to people with only a high-school degree or less have actually decreased.
It's hard to expect that this premium would now increase as more and more young people receive college degrees. Between 1992 and 2008, the number of BAs awarded increased by 50% to more than 1.6 million. However, the wage premium provided to people with advanced degrees (masters, professional and PhD's) has progressively increased. Because of the increasing supply of graduates with BAs, those with advanced degrees are as distinguishing now as BAs were in the 1970's and 1980's. Nevertheless, our increasingly well-educated citizenry has broadly benefited our nation and its citizens, not only with income growth, but in many other equally-positive, important ways.
But for all too many recent 2- or 4-year college graduates, their post-graduate world has collided with the reality of the nation's extended economic doldrums. Just ask any graduate who's waiting on restaurant tables and/or living with his/her parents to save money to pay off student loans. About two-thirds of BA recipients take out loans to finance their education. Student loans now total more than $1 trillion (more than credit card debt), and one in 6 student borrowers are in default.
During our continuing labor market weakness employers can afford to be much pickier about what they require of applicants, who they hire and how much they offer as starting wages. A recent article illustrates this "up-credentialing" trend, where more employers now require a job applicant to have a college degree that didn't in the past. For example, 65% of ads for claims adjusters now state that a BA is required, only 48% did in 2007. The dream of achieving success through a BA is starting to seem chimerical for more graduates.
Underemployment of college graduates – in jobs that require a BA, but do not need college-level knowledge or skills – has spread widely. This expanded "trickle-down" of a prerequisite BA makes it even more difficult for job entrants without a college degree to now find meaningful work. I believe this is part of an educational disconnect perpetrated by the educational industry.
Yet not just college students and graduates are dealing with changed financial circumstances. The fiscal challenges facing colleges and universities themselves are manifest. Colleges have heavily borrowed over the past decade, following the edifice complex, to upgrade their facilities. College debt levels have doubled – now at $205 billion – in the decade ending 2011; but their pledged gifts and investments received have dropped by more than 40%. Here are a few telling statistics that show how colleges have allocated their thinning financial resources: long-term debt at US nonprofit colleges grew 12% per year from 2002 to 2008; interest costs (on their debt) increased 9% per year. Instructional costs increased only 5%.
Despite underemployment of perhaps 50% of college graduates, an increasing number of media articles mention the "skills gap" that employers bemoan makes it impossible to hire as many skilled workers as they have need. Although there are undoubtedly firms that can't find workers with needed skills, skills that often require STEM knowhow (Science, Technology, Engineering and/or Mathematics), other firms lamenting a lack of employable workers continue to offer these skilled jobs at rock-bottom wages – starting salaries around $10/hr. If there's truly a "skills gap" in our labor market, then common sense (and extensive historical data) argues it can be lessened by raising wages/salaries to attract more qualified applicants. Why would a high-school or junior-college student with nascent STEM skills apply for such jobs that pay $10 to $15/hr when a McDonalds shift manager can make about $14/hr, and does not need any STEM knowledge? Good question.
A more fundamental question is: are high-schools and colleges producing graduates with skills needed in today's economy? When it comes to non-college-attending high-school graduates and manufacturers the answer seems to be, not really. Far too few people graduate from high school knowing the basic technical, math and science skills that more and more firms (including modern, heavily computer- controlled manufacturers) need.
Not enough newly-minted graduates have gained the skills to lay claim to the expanding job opportunities in modern manufacturing, modern science, modern engineering and modern quantitative analysis jobs. Why are job opportunities increasing for skilled, quantitatively-trained people? In part, because the average age of high-skilled factory workers is now more than 55 years old. And because quantitative methods have become necessary and expected in more and more jobs as on-line systems collect and assemble ever-more Big Data that needs to be properly analyzed and assessed.
For several reasons, today's labor market – that supplies workers to employers who hopefully demand them as employees – seems increasingly dysfunctional. This is not really a skills gap in the labor market; it's a really supply shortage of skilled workers coming into the labor market from schools, a lack of interest by students to learn such skills and a reluctance of some employers to increase wage offerings for higher-skilled workers.
First, various employers seem unwilling to understand that if they want workers with relevant skills they have to pay more than $10/hr to attract them. Second, students and potential workers must understand that in order to gain jobs in today's economy they will increasingly need skills beyond general studies and liberal arts. Although education in the liberal arts remains a necessary foundation for understanding modern society, quantitative, STEM-based skills are fast becoming necessary for a far broader array of jobs.
Finally, educational institutions that now seem disconnected from job market needs must up-date and revise their curricula to reflect these evolving needs in the labor market. This is especially true for high-schools whose non-college-attending graduates find themselves with no readably employable skills.
Basic economics explains a fair amount of this new state of affairs in the education labor market. This disconnect may result from being stuck in "the good old days" when having a college degree was truly exceptional, no matter what you majored in. It still is, but much, much less so. Now, your choice of college major makes an ever-larger difference in finding a worthwhile job.
I grew up in the 1950's and 1960's in a household where both my mother and father were college graduates. I didn't realize how unusual that circumstance was until recently. It seems in the 1960's only 3% of US households had both parents being college-educated. In fact, when my mother and father completed college in the heart of the Great Depression, less than 1% of females received a BA and less than 4% of all young people had college degrees. They were truly exceptional. In those times, as well as into the late 1960's when I graduated from college, having a BA remained very distinctive. In 1970, 11% of people over 25 years had college degrees. In 2012, for the first time 30% of young adults report having a college degree. In April, the Bureau of Labor Statistics reported that 68.3% of high-school graduates were enrolled in colleges or universities.
The difference between 11% and 30% may not seem that large, but over the past 20 years the promotion of college as one's ticket to (especially financial) success has been persistent and widely adopted. With more and more young people graduating from college having a BA remains distinguishing, but much less so than in the past – especially when combined with the effects of a slow-growth, high-unemployment macroeconomy. Yet understandably demand for post-high school education remains very strong and quite price inelastic, especially at so-called "selective schools." In my view, this continued growth in demand for tertiary education has lessened the incentives for colleges to modernize their curricula.
During the past decades, as the supply of young people in colleges and receiving degrees has significantly increased, the economic "law of diminishing returns" has become relevant. The return from receiving a BA probably has diminished compared to a decade or two ago; prompting articles with titles such as "Is college a rotten investment?" [This article's unsurprising answer: no, it's not a rotten investment. But some schools offer much lower returns – specifically on-line and for-profit – than others.] In other words, college-graduates' expectations about striking it rich just because they've got a BA needs some revision. The college return increasingly depends on exactly what skills/courses graduates gain, not the BA diploma itself.
What's happened with US education, relative to the rest of the educational universe? Perhaps most significant, over the past several decades US education has fallen from its top-tier perch of educational performance relative to other nations. After WWII, the US led the world in broadening and improving its citizens' educational attainment. This broadening was founded on passage of the 1944 G.I. Bill that sent ex-soldiers to college and on the Sputnik-inspired 1958 National Defense Education Act, which increased Federal spending on schools at all levels and created subsidized student loans for post-high-school education. Later legislation, like the 1997 Taxpayer Relief Act, further broadened tax breaks and subsidies for college education. Gradually other nations saw the wisdom of such policies and eventually either caught up or surpassed us. US education now badly needs to catch up.
By 2010, 21 OECD nations (out of the 37 member countries) have high-school graduation rates higher than the US, including the Czech republic. In 2010 the US ranked 9th in university-level education entry rates among OECD nations. In 2011 US high-school students fell behind 31 countries in math proficiency and behind 16 countries in reading proficiency. The US ranks a grim 43rd in the world, right behind Morocco, when comparing public education expenditures as a percent of GDP. This mediocre performance of our students bodes ill for our continued ability to compete against ever-stronger international rivals.
The US needs to counter this slipping performance if we want to benefit to our citizens and grow our economy. Here are 4 actions I suggest the US education system needs adopt to improve and become less disconnected.
1. High schools and employers must start talking together and re-emphasize vocational education as a viable option for 18-19 year old people interesting in employment directly after graduating. Such communication, together with specific programs, has begun closing the gap between education and employment, has shown promise. I'm not talking about dusting off the shop benches and auto repair facilities that were shuttered long ago when vocational ed was swept under the educational rug and pre-college academics was put on its pedestal. We seem willing to forget that even now at least one-third of high-school graduates don't enter college and their job prospects have never been less likely or less rewarding. Many of these graduates may do better through vocational-technical-apprentice programs in high-school and 2-yr colleges. These programs have worked in the past and can again, especially when affiliated with employers who need skilled workers. These programs need to become far more practiced and widespread. The costs of providing vocational ed are declining through the use of technology that effectively inter-connects students and teachers.
2. High-schools should mandate that all graduates must master two basic skills; writing cogent, well-constructed expositional prose with word-processing software, and knowing what I call "practical mathematics." Practical math refers to knowing how to use algebra, knowing how to graphically represent algebraic formulas, knowing how to use computer spreadsheets and understanding introductory statistics. Every graduating high-school senior needs these skills in order to be employable.
3. Junior/Community colleges must augment these writing and math skills so graduates with associate degrees entering the workforce can be understood and can easily deal with numbers and data that surround virtually every new non-minimum wage job.
4. Colleges and universities have been stultified into thinking no substantive changes in their curricula or programs are needed due to the ever-increasing tide of applicants. After all, students keep knocking at their front doors, almost begging to be admitted, why do anything different. Such colleges proudly display single-digit acceptance rates with tuitions and fees dutifully raised. That thinking is misguided and unsustainable for 2 reasons. (A) Although 68.3% of high-school graduates are now enrolled in colleges, only 56% of college students complete 4-year degrees within 6 years, and only 29% of those who start 2-year degrees finish them within 3 years according to a Harvard study. US college dropout rates remain distressingly high.[1] (B) US failure to graduate rates are highest among any of the 18 nations tracked by the OECD. In other words, too many US colleges aren't terribly good at what the purport to do – produce graduates. Has such mediocre performance caused a re-assessment in college presidents' compensation? Apparently not. A NYTimes article states that the number of presidents earning in excess of $500,000/yr more than tripled to 157 over the past 8 years.
What can be done at the college level? First, start by being honest with applicants and explicitly saying that gaining a BA is not a ticket for guaranteed financial and personal success. It requires significant work. It's education, not a job card. Getting a BA will involve studying hard and making strategic choices. A BA may be necessary for all too many jobs (at least half of which really don't require college-level thinking), but it's not sufficient.
The motivation for going to college needs to include interest in gaining a range of knowledge per se, not simply (or only) mastering the rec center's climbing wall and getting hired by the likes of Google, Apple or Genentech. I know, going to college to gain and expand one's knowledge may be so yesterday. But for decades college administrators have sold their service as if it were a credential for success. Middle-class families, employers and most importantly federal and state governments have swallowed this hook, line and sinker. In this educational variant of the American Dream, governments have continuously expanded subsidized loan programs so more students can afford college, which in turn has lessened the need for colleges to moderate their ever-escalating tuition and fees. Virtually everyone by now knows that the cost of a college education has followed a ballistic trajectory over time: rising 4 times as fast as all other goods and services since 1995.
Federal and state governments should leverage their large power of the purse to force colleges to adopt 3 needed, transformative changes. Colleges can receive continued financial and research support from the government only after they accomplished the following. (A) Higher education must create publicly-available standards of academic quality. These standards, which do not exist now, would be applied to colleges' degree programs allowing prospective students and others to assess a particular college, relative to the standards' norms. (B) Numerous colleges need to enter the 21st century by vacating the 19th through modernizing both administrative and educational fiefdoms. Too many colleges have as many administrators as instructors. The current management, operational and administrative structure of colleges (as well as K-12 schools) hasn't really changed in ages and all too often contains bureaucratic inefficiencies. By their nature, such bureaucracies will be reluctant to adjust. The carrot and stick of government funding may make them see the "value" of modernizing and improving.
It goes without saying that Harvard is an exceptional university and practically without peer academically. Like many colleges, Harvard has heavily invested to maintain its exalted position; debt has increased $7.4 billion in the last decade (the largest increase in the nation). It graduates 97% of its undergraduate students within 6 years. And yet, this university seems a decent example of a bureaucratic mausoleum. Harvard comprises 11 separate academic units and 10 faculties—that teach 6,700 undergrads and 3,900 grad students. It offers 46 undergraduate majors, 134 graduate degrees and 32 professional degrees. In other words, even exceptional colleges will likely benefit from modernizing their operations and realizing efficiencies that private industry has practiced for generations.
(C) Colleges must adopt and use modern educational technologies that support MOOCs (massively open online courses) and other innovations that can reduce cost and improve efficiency, flexibility and accessibility. I expect MOOCs and their associated infrastructure will exert a disruptively positive, broadening and re-connecting force on tertiary education.
With these changes more young people will receive more value from their high-school and post-high-school educational experiences. Education will become more connected and more effective, for everyone's benefit.
[1] The dropout (or failure to graduate) rate for private for-profit colleges is an astonishing 78%; for private nonprofit colleges it's 35%, for public nonprofit schools it's 45%.
