ECONOMY JUNE 9, 2011
Sally Cameron thought she had done everything right. After studying French and Arabic at a tony liberal arts college, she knew that graduate school would help her career chances. But when she hit the job market, her Ivy League management degree didn’t seem to matter. The worst recession in decades had pushed the unemployment rate to nearly 10 percent and good jobs were scarce. Sally paid the rent by tending bar and filled her time with volunteer work.
Meanwhile, experts and government officials warned that the days ahead would be grim. For decades, a growing number of students had streamed into higher education assuming that their degrees would lead to prosperity. Now people were openly questioning whether college was really worth it. As one George Washington University labor economist said, “A surfeit of any commodity—a BA or an MA—means that eventually it will stop paying off.”
Sally’s story sounds like the kind of depressing story filling the pages of newspapers and the popular press these days. Two weeks ago, the The New York Times published an article titled “Many With New College Degree Find the Job Market Humbling.” The piece immediately shot to the top of the Times’ “most emailed” list. Chemistry majors were tending bar, it noted, while labor economists were finding an alarming number of college graduates in jobs that did not require a college degree.
There’s only one difference: Sally Cameron earned her master’s degree from Yale in 1980. The Washington Post story that described her struggles was published in 1982. For going on four decades, the press has been raising alarms that college degrees may no longer be a sound investment. Two things about these stories have remained constant: They always feature an over-educated bartender, and they are always wrong.
Until the middle of the 20th century, relatively few people worried about a glut of college graduates because relatively few people went to college. But when the 1944 G.I. Bill was followed by a huge expansion of public university and community college systems in the 1950s and 1960s, the labor market changed dramatically. In 1940, less than 5 percent of adults over age 25 had a bachelor’s degree. That number nearly quadrupled over the next forty years.
In 1976, Harvard University labor economist Richard Freeman published a book called The Overeducated American, which predicted that a surplus of diplomas would push the long-term wages of college graduates down. The New York Times wrote a front-page story about it that began: “After generations during which going to college was assumed to be a sure route to the better life, college-educated Americans are losing their economic advantage…” People magazine framed its coverage of Freedman’s book with a provocative question: “Is a college degree still a passport to white collar success?”
The answer, it turned it out, was unequivocally “Yes.” As Freedman’s book and others like it made the rounds, the labor market was embarking on what turned into a decades-long run-up in the value of college degrees. Students continued to matriculate in record numbers. The percent of adults with a bachelor’s degree passed 20 percent in the 1980s, 25 percent in the 1990s, and stands just below 30 percent today. Yet despite the increase in supply, the price that employers were willing to pay for college graduates went up, not down. The inflation-adjusted median wage of bachelor’s degree holders increased by 34 percent from 1983 to 2008. (The earnings for high school dropouts, on the other hand, fell by 2 percent during the same time.) People with graduate degrees did even better, increasing their earnings by 55 percent.
The biggest gains came at the high end of the income spectrum. In 1970, 37 percent of people with bachelor’s degrees were in the top three deciles of income. By 2007, that proportion had increased to 48 percent. Graduate degree holders went from 41 percent to 61 percent. People with only a high school diploma or less, by contrast, increasingly fell into poverty.
None of this, however, has stopped the nation’s leading news outlets from regularly publishing terrifying stories about college graduates unable to find decent work, particularly during economic downtimes when unemployment and insecurity were on the rise. The formula has been carefully refined over the years: Start with a grim headline, like “Grimly, Graduates are Finding Few Jobs.” (Times, 1991). Build the lede around a recent college graduate in the most demeaning possible profession (janitor, meter maid, file clerk) and living circumstances (on food stamps, eating Ramen noodles, moved back home with parents.) Pull back to a broader thesis, like “The payoff from a bachelor’s degree is beginning to falter.” (Times, 2005). Cite an expert asserting that this is no passing trend, e.g. “ ‘We are going to be turning out about 200,000 to 300,000 too many college graduates a year in the ‘80s,’ said Ronald E. Kutscher, Associate Commissioner at the Bureau of Labor Statistics.” (Times, 1983). Finish with a rueful quote from the recent college graduate. “When I have to put my hands into trash soaked with urine or vomit, I say ‘What am I doing here? This job is the bottom. Did I go to college to do this?’ ” (Post, 1981).
The media get the story wrong every time for a number of reasons. People naturally tend to project current trends into the future, missing the up-and-down nature of the business cycle. Editors know that “Thing-you-thought-was-true-isn’t-actually-true” stories boost circulation. The college graduates who read newspapers like the Post and Times like to see their personal insecurities dramatized as national trends of great significance.
More importantly, the press misunderstands how the education needs of the modern economy have been augmented by technology and globalization. Many jobs involving simple, repetitive tasks have been rendered obsolete by machines. Employers will pay people less money, or no money at all, to perform them. The jobs that remain, however, require increasingly sophisticated skills. A steel mill that once employed 20 low-skill laborers per unit of production may now employ one person manipulating complex equipment. Typists barely exist any more, but scientists can communicate with colleagues worldwide via email, download documents from archives instantaneously, and crunch gigabytes of data on cheap laptop computers. Economists call this “skill-biased technology change.”
Under this scenario, more productive workers earn more, on average. And the workers who come to the labor market able to take advantage of complex technologies and manipulate flows of information are disproportionately college graduates. That’s why the labor market continues to pay a premium for degrees. The great recession of 2008 threw people from all walks of life out of work. But college graduates were most likely to have jobs when the economic crisis began and were least likely to lose them in the financial storm. Even as unemployment remains stubbornly high, college graduates are the only members of the labor force whose employment rate rose during the first five months of this year.
Why, then, do the labor economists and government experts cited in perennial “college graduates are so screwed” news stories keep getting the story wrong? One factor is a flaw in the way the federal government classifies jobs. The Bureau of Labor Statistics issues periodic projections of how many people will be employed in thousands of different kinds of jobs in the future. The BLS also classifies jobs based on the level of education required. The problem, as Georgetown University economist Anthony Carnevale has documented, is that the BLS assumes that educational requirements within jobs will stay constant. When making projections, it doesn’t account for the ongoing march of skill-biased technology change.
These methods miss most of the growth in highly-educated jobs. Only a third of the long-term growth in jobs requiring a college degree has come from more employment in sectors with traditionally high education requirements—scientists, accountants, teachers, etc. Most of the growth has come within very large existing white collar and blue collar industries. To compete in the global economy, companies have to manage increasingly complex supply chains and provide high-value professional services. Huge sectors like manufacturing and health care have made heavy use of technology and require enhanced human skills to match. As a result, employers are increasingly requiring college credentials.
College skeptics also fail to account for predictable career patterns. Low-education jobs have much higher turnover rates than high-education jobs, and people tend to progress from the former to the latter. There are a lot more law firm partners out there who used to be bartenders than bartenders who used to be law firm partners.
And indeed, that’s pretty much what happened to the sad cases described over the years by the Post and Times. Back in 1982, the Postwrote aboutMel Rodenstein, a Peace Corps alum with a master’s degree in international affairs who was slaving away in a “mindless” file clerk job, forced to cut coupons and subsist on rice and beans. He went on to a series of nonprofit management jobs and, by 2010, was a senior research project supervisor at the Johns Hopkins University School of Health. In 1993, a Post article titled “Grads Without Jobs” described two young women graduating from good state universities who planned to spend a year wandering North America in a station wagon because “there are no jobs anyway.” Today, one of them lives in Silver Spring, Maryland, and runs her own H.R. consulting firm. The other got a PhD and works 20 feet away from this author in a Washington, DC think tank.
Sally Cameron, meanwhile, isn’t tending bar anymore. She’s a senior manager at an international development consulting company that works under contract with USAID. Her recent work includes building railroads in cyclone-devastated Madagascar. Her liberal arts degree from Smith College must come in handy, since one of the two official languages there is French. That’s how things usually work out for people who get college degrees.
Kevin Carey is the policy director of Education Sector, a think tank in Washington, D.C.
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