College for All?
The Labor Market for College-Educated Workers
SOURCE: AP/Bebeto Matthews
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This paper addresses the pros and cons of a policy aimed at substantially increasing rates of postsecondary education. The focus is whether projected employer demand justifies an expansion of college education.
Although the emphasis of this paper is the job market, it is important to recognize at the outset that the case for expanding postsecondary education rests on a number of considerations, only a subset of which are the topic of this paper. Equity is an important concern. Over two-thirds of children of low-income families aspire to a bachelor’s degree, yet just 19 percent of young people from families with incomes below $25,000 obtain a community college degree or higher, compared with 76 percent from families with incomes of $76,000 or more. We also know that college attendance is highly correlated with race. For example, in 2006 the fraction of 20- to 29-year-olds with a four-year college degree or more was 23.7 percent for whites, 12.2 percent for blacks, and 6.7 percent for Hispanics. In addition to equity considerations there are social benefits to college attendance that go beyond the purely economic. These benefits include the fact that the quality of people’s personal lives and their opportunities to be good citizens are enhanced by education. For example, there is good evidence that postsecondary education leads to higher rates of voter participation.
The equity and social arguments for improving access to higher education are strong, but any substantial effort to increase the overall rate of postsecondary education must also rest on an understanding regarding the labor market demand for employees with a college education. Postsecondary education imparts a set of skills, and if the demand for those skills is flat or falling then any substantial investment in increasing their supply may not be a wise use of resources. By contrast, if the trajectory of economic growth points toward greater demand for college-level skills, then the case for improving access is all the stronger.
On the face of it, the economic brief for expanding college access seems very sensible. We know that employees with some college or college degrees earn substantially more than less educated workers, and we know that this gap has widened throughout the post-World War II period. This would seem to imply that the demand for college-educated labor is growing, and that a policy to increase college access is appropriate. However, jumping too quickly to this conclusion would be dangerous.
Indeed, there are several arguments that have been put forward that minimize the need for a substantial increase in college enrollment. One such argument points to the wage data and notes that in recent years the earnings advantage of the college-educated population has leveled off. A second argument claims that the wage data do not reflect learning enhancing productivity but rather that college education may simply be used by employers as a method for sorting employees based on other criteria, such as social class, race, or ability to sit still for long periods of time. If many more people attend college, then employers will find another sorting tool. Related to this is the view that college attendance is used by workers as a way of signaling their intrinsic ability and in fact adds little to what they can actually do at work. A third argument against an expansion of postsecondary education focuses on occupational projections and notes that a great deal of expected future job growth is projected to come from low-skill work.
Put most starkly, these considerations raise a worry that if we sharply increase the supply of college-educated labor we will simply start to see more college-educated taxi drivers.
This paper takes these arguments seriously and examines the arguments for and against a substantial expansion in postsecondary education. The first section provides a framework for thinking about the role of education in the job market. There is a great deal of discussion about “college jobs” and “non-college jobs,” but the meaning of these terms is ill-defined in most treatments. The paper shows that for any given job there is no formal dividing line between “college” and “non-college” jobs, but rather the appropriate question is the relationship between the productivity gains that accrue from college compared to the costs of obtaining that education. The empirical sections of the paper reach the following conclusions:
- The wage data do show that in the past several years the advantages of college relative to high school attainment have leveled off (although they remain substantial). However, there have been previous ebbs and flows in the wage data, and there is no reason to believe that in the long run the gains associated with college will disappear.
- Occupational projections suggest that employers’ demand for skill will grow over time, albeit at a modest rate.
- Direct observation of trends in work organization also supports the view that skill demands are increasing.
- The experience of graduates of the open admissions program at the City University of New York shows that a sudden substantial increase in college attainment did not depress wages, but rather that the graduates reaped substantial benefits. Perhaps more importantly, the children of the graduates also performed better over time.
- A comparison of the projected productivity gains associated with a doubling of the rate of college attendance versus the costs of such a policy shows that the increased attendance would be good public policy.
It is important to proceed in the step-by-step systematic way laid out above because the issue is complex and the data are sometimes conflicting. However, the final conclusion of the paper is clear: The effort to expand access to higher education is worthwhile in social, civic, and economic terms.
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