Saturday, November 1, 2014

Job market for college graduates not what it used to be

Published in Standard-Examiner, September 24, 2014, Ogden, Utah

There is a misunderstanding among many Americans that in today’s economy, those who wish to get a good high-paying job must get a bachelor’s degree. Colleges and universities further confirm this misunderstanding. They emphasize higher average salaries of bachelor’s and/or higher degree holders as compared to those with associate’s degrees and high school graduates, even though there are vast differences in salaries across disciplines for bachelor’s and/or higher degrees.
Data show that high school graduates with technical training and experience would earn more than some college graduates with four-year degrees in arts and humanities. I do not intend to discourage arts and humanities majors. However, many high school graduates would be well advised to pursue some technical training in marketable skills if their goal is to get well-paid jobs. Their net benefit from a bachelor’s degree after six years with overloaded debt, in a discipline with poor labor market demand, would be minimal.
The 2014 study at the Federal Reserve Bank of New York (NY Fed), by Jaison Abel, Richard Deitz and Yaquin Su ( illustrates well the transformation in the labor market environment for college graduates. They find that even though college grads (with bachelor’s degree or higher) as a group have half the unemployment rate of all workers, the unemployment rate of recent college graduates is much higher than all college graduates from 1990-2013. A tough unemployment rate for college graduates tends to decline with age from late 20s to late 30s, but it significantly increased during 2009 -11 as compared to 1990-2000.
The NY Fed study also finds that the underemployment rate (percentage of college grads working in jobs that do not require a college degree) for all college graduates is around 33 percent and close to 44 percent for recent college graduates in 2012. A significant fraction of underemployed in both groups is earning higher salaries and/or wages in career-oriented skilled jobs such as electricians, dental hygienists, and mechanics, with average salary of $45,000 in 2012. They earn more than the salary of many (close to 15 to 30 percent premium in 2012) with bachelor’s degrees in low-wage jobs.
Abel and Deitz, in another study at NY Fed, Sept. 4, 2014, find that annual wage of bachelor’s degree holders at the bottom 25 percent of the wage distribution is the same as for high school graduates. But data on rate of return of college education based on averages could confuse many. For example, some rough estimates on the rate of return (net of cost of education) generated by Abel and Deitz show that on average a bachelor’s degree earns 15 cents and associate’s degree earns 12 cents on $1 of investment. However, as expected, majors in engineering, math and computers or health sciences earn much more than majors in social sciences or education.
For many high school graduates who are not fully prepared for college, a better option would be to attain an associate degree to acquire marketable skills. According to the Utah Education Task Force Report, May 22, 2013 ( 18 percent of full-time and 17 percent of part-time students were in remedial courses in Utah’s four-year USHE Institutions in 2010-11. Total completion rate for first time students at a four-year public institution over six years is 32.21 percent, almost half the rate for the nation as a whole. This is not an efficient use of resources in higher education in Utah.
The Wall Street Journal reported, Sept. 12, 2014, that U.S. manufacturers are having a difficult time filling positions in skilled trades in 2014. To meet this skilled gap, President Barack Obama and some state governors want to implement German-style apprenticeship programs. Apprentices would work at jobs for pay and train for a broader range of skills, transferable to other jobs. For many high school graduates, a more rewarding and cost-effective strategy to earn a good wage would be to obtain an associate’s degree in marketable skills. This strategy will also lighten their debt burden and give them work experiences. They can always pursue higher education in the future if they so desire.
It is time to think of a different strategy for providing the workforce for the future. Simply said, all high school graduates going to four-year institutions to obtain bachelor’s degrees is not a cost-effective and welfare-maximizing strategy. Professors Frank Levy and Richard Murnane of Harvard University report in “Dancing with Robots” that since 1980, due to technological revolution, routine manual and other work tasks are declining. Work tasks that require non-routine manual skills, skills to work with new information, and abilities to solve unstructured problems are increasing.
Getting a four-year bachelor’s degree will not assure a promising work future for many. It is hoped that higher education institutions are ready for challenges in education and to prepare students to develop human capital to meet the demands of new technologies and information infrastructure.
Mathur is former chairman and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio. He also writes online for Standard-Examiner at He lives in Ogden.

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