Today, the White House hosts its second College Opportunity Day of Action, a gathering during which college and university leaders will discuss educational success for our nation’s emerging generation. While President Obama reiterates his goal that the U.S. once again lead the world in college graduates, dollars also enter the discussion. Especially when Americans have accumulated $1.2 trillion in student loans and good paying jobs are hard to come by for many young people.
Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. He writes in this blog that a college degree no longer guarantees a good job.
Why this is happening
"The main reason it pays better than the job of someone without a degree is the latter’s wages are dropping."
Reich says according to the Federal Reserve Bank of New York, 46% of recent college graduates are now working in jobs that don’t require college degrees. Their employers choose college grads over non-college workers on the assumption that more education is better than less.
As a result, he opines, non-grads are being pushed into ever more menial work, if they can get work at all. Which is a major reason why their pay is dropping.
"What’s going on?" asks Reich. "For years we’ve been told globalization and technological advances increase the demand for well-educated workers...This was correct until around 2000. But since then two things have reversed the trend. First, millions of people in developing nations are now far better educated, and the Internet has given them an easy way to sell their skills in advanced economies like the United States. Hence, more and more complex work is being outsourced to them. Second, advanced software is taking over many tasks that had been done by well-educated professionals – including data analysis, accounting, legal and engineering work, even some medical diagnoses. As a result, the demand for well-educated workers in the United States seems to have peaked around 2000 and fallen since. But the supply of well-educated workers has continued to grow."
Then what happens? Demand drops, supply increases, and incomes don't.
The Bakken boom
In this latest article from the Minneapolis StarTribune about the Bakken oil boom it says the opportunity for quick cash is making college a tough sell for many. Adults with little formal education can earn six figures. And among those workers are college grads, as well as dropouts, who have either ignored or abandoned their degrees to pay off debt and save for a future. The article quotes Joshua Johnson who earned an animal sciences degree from the University of Minnesota system, and also accumulated $35,000 in student loans in the process. His wife has college debt also.
So they moved to the Williston, N.D. area two years ago, and he took a job building and moving oil rigs, and now makes between $80,000 and $90,000 a year.
"A lot of people I know didn’t go to college and make just as good money and better and they don’t have $40,000 in debt sitting on them,” Johnson said.
Matthew Withrow, a business management grad of Rochester Community and Technical College, also came to the oil patch to earn more and pay down his college debts.
"What you want to accomplish after graduating won’t happen with that much debt.” said Withrow, who is a machinist and runs motors at a growing company that he says values experience over his business courses.
And Stephen Hopkins set out to North Dakota from Madison where he earned a business degree from the University of Wisconsin to work in a warehouse job by day, and tend bar by night.
He arrived he told the StarTribune with $148 in his pocket and a trail of bill collectors on his heels. He’s on track to make about $90,000 this year as he pays down $34,000 in student debt. “A lot of kids are making $30, $40, $50 grand a year with their college jobs and they’re not really getting ahead."
College costs go up but it still pays
Of course, people with college degrees continue to earn far more than people without them. Last year, Americans with four-year college degrees earned on average 98 percent more per hour than people without college degrees, and that "college degree premium" keeps rising.
"But when considering a college education in a perilous economy like this, it’s also important to know the economics," concluded Reich in his blog post.
David Autor, an M.I.T. economist, told The New York Times we have too few college graduates, and too few people who are prepared for college. According to a paper published by Autor in the journal Science, the true cost of a college degree is a negative $500,000. That over the long run, college is cheaper than free, because not going to college will cost you about half a million dollars.
The research group Economic Policy Institute argues that education is not the solution to all of the economy’s problems. And that workers with degrees, and without, are all suffering from the economy’s weak growth and from the disproportionate share of this growth flowing to the very richest households.
“To me, the picture is people in almost every kind of job not being able to see their wages grow,” Lawrence Mishel, the institute’s president, told David Leonhard of the NYT. “Wage growth essentially stopped in 2002.”