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Post-Secondary Education: The Cornerstone of the High-Skill, High-Wage Economy

Sunday, September 30th, 2012

Employment prospects and salary levels improve dramatically as education levels increase. These combine to result in big gains in lifetime earnings at each progressive level of the education ladder. College grads (and especially advanced degree holders) have much higher earnings and suffer far less unemployment than do high-school graduates (not to speak of those without a high school degree. Lifetime earnings of high school graduates average about $973,000 in 2009 dollars, compared with about $1.7 million for those with associate degrees, $2.3 million for those with bachelors and $3.6 million for those with professional degrees.

Moreover, these differences are getting wider. Pay for college graduates has risen by 15.7% (adjusted for inflation) over the past 32 years, compared with an average decline of 25.7% for those workers without college degrees. And this does not even begin to account for non-economic advantages held by college graduates, including lower divorce rates, fewer single-parent families and longer life expectancies.

Higher-Education: High-Skill Holy Grail?

At first glance, given the employment, income and other disparities, it may appear that any student, with a real choice in the matter, should get at least a baccalaureate degree, and ideally, a Masters, PhD or Professional degree. In addition to the benefits discussed above, the Bureau of Labor Statistics’ (BLS’) Employment Projections—2010-20 project projects that occupations in which a master’s degree or higher is typically required, are expected to grow at the fastest rate of any other education category (21.7% for masters and 19.9% for doctoral or professional degrees—especially in healthcare-related professions).

On the other hand, however, the report projects that only 3 of the 30 occupations that BLS expects to produce the largest number of job openings by 2020 are expected to require a bachelor’s degree or higher—teachers, college professors and accountants. But even these careers will face big challenges. Teacher and college hiring are both suffering from big government funding cuts that threaten to greatly reduce both the pay and the fabled job security these jobs offer. Accountants, meanwhile, are subject to the same type of offshoring pressures as a number of other high-skill jobs. And then there is the increasingly critical issue of the costs (both explicit and implicit opportunity costs) of attending college, the burden of college debt and the increasingly asked question as to whether the “return” from a college education is worth the “investment.”

This incredibly complex question entails much more than an ROI analysis. It is also highly situational, depending on factors including the student’s grades, motivation, objectives and family situation. Even if you focus exclusively on employability and salary, the answer varies greatly by factors including:

  • Which school on is talking about, Harvard or the proverbial Podunk State?
  • Cost of tuition—is it a private or public school, what type of financial aid is available, can you ameliorate expenses such as by living at home or working part time?
  • The breadth and depth of one’s personal network, which is still one of the most important determinants as to whether and what type of job one can get.

Most important, however, is the field of study. As shown in the BLS Employment Projections report, philosophy, anthropology, zoology, art history and humanities graduates are the least likely to find jobs. Those majoring in engineering, math, biology, computer science, accounting and economics are not only far more likely to find jobs, they are also more likely to get jobs in their field and earn higher salaries.

A more dated BLS report looked specifically at starting salaries for a range of liberal arts majors. Overall, liberal arts graduates of highly selective Ivy League and other Tier One schools often have reasonable success in finding jobs, almost regardless of their major—even among hedge funds and management consulting firms. Often, 80% or more of such graduates either go on to graduate school or get jobs at, or soon after, graduation.

The same is sometimes true of particularly attractive graduates of less selective programs. Morgan Stanley, for example, may obtain 25-30% of its undergraduate hires out of liberal arts programs, and then provide them with more functional training through online courses and training programs.

Community Colleges: The Other Higher Education

Higher education does not necessarily mean a four-year degree. Community colleges, often viewed as something of a poor stepchild of the university, play critical roles in educating many first-generation students who would not otherwise have a chance for a college education and play a key role as a low-cost “feeder system” for four-year schools. Just as importantly, they are often far-more attuned to the skills requirements of local businesses. Some of these schools design classes, certification programs and even associate degree programs in conjunction with, and serve as training arms for these businesses.

The single fastest projected employment growth (in terms of numbers) is for Registered Nurses. In fact, these jobs, plus those of 5 of the 30 fastest growing (in percentage terms) jobs in the country—all of which are also in healthcare—all require Associate Degrees (rather than Bachelors or advanced degrees) as their minimum educational requirements. Community colleges are also instrumental in preparing the next lower skill (and often wage) workers—those that must take certification courses and pass exams as either a formal or informal qualification for jobs.

Even many above-average paying jobs that don’t require a formal post-secondary degree of certificate often require a less formal education program, such as an apprenticeship program. In fact, occupations that require apprenticeships are expected to be the fastest growing of all jobs that require some form of on-the-job training. Some of these—especially those that require demonstrated technical competence—are among the highest paid and most difficult to fill positions in today’s job market. They are likely to occupy the same position in tomorrow’s job market..

Posted in Community/Other Colleges, Job and Career Opportunities, Skills Requirements, Workforce Trends | No Responses »
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Is the Great Recession Creating Two Lost U.S. Generations?

Sunday, August 30th, 2009

We have all heard of Japan’s “Lost Generation”, the young adults who entered the workforce during Japan’s decade of economic stagnation (generally the 1990s). Since the Japanese economy did not create sufficient numbers of new jobs to absorb these new entrants, these youths-including highly-trained graduates from good universities-ended up taking whatever type of work they could get. 3.3 million people who planned to enter Japan’s lifetime employment economy ended up taking menial odd jobs, contract work or temporary jobs. As explained by BusinessWeek in May 2007 , many of these jobs:

  1. Paid poorly, forcing many to live with their parents, rather than their own homes;
  2. Provided limited job security, which diminished marriage prospects; and
  3. Offered few benefits, which discouraged pregnancies (thereby exacerbating Japan’s falling birthrate).

Worse still, these jobs did not make use of these peoples’ existing skills and did not provide the type of new skills that would prepare them for more responsible positions. So when Japan’s growth resumed in the 2000s, companies shunned these workers in favor of younger, more recent graduates whose skills were current and who were not tarnished by spotty, low-level and non-traditional job histories.

What will be the long-term fate of this Lost Generation? Although it’s always dangerous to predict the future, it’s hard to foresee a future that will be kind to this generation.

So what does this mean for the U.S.?

The Gen Y Challenge

Although I ‘m certainly not predicting that the U.S. will suffer a full lost decade, we could easily suffer a lost half decade. U.S. employment peaked in December 2007 and, according to The Wall Street Journal’s article The Great Recession: A Downturn Sized Up, Stanford economist Bob Hall states that job losses have been piling up at a faster rate since any time since 1948–a pace that Hall expects us to surpass over the next couple months.

These job losses are expected to continue at least through the end of 2009, and possibly well into 2010. Even when the recession ends, growth rates are expected to remain low and most companies will increase the hours of current employees before hiring new people. And as we now recognize, a number of these lost jobs in industries ranging from automotive manufacturing to financial services are unlikely to come back at all. Although growth fields, such as healthcare, education and, increasingly, government are likely to sop up some unemployed workers, it is not yet clear which other industries are going to offer large numbers of sustainable, high-value job opportunities for newly minted knowledge workers—or over what timeframe they will do so.

True, the U.S. is not Japan. Workers who—due to no fault of their own—miss the first step of the employment ladder, are less likely to suffer a lifelong personal stigma. Moreover, some of those new graduates that are financially able are making the best of employment situation by going to graduate school. Even so, many of those Gen Y’ers who are forced to divert from their chosen career paths will face a big challenge. After all, when new jobs do become available, who are companies most likely to hire:

  • Applicant A, a 22-year old that just graduated; or
  • Applicant B, a 27-year old with the same educational qualifications, that has spent the last 3-5 years in menial or temporary jobs that did not exercise existing skills or create new ones?

Okay, newly graduating Gen Y’ers have the potential of becoming one of America’s new Lost Generation. Who will make up the second potential Lost Generation? Consider the Baby Boomers—Gen Y’s parents.

Baby Boomer Lost

It’s ironic. Two years ago, labor force economists and far-sighted corporations were in a panic. Baby Boomers were preparing to retire en masse and there were not enough Gen Y’ers to replace them. Even those companies that expected to be able to attract new entrants were struggling with challenges of capturing and managing the transfer of knowledge from retiring workers to their replacements.

That was before the Great Recession. Baby Boomers, in their mid- and late-50s, are now among the most prominent victims of the layoff ax.

It may be a something of a stretch to consider these people part of a Lost Generation. After all, most have already enjoyed 30 to 40 year careers. Moreover, weren’t many of these boomers planning early retirements, anyway?

Many of them were. But that was before the recession and before many of them recognized that their savings were far below what would be required to fund retirement, much less accommodate unforeseen medical costs or the growing potential of outliving their savings. According to an AARP study that was conducted before the bust, 73% of people over 50 did not even have sufficient income or assets to meet emergencies. Now, as explained in careersecretsauce,  many of these “reluctant retirees” are finding themselves out of work at a time when:

  • Their 401K and home values have been decimated;
  • They have years before becoming eligible for Social Security or Medicare and
  • Many will have trouble securing or affording health insurance once their COBRA plans expire.

Worse still, given the tough time that most older people have in finding new jobs, and the limited number of new jobs that the recovery is likely to produce, few have much hope of finding productive, well-paying jobs in their fields.

Even if these involuntary employees do find productive jobs or manage to create sustainable businesses of their own, many will lose the promise of a secure retirement.  Fewer will be able to muster the spending that will be required to fund new jobs for either themselves, or their children.

Am I overstating this problem? If not, what can be done to reverse or moderate this spiral? Although I plan to address these and other perplexing dilemmas in future blogs, I need your help. What do you think?

Posted in 21st Century Careers, Business Trends, Creating the 21st Century Workforce, Economic and Political Forces, Economic Forces, Global Forces-General, Globalization, Immigration and Offshoring, Job and Career Opportunities, Skills Requirements, Societal Forces, Technology's Impact on Job Skills, Workforce Trends | No Responses »
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