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Is College Still the Best Road to the American Dream?

Sunday, July 11th, 2010

My June 27 blog examined some of the high-level findings of the Bureau of Labor Statistics (BLS) recently released Occupational Outlook Handbook. Among the primary findings—university graduates have much better employment prospects, earn significantly higher weekly and lifetime earnings and suffer much lower unemployment rates than those with without these degrees.

The blog ended with the question: Given the economic advantages of higher education, why would anyone not get a college, or even graduate degree? This blog briefly reviews some of the reasons.

It is sad do say, but some people are simply not up to higher education. A good portion of those that are, are either too turned off by their experiences in primary and secondary schools, or have not received the type of education that will allow them to continue. This is prompting many educators and foundations, including the Gates Foundation, to look to community colleges as the lynchpin to improving higher education.

Although I will specifically discuss community colleges in future blogs, let’s focus on some of the reasons people do not, cannot or should not go to four-year universities.

The Cost Equation

One of the first and most frequently cited arguments against universities is the cost. According to BLS, college tuition and fees have soared 92% since 2000—almost double the pace of healthcare. And the rate of increase has accelerated thanks to the Great Recession, as the value of university endowments and government funding has plummeted. Tuition at some private universities now exceed $40,000 annually and even some state universities now charge more than $10,000. By the time you add in room and board, costs can exceed $50,000 per year for private universities and $20,000 for public universities. And this does not even begin to account for the opportunity costs associated with going to college—much less graduate school—of 4-10 years of earnings that students forgo while in school.

These costs are making it all but impossible for lower-income families to foot the bill, unless their children qualify for very generous scholarships or find particularly remunerative part-time and summer jobs.

Without even getting into the ways in which escalating education costs are likely to exacerbate already high levels of income inequality, these costs are throwing many students into debt, before they even get a chance to begin their careers. Statistics compiled by Credit.com show that students graduate from college with an average of $20,000 in student loan debt, plus an additional $4,100 in credit card debt. And then there’s graduate school. According to the AMA, 87% of medical students graduate carrying educational loans and graduate with an average of $156,456 of debt.

Starting out with high levels of debt is bad enough. But if these students have the misfortune of graduating into a deep recession, they may not be able to find a job that will allow them to pay off the debt. Or if they do find a job, it is likely to be a minimum wage position that has little to do with their chosen field, and may make it difficult to ever get onto a true career ladder. Even the lucky graduates, who do get jobs in their field, often must settle for lower-level positions and lower salaries. A study by Yale of Management economist Lisa Kahn, for example, found that new graduates who join a company during a recession (1981 for her study) not only start at lower wages, but generally continue to earn lower wages and find it difficult to compete with younger, more recent graduates when normal hiring patterns resume.

Education Quality Compromises

That is for those who graduate. The sad fact, according to Harvard economists Claudia Goldin and Lawrence Katz, is that while the U.S. sends a higher percentage of high school graduates to college than any other OECD country, it is second to last—ahead of only Italy—in graduating these students. About half of all students who enroll in four-year universities—and two-thirds of those in two-year colleges—do not graduate at all. They forego income, pay tuition and room and board for 1, 2 or 3 years and never earn a degree. And, according to the William Bowen and Michael MacPhearson book, Crossing the Finish Line, this drop-out rate is even higher for lower-income students. And since college drop-outs typically earn 30% less ($33,000 compared with $47,000) than do grads, they are unlikely to recover much of their investment.

And this does not even consider one of the central premises of the Bowen/MacPhearson book, that many colleges—and especially many of those attended by highly-qualified lower-income students—do a better job in “producing dropouts” than in educating and graduating students. Education quality—not to speak of availability—is likely to further decline as a result of the state funding cuts, college endowment losses and alumni contribution shortfalls engendered by the recession.

University of California budget cuts, for example, are forcing schools to increase tuition by 32%, lay off and cut salary of faculty and staff, cut programs and classes, increase class sizes. California State University, meanwhile, is being forced to stop accepting applications for the 2010 spring term and cut total system-wide enrollment by 40,000 students over the next year. Students who are already enrolled are finding it increasingly difficult to get into oversubscribed classes that are required to meet graduation and major requirements.

Some prospective students, especially those from lower-income families, are being foreclosed from higher education altogether. Those can afford the cost will find it more difficult to get required classes and may have to postpone graduation. Meanwhile, the limited availability of jobs is prompting many who would not otherwise seek higher education to go back to school. Dropout rates can be expected to increase over the next few years and more students will graduate with more debt.

The Education-Job Market Disconnect

What is a new high-school or college graduate to do? With jobs scarce—especially for young adults—graduates are increasingly choosing to go back to school. Schools, however, are cutting back on the number of students they can accept, increasing tuitions and reducing course offerings.

A relative handful of students will get into (and be able to pay for) the best schools, major in the fields most likely to qualify them for attractive, well-paying jobs and graduate into a robust economy that will value and pay for their skills. The vast majority, however, face less attractive options. They can:

  • Skip higher education and possibly relegate themselves to a life of less desirable, low-paying, low-security jobs; or
  • Go to school (if they can afford it), accumulate more debt and risk graduating into a still slow economy.

Luckily there are more attractive alternatives to each of these fates:

  • A number rapidly growing fields, in industries including health care and higher education, still offer attractive, relatively well-paying jobs that do not require bachelor degrees (some registered nurse positions, insurance agents, police, medical assistants, etc.) or to a lesser extent, even associate degrees (cooks, welders, truck drivers, carpenters, etc.). In fact, of the 30 jobs projected to grow at the fastest rate, only 7 typically require a four-year degree;
  • Those who do go to college or graduate school can pursue fields of study, especially in finance, accounting and STEM-related disciplines (science, technology, engineering, math) that lead to jobs which companies currently have trouble filling and are expected to produce large numbers of well-paying jobs in the future (physicians, pharmacists, post-secondary teachers, software engineers, accountants, etc.).

My next blog post will drill down into findings for some of these bachelor-and-above-level jobs, examining categories and specific jobs which offer the best employment opportunities, the highest earnings potential and ideally, good opportunities for intellectual and psychic fulfillment.

Posted in 21st Century Careers, Creating the 21st Century Workforce, Economic and Political Forces, Economic Forces, Education System and Institutions, Job and Career Opportunities, Societal Forces, Universities and Grad Schools, Workforce Trends | 2 Responses »
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Payoffs of a College Education

Sunday, June 27th, 2010

Last month, the Department of Labor’s Bureau of Labor Statistics (BLS) released the 2010 version of its bi-annual Occupational Outlook Handbook. This information-packed compendium outlines the state of the U.S. labor market and draws on reams of data and expert opinion to project long-term (through 2018) growth prospects for about 300 distinct occupations. It examines likely growth and declines in the job prospects, how each job is likely to change, the types of education that will best prepare people for these jobs, how much these jobs typically pay, the degree of competition one may face in seeking a specific job and even how best to find and win these positions.

Not to oversell the value of this data, BLS issues all the necessary caveats. The most important are that it is examining long-term trends and that findings are subject to uncertainties inherent in any effort to anticipate, much less quantify the future. Most importantly, it recognizes that unanticipated shocks, such as a global Great Recession, the collapse in the value of a world currency, a major terrorist attack or the implications of an unprecedented environmental disaster could delay or totally derail any such projections. Who, for example could have predicted that when a freshman entered college during the boom years of the mid 2000’s, the world would be mired in the worst recession since the great depression and that newly minted graduates would face the highest unemployment rates since the Depression?

Despite the caveats and uncertainties, the Handbook contains reams of fascinating information which is necessary reading for anybody that is even thinking about working over the next decade. Not just students who are now entering school or graduates attempting to enter the workforce, but virtually anybody who might consider the prospect of changing jobs, or who might be laid off any time over the next decade.

The Lifetime Advantages of Education

Given the value of this information, my next few blogs will examine some of what I consider the most important trends for occupations that typically require a four-year college degree or higher. I am not even going to touch upon the voluminous sections that focus on jobs that typically require only high-school, or what the BLS considers “mixed” educations (those that require some education beyond high school, but less than a bachelor degree).

Why focus exclusively on occupations that typically require bachelor’s, and increasingly, graduate degrees? Chart 2 of the report explains this far more succinctly and poignantly than I ever could. As it shows, every additional level of educational attainment, from less than a high school diploma through professional degree, yields progressively higher, stair-step-like increases in average weekly earnings (from $419 per week to $1,441 in 2006 dollars), lifetime earnings and progressively lower prospects for unemployment. (One interesting anomaly is that those with doctoral degrees tend to earn slightly less money and have slightly higher unemployment rates than do those with professional degrees, albeit still significantly better than those with master’s degrees.)

Although the 2006 year benchmark for the BLS data portrays unemployment rates that appear almost ludicrously low in the current environment (6.8% for less than high school through about 1.5% for bachelor’s and above), the pattern holds—although the differences are just as dramatic, and much more depressing—in 2010. As shown in the BLS’s May 2010 unemployment ratings, these figures are now 15% and 4.7%).

Just as important as the job security and earnings potential attributable to higher levels of education, occupations that require a bachelor’s degree or higher have in the past— and will continue to enjoy—higher growth rates (15% compared with an average of 10%) than occupations with lower educational requirements. And most importantly to many, higher education levels are more likely to give one more flexibility in selecting (at least in normal economic times) the type of work they would like to do and result in more intellectually stimulating and psychically rewarding careers. This does not even begin to account for the non-job-related benefits of college, such as improved health, civic involvement and aesthetic appreciation.

So far, it sounds like a slam dunk. The more education, the better, more lucrative and secure the career. A number of people have gotten the message. According to a Census Bureau survey, the percentage of U.S. workers (defined for this purpose as employed people between 16 and 44 years of age) with college degrees has doubled over the last three decades and the percentage of high-school graduates who are enrolling in colleges and universities has reached an all time high of 70 percent.

The bad news is that this still represents less than 30% of workers (although another 22% has completed at least some level of college, including Associate degrees). In other words, half of all these working adults still have only 12 or fewer years of education at a time when many employment experts agree that all employees should have at least two years of post-high-school education.

Given the economic advantages of higher education, why would anyone not get a college, or even graduate degree?

I will briefly discuss this issue in my next blog (July11). I’ll then shift back to the college-level job data, drilling down into those bachelor-and-above-level occupations that offer the best employment opportunities, the highest earnings potential and the greatest opportunities for intellectual, and ideally psychic fulfillment.

Posted in 21st Century Careers, Business Trends, Creating the 21st Century Workforce, Economic and Political Forces, Economic Forces, Job and Career Opportunities, Societal Forces, Technology's Impact on Job Skills, Universities and Grad Schools, Workforce Trends | 2 Responses »
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Preparing for “Hysteresis” *

Sunday, November 8th, 2009

(*from the Greek “husteros”, which means “late”)

I thought that I fully appreciated the nation’s employment crisis. My thirty year career in the IT industry gave me a unique perspective on the types of skills that are required to drive and market innovation in next-generation industries, how new technologies continually change skills requirements, and the rapid growth in emerging country skills. I saw how these trends, particularly when combined with complementary trends—such as demographics, educational patterns and political pressures—were fundamentally transforming the types of skills that would be required for success in tomorrow’s technology-based, global knowledge economy.

Then came the Great Recession. As if the disconnect between the future needs of the U.S., and current directions wasn’t already troubling enough, the recession made things much worse. Although the nation’s skills gap continues to worsen, the country no longer has the “luxury” of focusing on the skills that would be required for tomorrow’s jobs or the requirements for developing a new-age, globally competitive economy. We must now focus on the requirements for getting people back to work today. And we must do so in an economy in which:

  • Many traditional industry segments and jobs, such as in the automotive, financial services and retail sectors, will never return;
  • Consumers will be forced to reduce spending due to a combination of unemployment, falling wages and shrunken portfolio and home values;
  • All types of spending and investments will be severely retrained by the needs for families, financial institutions, corporations and governments to “de-leverage”; and
  • Big chunks of two generations—Baby Boomers and Millennials—may be all but locked out of the market for meaningful jobs. (see my 8/3/09 blog, Is the Great Recession Creating Two Lost U.S. Generations?

This explosive combination of trends (technology, globalization, demographics, education and the impact that the Great Recession would have on long-term employment opportunities) that prompted me to focus my research and launch my blog on the challenges and requirements for developing sustainable, high-value careers in the 21st century.

But, as well as I thought I understood the new career challenges, a recent article made me realize that even I–who has continually emphasized the profound structural shifts facing the U.S. employment market–may have underestimated the real magnitude of these challenges. This article, written by Joshua Cooper Ramos, managing director of Kissinger Associates for Time Magazine, is “Jobless in America: Is Double-Digit Unemployment Here to Stay?”

The article examines, and generally validates an off-text remark made by Lawrence Summers (who was a Nobel Prize-winning employment theory economist before becoming director of Obama’s National Economic Council) at a July 2009 conference sponsored by the Peterson Institute for International Economics.

As Summers discussed, the U.S. economy appears to have passed through an inflection point. Traditional economic models failed to anticipate the pace or magnitude of recent job losses and nobody really knows what will be required to get us back to acceptable levels of unemployment—or even if we will even will be able to get back to acceptable levels. The country has already lost nearly 7 million jobs—the total number of jobs that have been created in the entire decade since 1999—and many economists expect it to take at least five years before this number of jobs will be recovered. (And this does not even begin to account for the 100,000 new jobs that must be created each month to compensate for new job entrants or the 11 million additional people that are currently underemployed, either working fewer hours than they would like or are too discourages to even look for work.)

Summers, it seems, anticipated and coined a term for this type of structural dislocation back in 1986. He called it “hysteresis”—what happens when something snaps in such a way that it can never be put back together—like a light bulb which has been shattered by being dropped on the floor.

Traditional job creation measures cannot rally address these problems. Sure, the government can create temporary jobs—at least until political pressure and the ballooning budget deficit prevent it from funding these make-work jobs. New jobs, such as those in retail and hospitality may fund minimum lifestyles, but won’t create the types of skills required for tomorrow’s high-value jobs. Even growth segments, like nursing and education, will do little or nothing to ensure global competitiveness or generate the foreign exchange required to pay for the nation’s habits.

We already understand many of the types of jobs that will not return to the U.S. as the economy improves, but what type jobs that will take their place? Biotech, GreenTech, NanoTech? Perhaps, someday, but nobody knows for sure.

What should students and disaffected workers do in the interim? I hate to repeat myself, but I will stick with the recommendations I made in two recent blogs:

Posted in 21st Century Careers, Creating the 21st Century Workforce, Economic and Political Forces, Economic Forces, Job and Career Opportunities, Political Forces, Societal Forces, Workforce Trends | No Responses »
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