College: important, but not magic bullet

February 9, 2011 — As American policy-makers grope for strategies to deliver broadly shared economic prosperity, calls for increased education are more insistent than ever. In his State of the Union address, President Obama drew applause by declaring that the United States needs to “out-innovate, out-educate, and out-build the rest of the world.” In that speech, and in a December address at a technical college in North Carolina where he outlined his economic vision, Obama repeated a pledge that he made upon taking office: by 2020, America will again have the highest proportion of college graduates in the world.

With these goals, Obama is taking up a “competitiveness agenda” that has been embraced, to varying degrees, by every American president since at least Ronald Reagan — in other words, since the twin pressures of technology and globalization began to reshape the economy. And it’s not only politicians who emphasize the importance of schooling: a recent National Journal article exploring the roots of the country’s current job shortage reported that nearly every economist interviewed for the story “called education a key piece of any solution.”

The importance of education to an individual’s earnings potential, and the value of public investment to promote education and innovation, is indeed one of the few things on which most economists agree. But a closer look at the actual experience of American workers in recent decades suggests that the message often implied by what might be called “the education answer” — that vast quantities of good-paying jobs are waiting to be created in new, scientific-sounding industries, and that a bachelor’s degree is the key to landing one of them — is woefully incomplete.

Some form of post-secondary education or training does seem to have become, as one recent report put it, “the only pathway” to a middle-class job. But if education has become a necessary prerequisite for economic success in modern-day America, it is hardly sufficient. And, a number of economists and other policy thinkers worry, by placing such an emphasis on the virtues of higher education, our policy elite is foreclosing discussion of alternative or complementary strategies that could deliver gains to many Americans — those with and without college degrees alike.

Male college grads “running just to keep in the same place”

Discussion of the performance of the American economy in recent decades often describes the rise of a “hollow middle.” The idea is that technology and globalization have eliminated — first in manufacturing, and later in business services — ­­broad swathes of “mid-skill” jobs. This process, the thinking goes, created a polarized economy that puts holders of bachelor’s and advanced degrees — who have skills that are enhanced, rather than displaced, by technology — on one side, and workers with less education on the other.

But this account obscures an important fact: over a period of several decades, workers with only a bachelor’s degree have not fared particularly well. It’s true that the college-educated continue to do far better than those below them on the education scale, and that despite the rising cost, higher education is still generally a good investment. The so-called “college wage premium,” which rose sharply during the 1980s, persists; according to data from the Bureau of Labor Statistics covering the last three months of 2010, the average worker over age 25 with a bachelor’s degree but no advanced degree earned about 66 percent more than a high school graduate of the same age. And while unemployment spiked for all education groups during the current recession, mid-career holders of college degrees weathered the storm far better than most.

Relative to the experience of college graduates in the post-war decades, however — or to the expectations that they had for their own careers — recent generations of bachelor’s degree holders have seen disappointing results. After World War II, middle-class families from all education backgrounds saw steady income gains; the connection between a degree and a middle-class life today is in many ways rooted in the expectation that college graduates will continue to see such gains, even as those without a degree lose ground. Over the past decade, though, workers with only a bachelor’s degree have actually seen their real wages decline slightly, even as the cost of college has skyrocketed.

And these struggles are not only a function of the current downturn: the MIT economist David Autor wrote recently that “the real hourly earnings of males with a four-year college degree and no post-college education rose by only 10 percent between 1979 and 2007.” The growth in the college wage premium for men over that period, Autor wrote, was as much a function of declining earnings for those without college degrees as it was gains for those with them, a situation he described as “running just to keep in the same place.” (Women with bachelor’s degrees, while still earning less than men of equivalent education, made far greater gains — perhaps because obstacles that had previously held down their earnings began to disappear — as did advanced degree holders of both genders.)