Confusion Over Education

I think that Peter Orszag is confused about higher education. In his recent op-ed, musing over why there are so many cab drivers, bartenders, and other jobs with what should be low entry requirements have college degrees:

What has changed? One possibility, as I’ve previously written, is that the effects of a globalizing workforce are creeping up the income scale. Many jobs that once required cognitive skill can be automated. Anything that can be digitized can be done either by computer or by workers abroad. While the “winner take all” phenomenon may still mean extremely high returns for workers at the very top, that may be relevant for a shrinking share of college graduates.

I think that this expresses confusion. It’s simply not the case that we’ve lost millions of jobs in which college degrees are actual requirements over the last half dozen years. Most of the jobs that have been lost have been in construction and manufacturing. What’s been happening is that we’re not creating new jobs that actually require college degrees at a robust rate.

Right off the top of my head, I can think of any number of reasons that this might be happening other than just technological obsolescence which I think is actually a pretty minor factor. The first represents a battle I’ve been fighting off and on for more than thirty years. When production moves overseas, it’s not the only thing that moves. Production engineering moves, too. Then other engineering disciplines and all of the support staff that go with production and engineering. Ultimately, all that’s left here are owners, not many of those, and eventually those will be gone too as the new overseas enterprises give birth to new companies with ownership in their home countries.

Second, it’s the barriers, stupid. The reason that the greatest growth in jobs that actually require college educations is in highly subsidized and regulated sectors like healthcare, finance, and education is that they’re heavily regulated and, in fact, protected. If you want more jobs that actually require college educations, change the regulations.

Third, a large continuing supply of cheap unskilled labor doesn’t just keep wages low in sectors like agriculture and hospitality that routinely use cheap unskilled labor. It causes businesses that might have used more skilled labor to change how they organize their businesses. Rather than hiring a few people making relatively high wages and letting them work with machines to do the job, you’ll hire a lot more people making scut wages and doing the job completely manually. That’s not just because it’s cheaper. It’s also a desire for control. A few employees with relatively high, scarce skills makes you more dependent, limits your options, more than a larger number of minimum wage and sub-minimum wage employees.