That’s what Vincent Fernando is saying over at Business Insider:
Many like to paint America’s high unemployment problem as the death of America’s economic model, or the result of foreign ‘slave labor’ whereby low-value and cheap workers are taking U.S. jobs. It’s painted as a problem whose fault lies everywhere but in the American people.
But what if highly skilled foreign workers are taking jobs from lesser skilled Americans? Maybe foreign workers are doing better work for cheaper, not just the same work for cheaper. Some might even be earning more than many Americans, but at the same time delivering far more value to their employers.
This is obviously a touchy subject, but let’s take a look at the breakdown of U.S. unemployment, even if it opens up some ugly conclusions.
As shown below, the majority of America’s soaring unemployment problem is the result of people without four-year college educations losing their jobs. Unemployment for Americans with only a high school degree went from from a rather benign 4.2% in 2007 to 10.8% in June 2010, as shown below.
Here’s the graph he shows:
You can click on the graphic for a larger version.
I’m skeptical for a number of reasons. I think he’s conflating the gate-keeper functionality of college degrees with the educational requirements of jobs. If we magically gave everybody bachelors degrees, would we have zero unemployment? Or would we have a signficantly higher percentage of people with bachelors degrees who were unemployed? I think the latter and here’s why.
The number of people unemployed isn’t exclusively composed of people without college degrees as his graph illustrates. Wouldn’t that have to be the case in order for the result illustrated in my graph? Unless he’s saying that jobs for people with college degrees aren’t being created here because there aren’t people with college degrees here to fill such jobs. Try to explain that to the tens or even hundreds of thousands of Americans with college degrees whose jobs have been off-shored over the period of the last fifteen years.
I note, too, that China has a major problem with finding jobs for their own people with college degrees. According to the Chinese government the unemployment rate for Chinese students with newly minted college degrees is 30%. That certainly suggests a substantial supply of new college grads who are eager for jobs undoubtedly at lower pay than would be expected here but it doesn’t suggest an “if you’ve got the grads the jobs will come” dynamics.
Contrariwise, my model for explaining what’s going on is that the U. S. has seen phlegmatic job growth over a period of more than a decade due to a combination of overseas competition, off-shoring, technology, and market distortion due to a series of poor policy choices over the last 40 years. I also think that the value of a college degree is exaggerated due to the very high earnings of a relatively small number of workers whose incomes we subsidize the living daylights out of. When you’ve got several million people making over $300,000 a year via subsidies it’s bound to skew the statistics pretty severely.
However, let’s assume he’s right. What to do about it? Education through age 18 or high school graduation or equivalent is compulsory nearly everywhere in the United States. That means that most people without high school diplomas don’t have them because they’ve dropped out of school. Enforcement would be a necessary tool for ensuring that this segment gets more education. It’s unclear to me how chaining students either figuratively or literally to their desks will guarantee a better workforce.
A major reason for people with high school diplomas not completing their college degrees is financial. This post is already too long so I’ll let anybody who’s interested look into the difficulty of getting student loans these days. Essentially, if we want substantially more people to graduate from college we’re going to need to pay for them to do it and I can’t imagine that proposal going too far considering the many demands on the public purse these days, especially at the state and local levels.
So, contra Mr. Fernando I’d say that the solution is anything but easy.
Sadly, I’ve spoken with some recent graduates who haven’t been able to find jobs in their field, and I suspect their problem might be the result of over-specialization in the wrong field. A gentleman I spoke with last week has two post-graduate degrees and has been working at a job that would regularly hire high school graduates.
As I understand Fernando’s data, he would consider this a success. The gentlemen is after all employed, and there is nothing wrong with Albert Einstein waiting tables. It’s proof that if everyone had a doctorate degree, unemployment wouldn’t be such a problem.
As I imply in my follow-up post to this one, there’s an opportunity cost issue as well. All of that education isn’t free.
Take your own profession as an example. Right now it’s pretty clear that the ability of the nation’s law schools to graduate lawyers has out-stripped the ability of the country to find jobs for lawyers, at least as lawyers. And once the would-be lawyers are employed as insurance claim adjusters (the first job my dad got out of law school 70 years ago because there were no jobs for lawyers) they’ll be saddled with a couple of hundred thousand dollars of additional debt. If they can get a loan to put themselves through school. that is.
I fear what’s happening to law students is just the leading edge of a bubble that will probably envelope many college graduates. Cheap credit, subsidized by a number of well-meaning government programs, encouraging indebtedness in pursuit of degrees optimistically over-valued. The loans are non-dischargeable, so adverse consequences are borne solely by the student, while the lenders rake in money with little risk and schools increase tuition at rates well above inflation. Since payment is deferred during enrollment, students stay in school longer or return turn to school with the help of more student loans.
I readily expect that the non-dischargeability rules will be softened as more hardship stories surface and of course student loan interest rates will go up.