Northeastern University Center for Labor Market Studies associate director Paul E. Harrington moved to Philadelphia-based Drexel University. Harrington has been a frequent contributor to NEJHE and to NEBHE events

****

Joseph M. O’Keefe, S.J., will also leave leave Boston for Philly, departing as dean of Boston College's Lynch School of Education to become ...]]>

Northeastern University Center for Labor Market Studies associate director Paul E. Harrington moved to Philadelphia-based Drexel University. Harrington has been a frequent contributor to NEJHE and to NEBHE events

****

Joseph M. O’Keefe, S.J., will also leave leave Boston for Philly, departing as dean of Boston College's Lynch School of Education to become the 27th president of Saint Joseph's University, starting May 18.

****

Jamshed Bharucha, provost and senior vice president of Tufts University, was elected the 12th president of the Cooper Union for the Advancement of Science and Art, effective July 1, succeeding George Campell Jr.

****

Bryant University hired Robert Shea as the college's director of faculty development. Shea previously served as director of the Office of Student Learning, Outcomes Assessment and Accreditation and assistant director of the Instructional Development Program at the University of Rhode Island.

(This lively debate on the future demand for college-educated workers will continue in our Forum.)

“About every two years someone comes up with this story. There is absolutely nothing to it—it's simply not true,” Peter Capelli, Professor, Wharton School, University of Pennsylvania, commenting on the Georgetown's college labor supply shortage forecast.

(This lively debate on the future demand for college-educated workers will continue in our Forum.)

“About every two years someone comes up with this story. There is absolutely nothing to it—it's simply not true,” Peter Capelli, Professor, Wharton School, University of Pennsylvania, commenting on the Georgetown's college labor supply shortage forecast.

—“Prediction of Worker Shortage Has Critics,” The Press-Enterprise (Riverside, Calif.), April 10, 2010.

The recent response by Anthony Carnevale et al. to our analysis of the fundamental shortcomings associated with their predictions of widespread college labor shortages focuses on three areas. First, they suggest that we are educational Luddites by noting in the title of their response that we believe too many people have earned college degrees in New England. Carnevale et al. claim that we think, “New England is producing 35% more college degrees than are actually required for current and future jobs” because we recognize the real labor market problems that confront too many of our college graduates. We don’t think that New England colleges produce too many graduates, but we do find that a considerable number of recent and past graduates are malemployed and don’t get much of a financial return on their investment and that of society.

We simply argue that Carnevale exaggerates the size of the existing college labor market and overstates demand now - and therefore in the future - because he defines every employed college graduate as being in the college labor market. Why does he do this? Primarily, because he refuses to recognize the widespread problem of malemployment of college graduates, especially in the current, very difficult, employment situation confronting the nation. An even casual reading of numerous articles in the media and on the Internet on the labor market adjustment problems of college graduates, their rising debt loads, and increasing loan defaults would illustrate the situation.

We find that about 25% of all employed college-educated adults in the nation and closer to 40% of recent graduates work in non-college labor market jobs. Some voluntarily do so while others are trapped involuntarily. But, in either case, they receive a substantially diminished rate of return to their degrees compared to those who become employed in a college labor market occupation. We do not argue that these graduates should not have gone to college. Instead, we argue that colleges, employers and other labor market intermediaries need to develop strategies to reduce malemployment rates among college graduates and help them obtain better access to occupations that allow them to utilize their college skills. Otherwise, the expected size of the payoff to a college degree for them is not very high. Denying the existence of widespread and costly malemployment problems does not make this very severe problem go away. It simply diminishes the ability of our education and labor market institutions to effectively respond to the needs of college graduates who are stuck in low-skill, low-mobility and low-wage jobs.

The second issue Carnevale points to is the long-term rise until recently (2000) in the economic return to a college degree, suggesting that we think that college does not pay-off. Again, we have argued that college pays off on average and have written plenty of papers about this. The results of our recent multivariate analysis of the annual earnings premiums of college graduates in New England during 2009 summarized in the Chart 1 below reveal very large earnings payoffs to college graduates. However, the findings clearly reveal that, whether a given graduate’s degree pays off, depends on the success of the individual becoming employed in an occupation that has a substantial set of duties and tasks that utilize the knowledge, skills and abilities that they acquired in college. The estimated annual earnings advantages over and above a high school graduate for those who earn a degree and become employed in the college labor market were 55% for those with an associate degree, 71% for those with a bachelor’s degree, and 107% for those who earned an advanced degree. Among those graduates who were malemployed, however, we found very modest annual earnings advantages ranging from only 5% to 8%.

Source: American Community Survey, Public Use Data Files, analysis by the authors

Carnevale argues that we use a rigid set of “elite, traditional white-collar and professional jobs” to define the college labor market. In fact, we use a very broad-based set of occupations and an objective source of information that utilizes large-scale occupational analysis studies of the knowledge, skills, and abilities used at the workplace. This system was developed and regularly updated by the U.S Department of Labor, Employment and Training Administration through its O*NET system. We readily admit that we exclude many occupations from our listing of college labor market jobs, and our argument is that if you include all occupations in the definition of a college labor market (as Carnevale does), then its usefulness as a measure of the demand for college-level skills has lost most of its utility. Including “everything” in your definition is hardly the basis of any classification system that could serve as a meaningful taxonomy of employer requirements around postsecondary knowledge, skills, and abilities.

The findings in Table 1 below provide estimates of the occupational distribution of the jobs held by recent college graduates under 25 who were malemployed during 2009. The table illustrates the kinds of occupations that we exclude when we define the college labor market. The data also illustrate the kinds of occupations Carnevale et al. include when they determine the size of the college labor market. These 15 occupations are dominated by waiter/waitress, bartender, cashier and retail sales jobs, and low-end service and clerical jobs. The inclusion of so many waitress, waiter, and bartender occupations gives a new meaning to STEM occupation. By the Georgetown authors’ reckoning, all of these are part of the college labor market.

Table 1:

Distribution of the Malemployed with a Bachelor’s Degree Only Under Age 25, by Occupation, Annual Averages, 2009, U.S.

What’s the rationale for including these occupations in the measure of the college labor market? Carnevale et al argue that college degrees generate positive earnings premiums whether graduates are employed as they put it as “insurance agents or a rocket scientist.” But this is a poor example of what they see as our exclusionary classification. We include both of these occupations in our current college labor market definition. We do exclude most clerical, blue-collar production, material moving, retail sales, low-level services and jobs like bartenders such as those listed in Table 1 where entry skill requirements are well below the college level. We suspect that most fair-minded observers would agree that these occupations do not require a bachelor’s degree to become qualified for employment. Nevertheless, the proof is in the pudding and this gets us to Carnevale’s third point.

Carnevale argues that college graduates working in these sorts of non-college labor market occupations earn more than their high school graduate counterparts who are employed in those same occupations—like bartenders or landscapers. As we noted in our initial article in NEJHE, we agree. College graduates who work in occupations outside the college labor market do typically earn slightly more than their high school graduate counterpart, but not much more, and a lot less than their fellow college graduates who did become employed in a college labor market job.

Our findings clearly reveal that in New England college graduates at the associate, bachelors and advanced degree levels employed in occupations outside of the college labor market had annual earnings that were only 5% to 8% higher than those of their high school graduate counterparts, a small but statistically significant annual earnings advantage. Based on other recent research by the Center for Labor Market Studies, we find that some of this advantage is associated with better literacy and/or numeracy skills, making these malemployed college graduates slightly more productive than their high school graduate counterparts—within the constraints of the task/skill requirements of their occupations. That is, being better at math may raise the earnings of malemployed college graduates relative to employed high school graduates—but not by much.

A malemployed college graduate’s earnings are constrained because their ability to use the college-level skills they acquired are limited by the job duties and work tasks associated with their occupation. Graduates of a rocket science program who work as bartenders gets bartender pay. However, their pay will rise sharply when they become employed in a rocket scientist occupation where they are able to engage in a set of job duties and work tasks that better capitalize on the knowledge, skills and abilities that they developed while earning their degree.

What is the evidence for this? As our regression results reveal, college graduates in New England who work in college labor market occupations had annual earnings premiums during 2009 that were about 10 times greater than those of their counterparts who worked in non-college labor market jobs. New England residents with associate degrees who worked in college labor market jobs had an annual earnings premium of 58% compared with just 5% premium for their graduate peers who worked in non-college labor market occupations. At the bachelor’s degree level, New Englanders who work in the college labor market had an annual earning premium of 78% compared to only 8% among those who were employed in jobs outside the college labor market. At the advanced degree level, those employed in the college labor market had an annual earnings advantage of 108%, compared with just 8% for those who worked outside the college labor market

Carnevale and his colleagues do a disservice to the nation’s higher education system by so dramatically overstating the size of the college labor market. The Georgetown projections exaggerate the demand for college degrees in the present and future while at the same time ignoring the large and severe problems of malemployment and even joblessness among college grads around the nation. The consequence is that it suggests that colleges should prepare for a labor shortage problem that is based on a false premise. The nation’s labor markets continue to struggle with unemployment rates that hover close to 10% and under-utilization rates closer to 20%. The Georgetown analysis also fails to recognize the collateral impact of malemployment among college graduates. As college grads move down the labor market queue into occupations dominated by those with less schooling, the employment rates among those with fewer years of schooling plunge. Added labor supply also depresses their wages. Especially hard hit are non-college-educated teens and young adults who can no longer find work as recent college grads crowd them out of the labor market. These displacement effects further erode the value of a college education. So the problem of malemployment among college grads creates additional problems of unemployment and underemployment among non college grads, especially teens and young adults.

The substantial earnings losses associated with malemployment of college graduates also reduce their tax contributions to federal, state and local governments in the form of lower income taxes, Social Security payroll taxes, and state sales taxes. Malemployed graduates are also much less likely to receive health insurance and pension coverage from their employers, further reducing the private and social return to their investments in college.

It is time to stop fantasizing about the future and to start addressing the severe malemployment and joblessness problems confronting college graduates in the present day. The nation needs a laser focus on creating college-related employment opportunities and upward mobility pathways in today’s job market. Right now, there are at least five unemployed workers for every vacant job, and our recent analysis of state job vacancy data suggests that the ratio is 8 to 1 when we focus on only full-time job vacancies and unemployed persons. The pace of new job creation in the U.S. has been sluggish at best. Indeed, at the current rate of growth, the nation won’t recover the entire payroll jobs lost during the Great Recession and its aftermath until the end of 2017. If the labor force continues to grow as projected, the pace of reduction in unemployment rates will be even slower. Higher education’s major challenge is not a labor shortage in 2018. Instead our task is helping our graduates find intellectually fulfilling and economically remunerative employment that provides upward mobility, and favorable economic returns on skills and abilities that all of us desired when we entered college.

________________________________________________________________________

Paul E. Harrington is associate director of the Center for Labor Market Studies at Northeastern University. Andrew M. Sum is the center’s director.

The notion of the "college labor market" as a fixed set of occupations is remarkably static. In contrast, we assume that job and skill requirements are dynamic.

(This lively debate over future demand of college-educated workers will continue in our Forum.)

Northeastern University economists Paul E. Harrington and Andrew M. Sum argue that in our ...]]>

The notion of the "college labor market" as a fixed set of occupations is remarkably static. In contrast, we assume that job and skill requirements are dynamic.

(This lively debate over future demand of college-educated workers will continue in our Forum.)

Northeastern University economists Paul E. Harrington and Andrew M. Sum argue that in our recent report Help Wanted, we “radically overstate the size of the college labor market.”  This overcount, they claim, has nothing to do with the recession. “Even in times of near full employment,” Harrington and Sum argue that “substantial shares” of college-educated workers are “overeducated,” or “malemployed.” Harrington and Sum argue that we so overstate demand for college labor that we “ignore perhaps the most pressing problem facing college graduates today: malemployment, arguing the reality is that more and more college graduates are stuck in low-wage, low-skill jobs. This assertion contradicts the best available data on the hiring and pay practices of American employers. The evidence on earnings and college degrees is unequivocal: Employers continue to demand better-educated employees, and are willing to pay more to get them.

Harrington and Sum rely on official national and state Bureau of Labor Statistics (BLS) data, which implies that that New England is producing about 35% more college degrees than are actually required for current and future jobs. If true, their empirical assessment of “substantial shares” of “malemployed” people with college degrees in New England includes about 1.1 million people. [1] However, the earnings data raise serious questions about the quality of particular state and national government education data that undergirds their analysis.

If Harrington and Sum and the national and state BLS data are correct, "overeducation" and “malemployment” are rampant in every one of the New England states:

• Connecticut has 248,062 unnecessary degrees;
• Maine has 79,738 unnecessary degrees;
• Massachusetts has 531,669 unnecessary degrees [2];
• New Hampshire has 119,705 unnecessary degrees;
• Rhode Island has 70,904 unnecessary degrees; and
• Vermont has 51,026 unnecessary degrees.

Harrington and Sum have a point on “malemployment.” We agree there is some mismatch between college curricula and career opportunities. As they demonstrate, there are bartenders with bachelor’s degrees even in good times. However, they take the argument about over-qualification too far. The bartenders with bachelor’s degrees (and similar stories) are a testament to our failure to connect college programs to career pathways, but they do not signal overproduction of college degrees in general.

To the contrary, since the 1980s we have been underproducing college talent, and the college wage premium is the proof. Degree production in the 1980s flattened out after baby boomers reached college graduation age, and has remained flat ever since, at slightly above 40% of the labor force. Over the past decades, employers have responded to scarcity in college talent by raising college wages relative to the wages of workers with no more than high school diplomas. Yet in spite of the growing economic advantage of college degrees, the overproduction, over-qualification or “malemployed” school of thought still has a strong following. Harrington and Sum are not alone in their view that Americans get more college than is good for them. [3]

Overproduction?

The overproduction argument is always in the public dialogue, but gets more traction in hard times when even the most highly educated are unemployed or underemployed. The Great Recession of 2007, like recessions before it, has many people publicly wondering whether college is a safe investment. Hard times always inspire stories like bartenders with bachelor’s degrees, as well as the ever-popular cab drivers with PhD's and janitors with advanced degrees. With many college graduates unsuccessful in finding work, the temptation to reject postsecondary education as a viable economic option grows more tempting, especially among working families where college costs are always a stretch. Since we project a continuing slow recovery through 2016, the over-qualification and “malemployment” argument will likely get even more traction.

Media stories on the value of college follow the business cycle, and the bad advice gets more pointed as the recession deepens. The prominent conservative economist Richard Vedder thinks we need only a small fraction of the college talent we now produce. Charles Murray believes the vast majority of Americans are not innately intelligent enough for real college curricula. A few months ago, The New York Times suggested “Plan B: Skip College,” while the Washington Post ran “Parents Crunch the Numbers and Wonder, Is College Still Worth It?” Even the Chronicle of Higher Education has succumbed, recently running “Here’s Your Diploma. Now Here’s Your Mop,” a story about a college graduate working as a janitor that implies a college degree may not be worthwhile in today’s economic climate.

The New York Times and other prominent newspapers were printing the same kind of stories in the early 1980s during the last severe recession. The Times ran headlines like “The Underemployed: Working for Survival Instead of Careers.” The Washington Post even ran the college graduate-to-janitor story back in 1981: “When Lyman Crump graduated with a liberal arts degree he was confident his future rested in an office somewhere. But after working a year as a file clerk, Crump, 31, took a higher-paying job as a janitor.”

These ideas of “overeducation” were popular among labor economists in the 1970s and 1980s. It was in the context of stagflation in the 1970s and early 1980s that the big think books and articles were written about over-qualification and “malemployment.”  In that era, Harvard economist Richard Freeman wrote the Overeducated American and University of Pennsylvania sociologist Ivar Berg wrote Education and Jobs: The Great Training Robbery. It was also in the 1970s  that Frederick Harbison, the seminal author mentioned in Harrington and Sum’s critique of our work, coined the term “malemployment” as he worried over the ability of the economy to employ the full talents of the baby boom in other than low-wage, low-skill jobs. The BLS chimed in as well. As late as 1984, as the “bidding war” for college talent was underway, the New York Times quoted BLS Associate Commissioner Ronald Kutscher as saying “We are going to be turning out about 200,000 to 300,000 too many college graduates a year in the 80's. ... the supply far exceeds the demand.”

A boom in college jobs and earnings

Their central premise proved embarrassing when the boom in college jobs and earnings came in the 1980s—a boom that has continued with no sign of stopping, although it has slowed in recessions and picked up again in recoveries. After the early 1980s, the surplus of baby boomer college grads quickly became a shortage and spawned the most rapid and highest college wage premium in history.

The source of error in the dire predictions in the 1970s and early 1980s was too strong a focus on demography and not enough focus on the "upskilling" that would come with the knowledge economy that was replacing the industrial economy. At 74%, the college wage premium still dominates our labor markets and is the major cause of growing income inequality. Moreover, most of the growth in college degree requirements and earnings came in occupations where college degrees weren’t deemed “necessary” in the official data—occupations like insurance agents and financial analysts.  Going forward, both the demography and economic change favor increased demand for college degrees. The baby boom that reduced the college wage premium in 1970s by surging into the workforce will be surging out of the labor force over the next two decades. This most highly educated generation includes more than 40 million workers, each with roughly 40 years of experience. The retirement of college-educated baby boomers will only increase the demand for degrees to make up for their lost educational attainment as well as their experience.

That’s why we use the actual earnings of college to determine the demand for postsecondary education in the labor market instead of relying on the BLS’s subjective and static designations of college and non-college occupations. We reason that if the wages of people with postsecondary education are high and/or rising relative to people without postsecondary education within an occupation, there is an advantage that postsecondary education confers.  People with postsecondary education in these occupations, therefore, are not overeducated, because they see a real return to their educational investment—while all degrees may not produce equal returns, in virtually all cases, that return is far greater than the cost of obtaining the degrees. [4]

The difference between Harrington and Sum and BLS and our method is that we believe that we should not define the "college labor market" as “essentially a set of occupations,” in keeping with the elite, traditional, white-collar and professional jobs. The notion of the "college labor market" as a fixed set of occupations is remarkably static. In contrast, we assume that job and skill requirements are dynamic. Technology and other economic forces are constantly updating the skill requirements in jobs.  We view a college job as any job that brings substantial, positive earnings returns to a college degree, irrespective of occupation—whether an individual is an insurance agent or a rocket scientist. In contrast, Harrington and Sum argue that the economy and employment is like a game of musical chairs where opportunity is limited by a very small and fixed set of college jobs, many fewer than the economy’s college graduations.

Most importantly, what Harrington and Sum miss by defining occupations as either college occupations or non-college occupations is the shift toward increased postsecondary requirements that occurs even within occupations that are not deemed college jobs at a given point in time.  Their conclusions don’t coincide with the consensus among labor economists—that there has been a consistent shift towards increased postsecondary requirements on the job across a growing share of occupations that previously did not require two year or four year college degrees. [5] The increasing demand for college degrees among managers, healthcare workers, and office workers are examples in the white-collar world.  The increasing degree requirements among computer and information systems workers, production workers who become degreed technicians, the growth in healthcare technicians, and increased degrees among workers in utilities and transportation are examples in the blue-collar and pink-collar worlds.

The standard explanation for those shifts within the economics literature is a concept called “skill-biased technology change.”  The core mechanism behind this is that information technology automates repetitive tasks, increasing the relative value of non-repetitive tasks in individual occupations.   The relentless engine of technological change, spurred onward by global competition, drives up skill requirements and demand for postsecondary education and training within occupations—all occupations, not just “professional, technical, managerial and high-level sales occupations.” There is no indication that the economic trend has suddenly reversed itself, and the demographic effects of baby boom retirement are clear.

Moreover, our method is careful to minimize counting statistical outliers like those ever-present bartenders, cab drivers and janitors with BA’s and graduate degrees. As we point out in our Help Wanted study, these kinds of mismatches between degrees and low-skilled jobs are relatively small in number and don’t matter much in an economy of almost 150 million jobs. In addition, we have to account for the fact that most bartenders with bachelor’s degrees will eventually move on to better-paying jobs. Many workers are just passing through low-wage, low-skill jobs as part of their natural career progression and are not indicative of career-long effects of college degrees. Over a 10-year period, each cashier job has 13 incumbents who permanently leave the occupation; among medical doctors, that replacement rate is only one. People rarely leave jobs that require college because they have the best earnings, benefits and working conditions. There are many more brain surgeons who used to be cashiers than there are cashiers who used to be brain surgeons.

In addition, these kinds of non-college jobs are greatly over-represented in the official data because so many of them are part-time.  Although low-wage, low-skill jobs make up 20% of all jobs in a single year, they only make up 14% of the hours worked in a single year. Jobs that require a BA or better make up 30% of  all jobs, but 75% of them are full-time, full-year jobs, compared with 64% of jobs that require a high school diploma or less.

The BLS method: flaws and misinterpretation

Bartenders with bachelor’s degrees aside, in the final analysis, Harrington and Sum rest their empirical case on an appeal to a higher authority above reproach: the U.S. Bureau of Labor Statistics. Harrington and Sum write:

“Could BLS, the most objective, impartial and certainly data rich observer of American labor markets so objectively underestimate the demand for college graduates for such a relatively short time horizon? Our answer to this is no!”

We beg to differ.

We have high regard for BLS, and believe that the national and state level BLS occupational and employment data are unimpeachable. However, the BLS educational data is an offhand by-product of its employment and occupational data and is of substantially lower quality.

To a large extent, the poor quality of data that connects education to labor markets is a natural function of institutional silos. Labor departments at the federal and state level produce good employment, earnings and occupational data but are weak on its link with education. Education departments are strong on educational data but not its linkages with occupational and labor market data. Since no agency has responsibility for linking education and employment data, the connection is done badly and does not square with the broader economic literature that has shown skyrocketing returns to college degrees since the 1980s. That is why we set out in Help Wanted to link degrees and jobs both historically and over the near future.  Our report includes our results.

Because of the silos that separate official data on jobs form the official data on college degree production, the quality of data that links education to careers gets very little scrutiny  Every state and the vast majority of social scientists use the BLS education data uncritically. Similarly, Harrington and Sum accept the BLS data as gospel. In this regard, they are not alone. BLS’s deserved reputation on employment data gives its undeserved credibility to its static and misleading metrics on education requirements in labor markets. Very few ever look closely enough to see the huge discrepancies between the BLS and Census data on educational demand, or read the fine print, indicating that the Bureau does not claim to project educational demand. [6]

The Census data allow us to assess the BLS method. The Census Bureau actually counts college workers and their earnings in jobs. As time passes and the census data catch up with the BLS projections, we can determine if the BLS projections were accurate. To get to the punch line: The BLS projections always underpredict college demand.The BLS estimate the numbers of college degrees required and the census data report the actual numbers of college degrees employers hired; their conclusions are dramatically different. When we compare the BLS projections for 2006 and the actual count of people in the labor force with degrees in 2006, we see that the BLS undercounted the true count of postsecondary-educated workers by 17 million  in 2006, or roughly 30%, and by 22 million, or 40% in 2008. Our alternative method missed by 4%.

The bottom line is that the BLS predictions didn’t even come close to what actually happened in the economy. The only way to reconcile the BLS projections with what actually happened is to assert, as BLS, Harrington and Sum argue, that BLS is predicting the number of college degrees that employers require, not the actual numbers of college educated workers that employers hire. If this is the case then not only did employers hire these "extra" workers, in 2006 and 2008, but paid them more than 70% wage premiums for postsecondary degrees they didn’t need.   This would be cause for concern—it would mean that in 2008, 22 million workers—or more than a third of all workers with postsecondary education—got an appreciable economic benefit from their degrees that they didn’t earn. It would mean that employers were smart enough to cut back the college wage premium in the 1970s when they experienced an oversupply, courtesy of the baby boom, but the same employers started throwing money at degrees in the 1980s and continue to do so. If Harrington and Sum are correct, crisis abounds, markets don’t work, employers are irrational, and preparing your children for college is naive for all but a very select few.

We hope the dialogue over the measurement of the future demand for postsecondary-educated workers does not end here, but is carried into state agencies.  We need to know why the national and state BLS data show so much difference between what they estimate as the number of required college degrees and the actual counts of college degrees in each state. Intuitively, the difference between what the BLS says is required and the actual number of degrees is overqualification or “malemployment.” If that’s what the BLS believes, it needs to expand on why overqualified workers with college degrees make so much more than workers with high school or less. Eventually, the steady progress in most states to align education and careers will ultimately make the current flaws in our information systems moot, but in the meantime the myth of overeducation is perpetuated in national and state labor market data.

Unfortunately, the myth of overeducation misinforms policymakers looking for places to cut their budgets, and, worst of all, discourages decisions about college-going that are made at kitchen tables all across America. The sensationalist stories, the high unemployment among college graduates, and the misleading official data are unlikely to keep middle- and upper-class youth from going to college.  The real tragedy of these headlines is the message they send to less privileged youth for whom college is not an assumed path. The negative press on college fuels preexisting biases among working families that college is neither accessible nor worth the cost and effort. Moreover, the bad press and worse data strengthen the hand of elitists who argue that college should be the exclusive preserve of those born into the right race, ethnicity and bank account.

[1] Nationwide, a comparison of the BLS and Census data shows 37% or 22 million college degrees that are not required, even though employers pay much higher wages for these unnecessary degrees than they do for high school degrees.  See author’s calculations, CPS, various years.

[2] This count includes associate degrees and higher.

[3] Anyone who knows them or their work knows that Harrington and Sum are not to be associated with another popular view on overqualification that begins with the assertion that the majority of Americans are not smart enough for college. This elitist view on what’s best for other people’s children is most closely associated with Charles Murray and Richard Vedder and many more who believe we are lowering the bar by increasing access to college. To their credit, Harrington and Sum worry that college isn’t good for many students, not that the students aren’t good enough for many colleges. Our argument with Harrington and Sum is one of fact not values.

[4] Our projection method intentionally minimizes the impact of outliers—like bartenders with college degrees. For more information, please see the technical report on our website and Appendix 4 in our report.

[5] There is a deep and long literature on this subject.  It is best and most recently summarized in Claudia Goldin’s and Larry Katz’s book The Race Between Education and Technology (Harvard University Press, 2008).  The empirical essence of Goldin’s and Katz’s and Katz’s narrative is that the rising wage premium for college proves that technology is increasing the demand for college workers faster than we can produce them since the 1980s.

[6] The BLS does not claim to analyze educational demand nor do they project these estimates. The BLS data don’t project skill change at all. Instead they “assign” the most significant education and training requirements for employment in 755 particular occupations. BLS does not track skill or earnings from skill in occupations empirically.  Their educational assignment method is based on the subjective judgment of analysts in consultation with experts and 755 occupations, and requires a lot of subjective judgment and consultation. To some extent, BLS‘s limited efforts are a function of their limited goals. The fine print in the BLS data states at great length that their purpose is to represent the most significant education and training requirement in particular occupations. BLS recognizes assigning a single education level to a job does not accurately reflect what is needed on the job.  As they will tell you if asked, virtually every occupation in the economy comes with a variety of legitimate educational attainment levels.  According to BLS:

Because of the variability of job functions within a given occupation, and because different employers have many different requirements of education and training, workers in the same occupation can have substantially different education and training backgrounds. [BLS, 2009]

The Georgetown Center on Education and the Workforce has engaged in a highly publicized campaign claiming that the nation will face a very substantial deficit of college graduates by 2018 if the American postsecondary system fails to rapidly expand the number of college degrees it awards each year. Indeed, the employment ...]]>

The Georgetown Center on Education and the Workforce has engaged in a highly publicized campaign claiming that the nation will face a very substantial deficit of college graduates by 2018 if the American postsecondary system fails to rapidly expand the number of college degrees it awards each year. Indeed, the employment projections developed by Anthony Carnevale and his colleagues at Georgetown University suggest that there will be a shortfall of 3 million college graduates by that year. Such a labor shortage, if it were to actually materialize, could result in an enormous amount of lost production, reduced incomes in the U.S. and a deterioration in our competitive position in the world economy. Firms unable to hire domestic college graduates might shift their production overseas or look to postsecondary institutions abroad for new sources of high-end labor supply to meet the shortfalls predicted by the Georgetown authors.

So what is the evidence of future labor shortages in college labor markets? Should higher education institutions place some bets in terms of organizational structures and resource allocation in response to this projection of a serious labor shortfall? These are important questions since the higher education system has been burned by faulty projections in the past. Perhaps, the most egregious example of this was the “college enrollment crisis” that was forecast by a number of observers in the early 1980s. At that time, some college analysts expected that by the end of the ’80s, postsecondary institutions would face large enrollment shortfalls, as the size of the high school graduate cohort was forecast to decline sharply through the mid 1990s as a consequence of the baby bust generation coming of age. While the number of graduating seniors from the nation’s high schools did indeed decline, no enrollment crisis occurred. Instead, higher education experienced a renaissance from its 1970s doldrums, with increased enrollments and sharp rises in tuition and fees-signaling the effects of a sharp increase in demand for college degrees as the economic gains from completing college rose sharply.

While decline, consolidation and merger were the watchwords of the "enrollment crisis" proponents, colleges and universities in fact prospered over the period when shortfalls in enrollment were expected. While the forecasters got the demographics right, they didn’t account for changes in the nature and magnitude of job growth that favored those with more years of formal schooling. Thus, they missed the rise in college enrollment rates that would take place among high school seniors and the sharp growth in college enrollments among adult women that occurred during that time period; both associated with sharp increases in the earnings advantages of graduating from college.

The Georgetown analysis begins with a rejection of the better-known and well-documented industry and occupational employment projections developed biennially by the U.S. Bureau of Labor Statistics (BLS). They argue that the employment projections of BLS sharply underestimate the future demand for college graduates. They note that when they compare earlier BLS forecasts of employment growth between 1988 and 1998 with projections based on their own method for the same time period, that

“The Bureau under predicted how many workers in the U.S. labor force would have associate’s degrees or better by 19 million. That projection was off by 47 percent. Our methodology for that same period over predicted post secondary educational demand by about 2 million workers or just 4 percent.”

They go on to argue that the BLS underestimates of projected college graduate demand “… encourage a consistent bias against investing in postsecondary education.”

Could BLS, the most objective, impartial and certainly data-rich observer of American labor markets, so grossly underestimate the projected demand for college graduates for such a relatively short time horizon? Our answer to this is no! Instead, after a careful review of their data and methods, we find that the Georgetown authors radically overstate the size of the college labor market and, in the process, ignore perhaps the most pressing problem facing college graduates in the nation today—malemployment. A concept used by Frederick Harbison in his 1973 book titled Human Resources and the Wealth of Nations, malemployment represents the inability of a college graduate to find a job that effectively uses the knowledge, skills and abilities acquired in college and relegates them to employment in low-skill and generally low-wage occupations that don’t utilize college-level proficiencies. Since the skills of the malemployed remain largely unused by employers, they experience considerable wage losses.

Unlike virtually any other analyst of labor market activity, the Georgetown authors define the size of the college labor market as equal to the total number of college graduates that are employed. BLS and most other college labor market analysts define the college labor market as essentially a set of occupations that most often require persons to earn a college degree in order to be fully qualified for employment in that occupations. As a rule of thumb, we could define the college labor market as being composed of professional, technical, managerial and high-level sales occupations (like bond and stock sales representatives or commodity brokers), although BLS uses a much more careful approach than this.

Perspectives on occupations

To understand the difference between the Georgetown and BLS approach, let’s compare data on two occupations: bartender and compensation and benefits manager—jobs that most readers have some familiarity with in either their personal lives or professional capacities. An analysis of the data provided in Table 1 (derived from the U.S. Census Bureau’s American Community Survey) reveals that workers in both occupations have varying levels of formal schooling. But a closer look at the data reveals that most bartenders don’t have any type of college degree (only one in four bartenders report they have graduated from college). In contrast, compensation and benefit managers are much more likely to have finished college. More than six of 10 compensation and benefits managers have a college diploma, and nearly one in five have obtained an advanced academic degree.

Table 1: Mean Annual Average Percent Distribution of Employed Persons Ages 25+ by

Selected Occupation and Level of Educational Attainment, 2006, 2007 and 2008 Averages

Source: American Community Survey, 2006-2008 public use files. Tabulations by authors

When we look at existing data on the skill requirements needed to work in either of these occupations, we find similar disparities between bartenders and benefit and compensation managers.

The U.S. Department of Labor, Employment and Training Administration’s O*NET system is a massive database compiled over the past 15 years on occupational skill needs in the U.S. economy. Developed and maintained for the express purpose of understanding the education, training and work experience requirements of different occupations found in the nation’s labor markets, it is designed to inform workforce development, education and training professionals, higher education leaders and the business community about the wide range of skills needs within hundreds of individual occupations in the U.S. labor market. An examination of the O*NET studies of these two occupations reveals sharp differences in education and skills requirements.

O*NET assigns the bartender occupation to job category two, while compensation and benefit managers are assigned to job category four. What the significance of these assignments? O*NET studies of the bartender occupation found that the fundamental educational qualification for employment is a high school diploma and that bartender skills are largely acquired though work experience (although there are training schools including Harvard University, where one can prepare for employment in the occupation). English language and math skills required for work in this field were assigned relatively low values. In contrast O*NET studies of the compensation and benefit manager occupation found that most employers require a college degree for initial qualification for employment along with a considerable amount of work experience directly in the human resource and compensation fields. The English language and math skill requirements for this occupation are considerably higher than those for bartenders and the occupation requires a high degree of specific knowledge of human resource principles and procedures.

Taking the data on the distribution of employment by occupation and the findings from the O*NET studies of the skill requirements of both occupations, it would not be difficult to conclude (as BLS did) that, while the compensation and benefits manager occupation should be considered part of the college labor market, the bartender occupation should not. Indeed, even without these two objective sources of information it would not be hard for the informed reader to conclude from their own experiences that becoming a bartender requires no college experience (other than the usual undergraduate extracurricular experiences of interacting with bartenders) while the gateway to becoming a compensation and benefit manager is by initial completion of a college degree. And there is the rub.

The Georgetown measure of the college labor market includes all employed college graduates, irrespective of the occupation in which they are employed. So for the Georgetown analysts, all the college graduates working as bartenders are part of the college labor market. Indeed, those college grads working in cashier, retail sales, clerical, health aide, moving and transportation occupations, landscape and janitorial services and the like are all part of the college labor market.

BLS analysts disagree. They would not assign any bartender employment to the college labor market because, although one in four bartenders are college graduates, these jobs do not typically utilize the knowledge, skills and abilities acquired in college. Most of us would agree that college graduates working as bartenders are not utilizing their college education. We would regard many, though not all, of these individuals as underutilized with respect to their education or what labor economists refer to as malemployed. Amazingly, in the current labor market environment characterized by a high incidence of malemployment among young college graduates, the Georgetown analysts argue this type of skills underutilization problem simply does not exist. Essentially, the Georgetown approach assumes a world where no under-employment or malemployment of college graduates exists. Indeed, they expressly acknowledge this choice and reject the idea that college graduates could become underutilized or malemployed. The authors explain the discrepancy by arguing that overeducation or underutilization of college skills is non-existent among employed college graduates:

“… BLS’ educational and training requirements data undercount postsecondary degrees by 22 million in 2008. This implies that 22 million workers are overeducated. The overwhelming consensus in the literature contradicts this”.

While reasonable individuals can argue about the specific degree of overeducation or surplus schooling or malemployment of college graduates, it is surely the case that even in times of near full employment substantial numbers of college graduates are malemployed and are unable to effectively utilize the proficiencies associated with a college degree on their jobs. And the labor economic literature has long recognized problems of overeducation in both the U.S. and in Europe.[1]

If malemployment among college graduates simply does not exist, as the Georgetown forecasters argue, then there should be little difference in the earnings among college graduates regardless of whether they were employed in college labor market occupations or not. We examined the issue of malemployment in greater depth using data on annual earnings of employed adults during the 2006 to 2008 period to determine if earnings varied systematically by our measure of college graduate malemployment. Not surprisingly we found very large and statistically significant difference in the annual earnings of college graduates based on their malemployment status. Specifically, we found that:

• At the associate degree level, those graduates employed in a college labor market occupation had expected annual earnings that were 60% greater than those of high school graduates, while their counterparts who earned an associate degree but were employed in a non-college labor market-related occupation had expected annual earnings that were just 10% higher than those of high school graduates.

• Among bachelor’s degree recipients, those who worked in college labor market occupations had expected annual earnings that were 88% higher than their high school graduate counterparts, while the earnings premium for those who were not employed in a college labor market occupation was only 15% higher.

Indeed, we find that at every level of college attainment and across all age groups, large negative earnings impacts were associated with failure to find work in the college labor market. These findings clearly suggest that most of the economic gains to a college degree are strongly associated with the ability to obtain employment in the college labor market in occupations that utilize the knowledge, skills and abilities developed as part of a program of study leading to a college degree. Despite the claims of the Georgetown researchers, the available empirical evidence overwhelmingly supports the view that the personal and social payoffs to a college degree occur largely when graduates have access to jobs within the college labor market and that gains to a college diploma are quite small when graduates are relegated to jobs outside of the college labor market.

This finding implies that the Georgetown researchers dramatically overstate the size of the college labor market by including a substantial amount of employment in low-skill occupations. Paradoxically, by including this low-end employment in their “college demand forecasts,” they actually produce a slower projected growth rate in the demand for college graduates than projections based on our definition of the college labor market, although the absolute size of their projected college graduate demand remains quite exaggerated.

The demand for college graduates would grow more substantially if the U.S. economy can get back on a sustained recovery track and generate jobs in key industrial sectors that hire relatively large numbers of college graduates. Whether a generalized labor shortage of college graduates will emerge or only spot shortages in a few technical areas is simply unknown at this time. The Georgetown study fails to provide any serious evidence of college labor shortages in the future. The study is fatally flawed by its methods and even by its interpretation of fundamental labor market concepts.

As we have shown, the economic gains to earning a college degree can be quite high and, thus, college completion can be a very important determinant of lifetime success in American labor markets. However, the existence of these returns is highly dependent on one’s ability to obtain access to jobs in college labor market occupations. Rather than responding to unsubstantiated claims about future shortages, education leaders should focus on the results of serious research and evaluation and improve higher education efforts to broker new graduates into college labor market jobs, to build stronger relationships with employers to help develop more college labor market jobs for graduates, and assist alumni to get them back into the college labor market when they re-enter the workforce or lose their jobs.

Today, labor market problems especially for our younger college graduates are associated with both relatively high levels of joblessness and especially malemployment. The personal and social costs of these malemployment problems can be quite severe in forms of decreased employment, lost earnings, diminished job satisfaction as well as real output losses to society. The higher education community should seek innovative  strategies to reduce the very real problems of unemployment and malemployment that plague college graduates today instead of relying on unsupported forecasts that their problems will be solved if they simply wait long enough. As the late John Keynes once forecast with 100% certainty, “In the long-run, we are all dead.”

________________________________________________________________________

Paul E. Harrington is associate director of the Center for Labor Market Studies at Northeastern University. Andrew M. Sum is the center’s director.

Endnotes

[1]. For a review of the concepts of malemployment and overeducation and their costs to workers in the nation and the world, see: (i) Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin, et. al., The Status of Teens and Young Adults (16-24 Years Old) in the Commonwealth of Massachusetts: Implications for State and Local Youth Development Systems, Center for Labor Market Studies, Northeastern University, Prepared for The Commonwealth Corporation, Boston, MA, April 2009, p. 90; Selected studies of overeducaton include: (ii) Richard R. Verdugo and Naomi Verdugo, “The Impact of Surplus Schooling on Earnings; Some Additional Findings,” Journal of Human Resources, Vol. 24, No. 4, 1989, pp. 629-673; (iii) Wim Groot, “The Incidence of and Returns to Overeducation in the U.K.,” Applied Economics, Vol. 28, pp. 1345-1350.(iv) Russell W. Rumberger, “The Impact of Surplus Schooling on Productivity and Earnings,” The Journal of Human Resources, Vol. 22, No. 1, 1981, pp. 29-50; (ii) Richard R. Verdugo and Naomi Verdugo, “The Impact of Surplus Schooling on Earnings;  Some Additional Findings”, Journal of Human Resources, Vol. 24, No. 4, 1989, pp. 629-673; (v) Nachum Sicherman, “Overeducation in the Labor Market”, The Journal of Labor Economics, Vol. 9, No. 2, 1991; (vi) David Mills, Overeducation and Earnings, Labor Economics Seminar Paper, Northeastern University, 1996; (vii) Paul Harrington and Andrew Sum, The Post College Earnings Experiences of Bachelor Degree Holders in the U.S.:  Estimated Economic Returns to Major Fields of Study, 1998 Conference on Higher Education and Workforce Development, Portland State University, March 1998; (viii) Steve Rubb, “Post-College Schooling, Overeducation, and Hourly Earnings in the U.S.”, Economics of Education, Vol. 11, 2003, Issue 1, pp. 53-70; (ix) Lisa Kahn, The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy, Harvard University, Cambridge, 2006. Santiago Budria and Ana Moro-Esido, “Overeducation and Wages in Europe”, University of Madeira and Granada, January 2007

The New England Council (NEC) will sponsor remarks by U.S. Rep. John Tierney (D-Mass.) and U.S. Department of Labor Assistant Secretary for Employment and Training Jane Oates on strengthening connections between business  and postsecondary education for young adults in New England. The event will be held  Thursday, Oct. 21, at 8 a.m., at ...]]>

The New England Council (NEC) will sponsor remarks by U.S. Rep. John Tierney (D-Mass.) and U.S. Department of Labor Assistant Secretary for Employment and Training Jane Oates on strengthening connections between business  and postsecondary education for young adults in New England. The event will be held  Thursday, Oct. 21, at 8 a.m., at Northeastern University.

The remarks by Tierney and Oates will be followed by an audience discussion moderated by Paul Harrington, associate director of Northeastern University's Center for Labor Market Studies.