Tuesday, March 08, 2011


Krugman's Challenge

Regular readers know that I'm consistently disappointed in the New York Times' coverage of higher ed, since it mostly boils down to Stanley Fish and Mark Taylor. But this week, just to be contrary, it decided to throw a curveball and publish something intelligent.

Paul Krugman, of whom I am a fan, noted correctly this week that the “education leads to good jobs” storyline – which he introduced with a nice riff on Jane Austen – is true enough on the individual level, but not on a societal level. The argument that an educated workforce will necessarily generate good jobs is getting harder to sustain in light of the experience of the last twenty years or so. The direction of the economy over the last few decades has been towards greater income polarization, with a small group at the top raking it in and a great many on the bottom struggling badly; the middle is hollowing out.

Those of us who got Ph.D.'s in evergreen disciplines over the last few decades have seen this firsthand. A surge in doctorates did not bring with it a surge in full-time faculty positions; to the contrary, the availability of well-qualified adjuncts has made it easier to hollow out those jobs. Something similar is happening now throughout the economy, with college graduates struggling to find middle-class work. The latest changes are apparently happening in the legal profession, where software is making the 'discovery' process much faster and much less labor-intensive, thereby requiring fewer attorneys. “Brawn” jobs were the first to fall victim to automation and globalization, but now “brain” jobs are falling, too. To the extent that colleges have been able to sell access to those “brain” jobs and the higher salaries they once brought, college grads are discovering a hole in the narrative.

As a community college administrator, I'm conflicted about this.

On the one hand, Krugman is descriptively correct. Clear and legible pathways to good jobs are fewer than they once were, and many jobs that used to provide a family wage are now either gone altogether or hanging on only by paying new hires much less than their predecessors. (GM and Ford still hire, but new hires get a lower tier of salaries than their seniors. Even as they accrue seniority, they will never catch up.) On my own campus, folks who were hired ten or twenty years ago pay far less toward their pensions than I do; in a few years, it's an open question whether pensions as such will exist at all. The oft-noted trend of college grads living at home, I suspect, is largely driven by the relative lack of good-paying jobs for folks who didn't have the foresight to have been born twenty years earlier than they were.

Krugman's thesis – again,correctly – also suggests that the “colleges will save the economy” narrative is oversold at best. We can prepare students to take advantage of opportunities as they come along, but we can't generate most of those opportunities ourselves. If you graduate into a nasty recession, the fact that you got good grades may not save you.

And that's where the ambivalence comes in. Yes, too many college grads and college dropouts are languishing on the economic sidelines. (So are too many PhD's, for that matter.) And I'm convinced that Krugman is right that a more intelligent set of economic policies could go a long way toward improving matters on the ground. But I'm concerned that in this political climate, people will hear only the diagnosis and ignore the prescription.

One response to Krugman's observation is to say “yup, we need policies that will encourage the growth of middle-class jobs.” Another response would be “yup, college is a colossal waste of money.” Both can take the same observation as a starting point, even as they move in very different directions.

My sense of it is that education is a good in itself, and one that frequently – though not always – leads to economic payoff. Between technological advances and the ramping-up of the former third world, I'm guessing that we can either try to move up the value chain, or we can move down. Staying where we are is not an option. If we move down, incomes will move down, too. If we move up, we have a choice about those incomes. Education gives us the raw material to put ourselves in a position to move up and thereby to have choices, but it doesn't guarantee that we'll make the right ones. We could, for instance, train a few wildly successful innovators and then let them hoard the wealth, thereby largely defeating the purpose.

My fear is that as the population of underemployed graduates grows, so too will resentment towards higher education. Certain of our politicians are very, very good at exploiting resentment – Gov. Walker actually used the language of “haves and have-nots” – and will not miss the chance to do it. The resentment misses the point, of course – the real issue is jobs, not education – but people can take a long, long time to figure that out. In the meantime, the damage done can be irreparable.

So yes, Krugman has a point. I'm just concerned that folks with very different agendas will use that point to do once-in-a-generation damage.

My sense of it is that education is a good in itself, and one that frequently – though not always – leads to economic payoff.

You're going to have to do better than "my sense" if you want to turn people away from the "college is oversold narrative." Nothing you've posted here refutes Krugman's point about societal outcomes, Academically Adrift's points about individual outcomes, or the BLS data showing that the increasing college enrollment leads to increases in college-educated persons doing jobs that don't require a college education.

I'm sympathetic to your insistence on the need to reorganize society to create space for middle-class jobs (though I suspect our visions of how differ), but--speaking as a college educator--the arguments cited above convince me that college is not as important as you think.
Well, I think the real issue with education is the economic value of it. My brother went to a satellite University of Wisconsin campus where his tuition and room were about $7k each year. The odds of that being a good economic choice have to be pretty good.

Me? I went to a SLAC and came out with $50k in the hole -- not too long ago, my institution ranked as the most expensive university in the country. From an economic perspective, I've decided that was a completely stupid idea.

In a crappy jobs market, I just can't see much resentment toward the former, while the later is prime for a full frontal assault.
Just a quick thought:

For me, the current economic situation of higher ed is bit like that of housing market. Conventional wisdom said that "houses always appreciate in value". This has turned out to untrue in some circumstances. Similarly, the advice "a postsecondary education leads to better job prospects and a better future" is also being shown to be untrue in some circumstances. The worst part is that not only are these pieces of advice turning out to be wrong, but wrong with wildly terrible consequences.

In the case of higher ed, I think the main problems have been a lack of response to market forces (job markets, etc) and technology. I think it's true that white collar jobs are more suspect to leave (not that that's a guarantee), and this is made possible by technology.
Cause or effect?

IMHO, one reason college is required for some jobs that used to "only" require a HS education is that a HS degree is worth much less than it was 40 or 50 years ago and that NCLB has not improved this situation.

As for housing, even at the likely bottom of the local market, our house is worth somewhat more (corrected for inflation) than when we bought it. The housing bubble grew from the silly premise that you could get a return of 20% or more by flipping a house in a few months. Granted there is similar thinking going on with college (expensive degree will lead immediately to $100k job), but not on the same time scale.

What we are seeing is a transfer of the cost of college from the state to the student, although many students (and some of their parents) don't have the life experience to recognize this fact. Sunday's "Doonesbury" captured that disconnect really well. Is class time precious at your school? Do faculty treat it that way even if some students do not?
I generally reconcile it with a 'education is a good. formalizing, commercializing and credentializing education can ruin a perfectly good thing'.
But then, I am not invested in the system having colleges.
"We could, for instance, train a few wildly successful innovators and then let them hoard the wealth, thereby largely defeating the purpose. "

I'm trying to understand what this means.

Are you saying that if you train an innovator, you have a right the fruits of subsequent innovation? Like a royalty? How else can I interpret "let them hoard"? Or do you just want the right to direct their spending, or at least prevent their saving? Why? If they "hoard," doesn't that mean capital formation? That is, either they are funding the government by lending their wealth (muni bond investors), or they are investing in companies, creating jobs. Why does this outcome "defeat the purpose"?

As a matter of recent history, the wildly successful innovators owed relatively little to their formal training. I believe both Gates and Jobs were college dropouts.

We have become a society with a few winners and many losers, largely as a result of technology advances, completely by accident. Whether you win or lose is, increasingly, a function of who you know or what family you were born into. Higher education has become less about gaining knowledge or skill, more about networking. So the Ivies might be worth the price, especially the ones that are free to the middle class, but the rest of higher education is seriously overpriced.

It's fair to say that the "limits to growth" people have won, even though no one ever admits to wanting to limit our growth.
I think the comparison with the housing market is mis-placed. The comparison with housing ought, in my view, to be framed both in terms of credit as well as the diminishing value of both housing and a college degree. The two go hand in hand. Neither a house nor a college education are affordable without borrowing vast sums of money. Theoretically, one passes various means tests -- proof of employment, income etc. -- to borrow the funds needed to purchase a house. (I said theoretically) No such test exists when borrowing for school.

When it comes to higher ed. the bet is that the degree will place a graduate in a position that will increase their earning potential so they can both pay back the student loan AND buy a house one day. Except this is no longer even a half-way decent bet let alone a good one. Some, a select few can do both; some can do perhaps one but not the other. But realistically, an increasing majority can do neither, and never will. And there's the rub.
The conservative lie is always that they're only going after "them," and that if you toe the line, "you" will be safe.

So, they were only going to gut the part of the middle class that didn't go to college, and "you" could avoid this terrible fate -- and feel superior to "them" -- by going to college.

It's the old saying, "You don't have to be faster than the bear, you just have to be faster than the slowest guy."

Better question: why is there a bear?
"completely by accident. Whether you win or lose is, increasingly, a function of who you know or what family you were born into."

Right. There is no political philosophy which is more compatible with aristocracy, and no political philosophy which is less so. Which is why both parties have nominated for President the incompetent son of a former President.

Oh wait.
Interesting questions, Edmund Dantes. One might argue that the innovator owes a royalty of sorts to protect and defend the Constitution that explicitly grants hir copyright and patent rights and the courts to defend them.

"If they "hoard," doesn't that mean capital formation?" Not necessarily. Much of the wealth held by Gates is virtual capital (unrealized capital gains) until he puts it to work.

Christopher observes "Neither a house nor a college education are affordable without borrowing vast sums of money." Many counterexamples exist for this assertion, although it is interesting to contemplate that the place with the cheapest college costs has the highest housing costs.

Vast sums must only be borrowed if you want a house like those parodied by "Unhappy Hipsters" or a degree from the most selective of private schools. The old fashioned idea of saving for college (not to mention working your way through college) also leads to a focus on value. Since borrowing for college and for a home are both in the promos for the PBS show that airs tonight as a co-promotion for Suze Orman's latest book, it will be interesting to see what she has to say on those subjects.
There is a correlation between college degree and economic success. It's just that the correlation is not as strong as it should be given the huge investment that students and/or the taxpayers make in the degrees (or the ill-fated attempt to get the degree). Plus, the law of diminishing returns seems to be in effect once we get some unknown percentage of young people past the finish line. The effort it takes to try to get the rest past that line (both their own effort and the efforts of the institutions of higher ed in the form of recruitment, tutoring, lowered expectations for academic performance, etc etc) don't pay off often enough to make us feel that the system is delivering what we hoped it would: degrees for all who matriculate with a reasonable amount of effort and expense.
"capital formation" is only meaningful in the context of future consumption. The point of an economy is to create things which the people in it want to consume, in the process using up things which they don't necessarily want to consume. Create food, use sunlight. Create gold, use a hole in the ground.

This conservative idea of "capital formation" as a good in and of itself -- for which permanently foregoing consumption is sensible -- is bizarre. It's like the idea of deeply concerning oneself with the idea of universal health care for the angels on the head of a pin, and putting enormous national resources into making that happen.
We'll know something has really changed when we start seeing young people who have a real chance to go to college, but choose not to. Right now that seems to be pretty rare. Plenty of people don't go to college, certainly, but for most of those it would be a real financial, social, or academic longshot to get in and through.
The initial hollowing out of the middle class was due to the inability of people to earn a middle-class wage without a college degree. This is attributable to the low cost of labor in developing nations, and improvements in technology that make it cost effective to manufacture there and sell here.

I believe we are seeing the same process at work now with the college-educated. It is no secret that, engineering aside, the main value of a college degree is as a job market signal of socioeconomic class and work ethic. If you can get a degree from a decent 4-yr institution, odds are that you're not a serious revolutionary or a complete shirker. The technical knowledge learned at college--how to do the job you will do--is negligible compared to this.

Employers have realized this, and given the logic of the market, they have an incentive to outsource positions where the person doing the job is interchangable so long as he or she shows up most days and doesn't threaten the dominant social interests. There are a lot of skilled employees in India who meet both requirements.

None of this is planned in the smoke-filled room way: those who run the large firms are pursuing their self-interest in good Adam Smith fashion. I would believe that the businessmen of Smith's time would do the same thing if they had the means. But they didn't back then. Now they do.

Economics says that people pursue their self-interest given the market constraints they operate under. Nowhere does it say that this pursuit makes everyone better off in all market conditions.
Those of us focused primarily on social justice will never find a way to trump a system (capitalism) that is at best intrinsically a-moral. In a system predicated on a power principle of human exploiting human, education becomes a palliative to distract the exploited. It is an illusion to make folks think fairness exists where it does not. I will continue in it, but without illusion that I can use it to change an economic system I find unconscionable.
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