Is the Middle Class Getting Wise?

When the going gets tough these days, the tough get educated. Six years after the financial crisis the number of Americans getting university or advanced degrees has sky-rocketed. This despite the effect the recession has had on the educated as well as those who are not and despite the growing concerns about technology's impact on even those jobs thought to be the exclusive province of the knowledgeable.

The roiling unemployment numbers contributed to concerns that tech might be supplanting education as a cure-all. But the data belies that meme, most often promoted by those opposed to any government role in anything.

The reality is that although it may take time to find a 'good' job, the fact is that more full time jobs are available to those with advanced degrees (eg, beyond high school) and that those are better paying as well as more secure.

The Big Data economy is a subset of the knowledge economy. And in a socio-economic system based on one's ability to generate, aggregate, interpret, communicate and apply information so that it becomes wisdom, you may not always have to eat what you kill (figuratively), but you will almost certainly have to eat what you know.  JL

Jonathan Cowan and Jim Kessler comment in the New York Times:

In the last six years, American higher education institutions conferred nearly 3.5 million more degrees (from associates to Ph.D.’s) than they did over the six years before that
Perhaps we underestimate ourselves. Five years after the Lehman collapse triggered the deepest recession in eight decades, the middle class may be solving the vexing problems of income inequality and stalled wages on its own.

Faced with unemployment and dim job prospects, Americans made one significant change that should alter their fortunes and those of the middle class for decades: they went back to school. During the recession, there has been a sharp surge in the number of Americans who are getting a college degree.

For much of the last several decades young Americans, particularly young men, had shied away from college. As a share of the population, there were actually more male college degree holders among those ages 25 to 29 in 1976 than there were in 2006. Between 2000 and 2006, the share of all Americans ages 25 to 29 with a four-year college degree dipped by 0.7 percentage points, with men leading the decline, falling from 27.9 percent to 25.3 percent.

Americans have now reversed that decline by going to school in unprecedented numbers. In 2011, there were 3.2 million more people enrolled in higher education than there were in 2006. This 18 percent increase in enrollment was the largest such jump since the end of the Vietnam War.

In the last six years, American higher education institutions conferred nearly 3.5 million more degrees (from associates to Ph.D.’s) than they did over the six years before that. By last year, 29.8 percent of men and 37.2 percent of women ages 25 to 29 possessed four-year college degrees. This blows past previous highs.

Educational gains during the recession were not reserved for the young. By 2010, there were nearly 8 million students over the age of 25 enrolled in higher education institutions, 1.2 million more than in 2007. Degrees conferred at all levels of education for all races, ages and genders are up from six years ago.

The knock on the American work force is that when it comes to brainpower, it has fallen behind our international competitors. In a recent survey of 23 countries by the Organization for Economic Cooperation and Development, American adults were mediocre in both math and reading. In “The Undereducated American,” Anthony P. Carnevale and Stephen J. Rose assert that the United States has been underproducing college graduates since the 1980s, creating a labor force unable to match the needs of employers.

But is college still worth it today? It’s not just that college graduates are riding out the meager recovery living in their parents’ basements; the fear is that they will permanently underperform in the labor market. This seems unlikely. The recession has followed familiar labor patterns, with unemployment rates among college graduates roughly half those of high school graduates, just as in every recession since the mid-1970s.

In time, these young college graduates will find work and they will earn pay that is significantly higher than what they would have earned had they not gone to college.

How can we be so certain? Because the more education you have, the more you earn. In 2012, two-year-degree holders earned close to $7,000 more per year than their high-school-diploma-only counterparts. Someone with a four-year degree earned roughly $15,000 more than that same someone with an associate degree. A professional degree reaped nearly $35,000 more than a four-year college degree, according to the Department of Labor.

What this means is that the income mobility problem that drives policy makers nuts disappears for those who get a degree. Over the past few decades, those born into the middle three income quintiles were more than twice as likely to reach the top income quintile if they possessed a college degree compared with those who did not. The steepest mobility gains came from those in the second poorest quintile. Nearly two-thirds of these working-class Americans jumped to the richest quintile (37 percent) or the next richest quintile (27 percent) on the basis of earning a college degree.

But we still face serious obstacles if we want to turn this recession-led college resurgence into one of the dominant economic trends of the 21st century. First, almost 60 percent of adults over the age of 25 still do not have any degree beyond a high school diploma. For men in particular, this is a problem. When inflation is accounted for, the peak earnings year for men with a high school diploma was 1973. We’re living in a fantasy if we think that 40-year trend is about to change.

Likewise, college graduation rates are still far too low. Even now, 46 percent of students enrolled in a four-year college will not have a degree after six years.

And then there are the record levels of student debt. For people under 35, student loans are the second largest source of debt behind mortgages. College tuition has increased faster than inflation every single year since 1981.

So what can we do? Anya Kamenetz, the author of “Generation Debt,” has put together some excellent ideas for Third Way, the centrist policy organization where we both work. Let’s start by reducing the number of college administrators per 100 students, which jumped by 40 percent between 1993 and 2007. We should demand a cease-fire to the perk wars in which colleges build ever-more-luxurious living, dining and recreational facilities. Blended learning, which uses online teaching tools together with professors and teaching assistants, could also help students master coursework at less cost.

There are 37 million Americans with some college experience, but no degree. So pegging government tuition aid to college graduation rates would entice schools to find ways of keeping students in class. And eliminating some of the offerings of rarely chosen majors could bring some market efficiencies now lacking in education.

The most commonly discussed solutions to the problem of income inequality seem unlikely to get to the heart of the problem. Yes, we could raise additional taxes on the wealthy, but we just did that. Bumping up the minimum wage would help, but how high would lawmakers allow it to go? We should look instead at what Americans are already doing to solve this problem and help them do it far more successfully and at less cost.