Higher Education Bubble

03.27.13

Why a BA is Now a Ticket to A Job in a Coffee Shop

The number of jobs requiring high-skilled labor has declined.

There's a growing perception out there that a college degree no longer delivers the value that it used to.

Too many college kids are living in Mom's basement, or working at Starbucks.  Like most personal finance columnists, I get the letters from them: what do I do?  How do I fix this? For many, the answer is grad school.  But I get the letters from grad students too.  A while back, I found myself talking to a professor whose school has a number of impressive-sounding graduate programs that were originally conceived as add-ons for a professional degree in law or medicine or business.  They are now attracting a number of students who just go for the standalone degree.  He didn't understand what the career path was for these kids, and he wasn't sure that they did either.  

"It sounds good, so they can persuade their parents to pay for it," he said, a touch guiltily. 

A new paper from Paul Beaudry, David Green, and Benjamin Sand argues that these worried kids--and their worried parents--are not just imagining things.  The phenomenon is all too real.  Skilled workers with higher degrees are increasingly ending up in lower-skilled jobs that don't really require a degree--and in the process, they're pushing unskilled workers out of the labor force altogether.

The graph above shows the average cognitive load of the work that college students are doing.  As you can see, in the 1990-2000 period it spiked, as the IT revolution created new opportunities for "thought work".  Then it started to fall.  A brief recovery around 2006 was pretty much squashed by the financial crisis.  Meanwhile, the amount of routine work that they're doing has risen.  

The authors think they have an explanation: during the great IT boom, the returns to cognitive skill rose.  Since then, the process has gone into reverse: demand for cognitive tasks is falling.  Perhaps this is because installing robots consumes more resources than maintaining them, or perhaps it's simply that the robots are doing an increasing number of those cognitive tasks.  But whatever the reason, we no longer want or need so many skilled workers doing non-routine tasks with a big analytical component.  The workers who can't get those jobs are taking less skilled ones.  The lowest-skilled workers are dropping out entirely, many of them probably ending up on disability.

This is, of course, highly speculative: it's one paper.  But it would explain a lot.  Six months ago, I made quite a splash with a Newsweek story arguing that we may be overinvesting in college.  There were basically three parts to this argument: first, that a lot of college attendance is signalling activity rather than skill acquisition; second, that more students with BAs are ending up in jobs that don't require them; and third, that a substantial number of kids don't finish, washing out with a lot of debt and no commensurate earning power to pay it.  

My many critics responded that the wage premium for a college graduate is higher than ever.  But this is consistent with the story that Beaudry, et al are telling: lower skilled workers are increasingly falling out of the higher paying jobs altogether as college graduates move down the skill ladder.  So while college graduates are having trouble getting college-style jobs, the unskilled workers are doing even worse.  This is not necessarily evidence that the college degree is producing the wage--it might be that folks capable of getting into college would be able to get that barista job even if they didn't go.  

Obviously, if Beaudry et al right, this is ferociously depressing news.  It suggests that we're pushing more and more people into (more and more expensive) college programs, even as the number of jobs in which they can use those skills has declined.  A growing number of students may be in a credentialling arms race to gain access to routine service jobs.  Or maybe the productivity of our nation's wait staff is spiking as more skilled workers flood into these jobs.

Unfortunately, there's no obvious policy response to this.  It's easier to create more college educated workers through government policy than it is to create jobs for them.  It's not even obvious what the personal response should be--except that if you're planning to major in English, you should maybe see if you can't get a job at Starbucks instead.