Are more college graduates really taking 'high school' jobs?

Monthly Labor Review, Dec, 1995 by John Tyler, Richard J. Murnane, Frank Levy

Upward mobility through education is a central belief in American society. Since World War II, this belief has centered increasingly on the value of a college education. But twice in the last 25 years, the economic value of college has been called into question by labor market developments.

The first challenge arose in the late 1960's and continued through the 1970's as college-educated baby-boomers surged into the labor market and sharply depressed a college diploma's economic return.(1) By the early 1980's, however, wages for workers with fewer years of education had plummeted while the earnings of college graduates held their own. A college education looked like a good investment once again.

The second challenge came in a 1992 Review article by Daniel Hecker, a Bureau of Labor Statistics economist. Using occupational and demographic data from the Current Population Survey, Hecker estimated that in 1990, 20 percent of all workers with college degrees were either unemployed or employed in jobs requiring only high school skills.(2) This figure, he argued, had risen significantly since 1970 when only 11 percent of college-educated workers were similarly "underemployed." Put simply, there were too many college graduates.

Hecker's article, published during the 1989-92 white-collar recession, was quickly taken up by the popular press. For example, in an August 1992 Newsweek column, economics reporter Robert Samuelson wrote that Hecker: ... convincingly demolishes the notion that there's a scarcity of college graduates and that sending more Americans to college will automatically create a more productive economy... [If] more people had gone to college in the 1980s they would have competed mostly for lower-wage jobs that usually don't require a degree.(3)

Similarly, the New York Times reporter, Sylvia Nasar, wrote a story in which she emphasized the irony of Hecker's findings coming at a time(4): when college enrollments are at record levels, tuition is at an all-time high and the most costly item in Bill Clinton's economic plan is a program to send everyone to college who wants to go. Hecker's message was updated and reinforced in 1994 by BLS economist Kristina Shelley who warned:

The employment outlook for college graduates between 1992 and 2005 is like a weather forecast in the midst of the summer doldrums: Tomorrow will be a rerun of today--or a little worse.(5)

Each of these articles contains the same warning: the economy is generating college graduates faster than it is generating jobs for those graduates; potential college students and those who design educational policy ignore this fact at their peril.

This article demonstrates, however, that the warning is largely misguided and that a college education continues to have significant economic

Daniel E. Hecker is an economist in the Office of Employment Projections, Bureau of Labor Statistics. Kurt Schrammel tabulated the survey data used in the analysis presented.value. We reach this conclusion by probing the details of Hecker's analysis. We show that Hecker's conclusion stems, to a large extent, from his decision to focus on a highly aggregate statistic: the 1970-90 change in the proportion of all college graduate workers holding high school jobs. Persons who are concerned with the value of a college degree--potential students and their parents, and policymakers--need to look specifically at recent changes in the job market for young college graduates.

To see why this is so, note that Hecker's main finding may reflect any of several, quite different situations:

* A growing number of recent college graduates working in jobs for which they are over-educated (This is the situation that has been emphasized in media summaries of Hecker's papers.

* A growing number of middle-aged college graduate managers losing their positions in the 1980's, during the restructuring of white-collar jobs.(6)

* Job market events that took place in the 1970's, and have little relevance for current career-related decisions.

If, in this period of rapid technological change, younger college graduates and older college graduates are not close substitutes in employment, only the first of these situations would raise serious doubts about going to college today.

In a similar vein, more detail is needed on the meaning of "high school jobs"--jobs that seem to require only a high school education. As Samuelson suggests, Hecker's readers assume a high school job is one which pays a wage commensurate with a high school education even to a college graduate. But this is only an assumption because Hecker does not report wage level data. College graduates in high school jobs will probably have lower earnings than other college graduates, but they still could earn more than high school graduates in similar jobs. Anecdotal evidence suggests that skill requirements have been using within some occupational tides. If that has happened, it is possible that certain jobs requiring a high school education now require college graduates and employers are willing to pay to get them.