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A College Degree Is Still Worth It

It wasn't all that long ago—the 1980s and '90s—when hardly anyone questioned the value of a college degree. Sure, a couple of skeptics liked to point out that neither Bill Gates nor Steve Jobs graduated from college, and parents complained about the tuition bill. Still, when college acceptances went out in the spring, people cheered, believing that admission represented the ticket to a good job and career.

The doubters have a bigger audience these days. From Charles Murray at the American Enterprise Institute to New York Times columnist William D. Cohan, a cottage industry of critics argues that the degree may be a waste of money. Recession-scarred parents and their students are dismayed at the soaring cost of college. The inflation-adjusted tuition and fees in 2010-11 at a public university is 3.59 times the tab in 1980-81, according to the College Board. The comparable number for private colleges is 2.86 times. The list of college dropouts that have done well has grown to include Mark Zuckerberg, the founder of Facebook, and Jack Dorsey, a co-founder of Twitter. Most troubling of all is an emerging narrative that modern information technologies are making college-educated workers an expensive anachronism. Workplaces filled with powerful computers, savvy software, and artificial intelligence linked through quicksilver global communications networks will turn lawyers and medical technicians into the secretaries and bank tellers of the 1980s.

Cohan aptly captured the sentiment in his Mar. 16 online column, when he wondered about the high school students that get accepted into colleges and universities in a few weeks: "But will it turn out to be a Pyrrhic victory if they get in?"

No, it won't.

Vital for Most U.S. Jobs

The message of the Great Recession and anemic recovery is that postsecondary education—from a certificate at a community college to an advanced degree—is more valuable than ever. The concern among the necktie set about widespread job insecurity from the twin pincers of globalization and information technologies is real. But the data suggest the dire conclusions are exaggerated, with the share of jobs in the U.S. economy requiring postsecondary education up from 28 percent in 1973 to 59 percent in 2008. Over the next decade that share could increase to 63 percent, estimate scholars at the Georgetown University Center on Education and the Workforce. "Step back for a minute," says Terry Fitzgerald, senior economist at the Federal Reserve Bank of Minneapolis. "If I am talking to a 17-year-old, am I really going to tell her, 'Don't go to college?' No."

Yes, it has been a rough decade for college-educated workers. The real earnings of young college graduates have stagnated. The job market has been inhospitable to newly minted graduates since the recession started in 2007, and economic research suggests an initial income hit for workers just starting out continues to exert a downward influence on their wages 15 years later. Routine white-collar jobs are being outsourced to high-tech shops at home (think legal research) and to emerging markets abroad (jobs such as processing individual tax returns).

Still, college graduates are doing better than everyone else. For instance, the median earnings of a college graduate with a BA working full-time in 2008 was $55,700 and for those with an Associates Degree (typically awarded by community and technical colleges) was $42,000. That's significantly better than the $33,800 for high school-only grads and $24,300 for those without a high school diploma.

Low-Skill Jobs Are Disappearing

The unemployment numbers are striking, too. The latest figures from the Bureau of Labor Statistics show an unemployment rate of 4.3 percent for college graduates and above who are 25 years and older. That compares with 9.5 percent for high school graduates and 13.9 percent for those with less than a high school education. "The real damage has happened with the loss of low-skill jobs," says Stephen Rose, research professor at the Georgetown University Center on Education and the Workforce.

The benefits of postsecondary education are apparent even after drilling down deeper into the unemployment numbers. For instance, some high-wage workers have little education—a plumber, say. And highly educated workers can make very little—an English PhD, for instance, working in the back office of a nonprofit. Specifically, after dividing worker wages into fifths, about 25 percent of those in the two highest wage groups, or quintiles, have only a high school diploma. Similarly, about 20 percent of workers with a college degree were in the lowest two wage quintiles. Yet from 2007 through 2009 the unemployment rates for less-educated high-wage workers rose faster than for college-educated low-wage workers, according to researchers at the Federal Reserve Bank of Minneapolis.

"The takeaway message for young people weighing their career options in the wake of the Great Recession? If you want to keep your job during the next one, it's better to be well-educated than well-paid," conclude Minneapolis Fed authors Wonho Chu, Phil Davies, and Terry Fitzgerald.

But are data like this backward-looking, an intellectual anachronism in a world of rapid technological innovation and intense global competition? Probably not, especially since the great American middle has been certainly nicked but not hollowed out.

More Jobs in Health Care, IT, and Education

Economists Harry Holzer of Georgetown University and Robert Lerman of American University found that middle-skill occupations (defined as requiring postsecondary education but less than a four-year BA) declined from 55 percent of the workforce in 1986 to 48 percent in 2006. They expect that the middle-skill occupations will still account for 40 percent to 45 percent of all hiring over the 2008 to 2018 period. Since the 1970s, education and health-care jobs have increased from 10 percent to almost 20 percent of all jobs. The share of these jobs requiring postsecondary education has increased from about half in the 1970s to more than three-quarters today, according to the Center on Education and the Workforce. And more than 52 percent of those jobs require a BA or higher.

It's striking how job growth is picking up in the information technology ecology. Facebook, Twitter, Groupon, and countless other startups in the mobile Internet and social media are fiercely competing for talent. A number of high-tech titans may have skipped college, but they favor hiring people with a college certificate on their résumé (about 86 percent of the industry has at least some college). In February, information technology employment was up 4.3 percent from the same time a year ago, calculates the TechServe Alliance, a trade group in Virginia. The increase for total nonfarm jobs over the same time period was 0.98 percent.

Recent American economic history has sharply accelerated a long-term job trend: the demise of good manufacturing jobs for high school graduates and the rise of postsecondary education as the entry point into the middle class. In 1970, 26 percent of the middle class had postsecondary training and education. By 2007 that figure had swelled to 61 percent. The jobs and careers that move people into the middle class are different from the factory work of a generation or two ago. Today it is jobs in government, education, health care, technology, and other creative-class industries that tend to offer middle-class incomes and benefits. The real labor-market problems are concentrated among less-educated men.

Karl Marx was right when he emphasized the devastatingly painful dynamism of capitalism. As the economy continues to expand and the Great American Job Machine grinds into gear, the beneficiaries will have more than a high school certificate. Education doesn't always pay. It isn't a panacea. But it's still the ticket that creates the opportunity for a middle-class job and career.

Farrell is contributing economics editor for Bloomberg Businessweek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace.

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