The Case for More College Grads

Doug Lederman | Inside Higher Ed
June 27, 2011

Anthony P. Carnevale and his Georgetown University Center on Education and the Workforce have released another report aimed at making the case that the United States needs 20 million more college-educated workers by 2025.

The work of Carnevale and other economists reinforces -- and in many ways has influenced -- the Obama administration's push to have the United States return to the top of international rankings of countries with the largest proportions of citizens with college credentials.

That campaign has been threatened by the country's economic woes, which have forced the federal and state governments to impose or consider cuts in spending on higher education and student aid, and by ever-rising tuitions that have pushed college out of reach for more students and families. The administration's policy approach has also been challenged increasingly by skeptical commentators and policy analysts (many on the right, but some on the left), who cite the large numbers of unemployed bachelor's degree recipients now to question the historical assertion that education is the key to economic success, for individuals and nations.

In their new report, "The Undereducated American," Carnevale and his co-author, Stephen J. Rose, acknowledge that "with many college graduates unsuccessful in finding work in the current economic climate, the temptation to reject postsecondary education as a viable economic option grows stronger, especially among working families for whom college costs are always a stretch." But they aim to use historical data to show that the analysts (and parents of recent graduates who may feel that way) are engaged in short-term thinking.

At its simplest, their argument goes like this: Up until about 1980, the United States produced college graduates (at the bachelor's degree level, with some associate degrees mixed in) roughly in proportion to the demands of employers. But beginning around then, and accelerating around 1990 (as the number of retiring workers grew and the academic credentials of those replacing them began to ebb), the report shows, the rate of increase in the number of college-educated workers slowed, to 2.0 percent from 1990 to 2000 and 1.0 percent from 2000 to 2010.

As it did so, it failed to keep pace with employers' demand for skilled workers, which grew at a 3.6 percent clip through 2005.

The gap between supply and demand drove up what employers were willing to pay for college-educated workers, Carnevale and Rose assert, creating an ever-rising "wage premium" -- the gap between what college graduates and high school graduates earn. College graduates earn 74 percent more than do high school graduates today -- a gap that is up from 40 percent in 1980. That wage premium is one of several factors driving income inequality in the United States.

If trends stay on their current course, Carnevale and Rose argue, with the number of college-educated Americans growing by 1 percent a year, the country will produce eight million more postsecondary-educated Americans by 2025, pushing the wage premium up to 96 percent.

Instead, the scholars assert, the country needs to propel the college-going rates so that the rate of educated workers grows by 2.6 percent a year instead, which would mean adding a total of 20 million (instead of 8 million) -- 15 million with a bachelor's degree, and 5.3 million with associate degrees or certificates of various sorts. That would not only allow the wage premium to shrink to 46 percent, much closer to what it was in 1980, but increase the gross domestic product by about $500 billion over what it would be without those better-educated, higher-earning workers.

Achieving such a goal is "not beyond our capacity" -- but it will be difficult, Carnevale said in an interview about the report Sunday.

There are two main ways to increase college going rates, he said -- with additional money for students and/or institutions, or increased efficiency in the higher education system.

With states cutting back on their fiscal support for institutions, and the push for deficit reduction likely to compel limitations, if not cutbacks, in spending on Pell Grants and other student aid, significant new investment in higher education is unlikely unless or until politicians agree on some combination of increased taxes and spending reductions to reduce the deficit.

Both are probably necessary over the next several years, Carnevale said, with changes to Medicare at the core. "There is no little green pill for our budget problems."

Higher education has not historically been inclined to look for efficiency, but it is likely that "as money slims down, there will be kicking and screaming, and higher ed will move toward efficiencies," he said.

If not, he said, "individuals are going to lose massive amounts of opportunity, and the economy will lose" much-needed revenue. "There is a problem here."

Andrew Gillen of the Center for College Affordability and Productivity, which has produced several critiques of Carnevale's analysis in the past, questioned the report's assertion that college attainment itself drives economic growth.

"Eric Hanushek and Ludger Woessmann have numerous studies showing that it is not attainment that boosts growth, but [instead] increases in cognitive skills," he said via e-mail. "In other words, increasing college attainment will only boost growth if it increases cognitive skills, and recent research (such as Academically Adrift) calls into question how much college boosts cognitive skills. The main takeaway is that if you are worried about growth, the focus should be on quality rather than quantity."