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CHAPTER 1
Graduation Rates and Educational Attainment
Until recently, graduation rates were not widely regarded as a national problem. Throughout the eighteenth and nineteenth centuries, fewer than 5 percent of young people entered college, and less than half of those enrolling graduated. Yet few people cared. Finishing college was rarely a matter of great consequence, since students did not need a degree to enter the vast majority of occupations and professions.
As the economy grew in size and complexity, college education became more important to the economy. Throughout most of the twentieth century, however, the percentages of young Americans who finished high school and graduated from college were above the levels of other countries and large enough in relation to the needs of the society that increasing the number who earned a degree did not seem a matter of much urgency. Until late in the century, dropout rates were seldom even considered a responsibility of the college. If students failed to stay the course, their departure was widely attributed to their lack of ability or perseverance, not to any failing on the part of the institution.
During the 1980s, however, Americans grew increasingly concerned about the nation's ability to compete successfully in global markets. By this time, rates of increase in the gross domestic product had become the principal measure of the nation's progress. Since economists identified the skills and knowledge of the labor force as important contributors to economic growth, policy-makers began to look more carefully at the performance of our educational institutions. Many state legislatures started to examine the benefits achieved by their appropriations to higher education and tried to make their colleges and universities more accountable by requiring them to submit detailed reports on their performance. Graduation rates were one of the outcomes included in almost all of these reporting requirements.
The problem of graduation rates attracted even more attention following the publication in 2008 of a book entitled The Race between Education and Technology by Claudia Goldin and Lawrence Katz. The authors emphasized the importance of education not only for economic growth but also for equality of income and opportunity. In America, they claimed, the failings of our educational institutions over the past several decades, including a prolonged stagnation in college graduation rates, were a major reason for our sluggish economic growth and increasing inequality of income. These concerns were amplified by surging college enrollments in other industrialized countries that allowed many of them to overtake and even surpass the United States in the educational levels of their younger workers.
Research on college completion also revealed the large and growing income and racial gaps in the rates at which students were graduating from college. Among high school graduates academically qualified for college study, far more students from high-income families completed a bachelor's degree within eight years than did those from low-income families. This vast and growing difference was accompanied by rising income inequality, a problem that came to attract increasing attention in the twenty-first century.
Responding to these trends, President Obama declared to Congress in 2009 that the United States must regain its historic leadership in the educational attainment of its people. To achieve this goal, he declared that America needed to raise the share of twenty-five- to thirty-four-year-olds earning a "quality" college credential to 60 percent by 2020. Since the existing percentage of college-educated Americans barely exceeded 40 percent, achieving the president's goal within little more than a decade would require a mammoth effort by all concerned, especially colleges and universities. The percentage of Americans with college degrees had been increasing for several decades at a rate of roughly 0.5 percent per year, aided by growth in the college-age population. Now, the percentage would have to rise at least four times as fast.
DO WE REALLY NEED SO MANY MORE COLLEGE GRADUATES?
The call for a massive increase in college degrees echoed a widely shared view among business executives and policy-makers that America faces a shortage of highly educated workers, and that the problem will likely get worse if something is not done to increase the number of college graduates. The most authoritative estimates available, those of the Bureau of Labor Statistics, project that more than 60 percent of all new jobs created by 2018 will require at least some college education. Anthony Carnevale, the widely cited director of the Center on Education and the Workforce at Georgetown University, has foreseen an even more serious problem, declaring that America will experience a skill deficit of roughly three million jobs by 2018 if the number of college graduates does not grow faster. Already, the shortage of educated workers has helped to lift the earnings premium for college graduates to levels not seen for the last one hundred years.
Reports of a serious shortage of highly skilled employees have continued to appear since the recession that followed the financial crisis of 2008. Most of these claims have been based on surveys of employers. For example, in 2014, the Business Roundtable projected shortages of college-educated workers even greater than those anticipated by Professor Carnevale. According to the Roundtable's "action plan,"
By some estimates, the economy will create 54.8 million new and replacement jobs between 2010 and 2020 with 65 percent of all jobs requiring some level of postsecondary education and training. Unfortunately, we may fall short by as many as 5 million workers who do not have the post-secondary qualifications needed to meet this goal.
Employers expressed particular concern over shortages of workers with degrees in science, technology, engineering, and mathematics, the so-called STEM subjects. In 2013, a poll, sponsored by the Bayer Corporation, of 150 talent recruiters from Fortune 1000 companies found that 89 percent of respondents reported "fierce competition" for STEM graduates and alleged that only half of the participating companies were able to fill job vacancies for STEM majors "in a timely manner."
Is There Really a Skills Gap? Despite the concerns of employers and the projections of the Bureau of Labor Statistics, a number of analysts dispute the very existence of a "skills gap" in the economy and question the forecasts of a growing shortfall of college graduates over the next several years. Some economists claim that such projections overlook the fact that large numbers of jobs currently occupied by BAs could be performed by employees with lesser credentials. Other analysts point out that the demand for college-educated workers diminished during the first decade of this century, and that the average earnings of BAs (not counting those with advanced degrees) actually declined slightly, which they would hardly do if a genuine shortage existed.
The most detailed attack on claims of a skills gap has been mounted by Peter Capelli, chair of the Wharton School's program in human resources at the University of Pennsylvania. In a paper published in 2014, Capelli pointed out that only 5 percent of employers indicated that they planned to raise their pay to cope with shortages of skilled employees. With respect to STEM graduates, he cited figures showing that half of the engineering BAs take jobs in other fields, and that 30 percent of those who do mention the lack of employment opportunities in engineering as the reason. Although recent engineering graduates are less likely than most BAs to be underemployed, 22 percent held positions in 2010 that did not require an engineering degree, and an additional 7 percent were without a job. Other analysts agree that the earnings of engineers have risen only modestly, not at all what one would expect if a serious shortage existed.
After considering the evidence, Capelli concludes that employers are complaining about a nonexistent skills gap because they prefer having a surplus of qualified workers on which to draw rather than having to increase wages and provide more in-house training. Since there has been no dearth of qualified candidates since the recession of 2008, Capelli claims that many companies wait to fill job openings in the expectation that ideal replacements will eventually appear possessing sufficient work experience to "hit the ground running" without a need for higher salaries or added training. Under these conditions, he concludes, "whether it makes sense for society as a whole to send a higher percentage of high school students to college expecting that they will all earn the same [earnings] premium, in the absence of any evidence of increased demand for college-level skills, is not obvious."
Well-known difficulties in estimating future economic fluctuations add to the confusion over the future educational needs of the economy. Estimating labor market trends, like predicting movements in the stock market, has always been an uncertain enterprise. Sharp differences of opinion over the likely effects of new technology make current projections of future job requirements even more problematic. Thus a recent study by two Oxford professors concludes that 47 percent of the jobs in America are now at high risk of displacement by machines, but that "computerization will mainly do away with low-skill and low-wage jobs in the near future." On the other hand, author and Silicon Valley entrepreneur Martin Ford argues that advanced technology is already beginning to displace highly educated workers in fields such as law, radiology, and medical diagnostics, and that "we are running up against a limit both in terms of the people being herded into colleges and the number of high skilled jobs that will be available to them if they manage to graduate."
The Immigration Solution. Even if a shortage does exist in subjects such as science and engineering, and even if the need for advanced skills grows more acute, it may not be necessary to solve the problem by massively increasing the number of people graduating from college. Instead, America could meet its needs by increasing the supply of well-educated immigrants. Large numbers of able young people regularly come to the United States to complete their education, and many of them want to remain here to work. Already, immigrants account for 15 percent of America's workforce, including one-third of all employees in STEM occupations and half of all employed engineering doctorates. The supply of highly educated workers could easily grow more rapidly if immigration restrictions were eased.
This situation may not last forever, once leading suppliers, such as India and China, develop their own economies sufficiently to offer more attractive career possibilities to their most talented graduates. Still, America could probably adjust immigration limits to meet the demand for highly educated talent for at least another generation or two, especially in STEM fields, a step enthusiastically supported by high-tech employers in Silicon Valley. By responding in this way, policy-makers could avoid the risk of encouraging more young Americans to earn college degrees only to find no need for their skills.
At the same time, immigration would do nothing to increase the career prospects of employees who have seen their earnings stagnate or even decline over the past several decades. For generations, the American Dream has portrayed the United States as the premier land of opportunity where those who are willing to work hard enough can realize their ambitions, however humble their origins. This belief has been an important factor in maintaining social solidarity and securing acceptance of the existing economic system despite its high levels of income inequality. In recent years, however, a number of researchers have examined the evidence and concluded that the American Dream is actually just that — a dream. Far from being exceptional, our current rates of upward mobility appear to be lower than those of a number of advanced European countries. Relying on immigration to meet the demand for highly skilled employees will do little to change this situation.
In addition, the percentages of our young people who earn college degrees continue to be much higher for the offspring of white and well-to-do Americans than they are for blacks and Hispanics or for children from low-income families. From 1995 to 2015, the percentage of whites aged 25–29 with BA degrees or higher rose from 29 to 43, while the percentages for blacks rose only from 15 to 21 and those of Hispanics from 9 to 16. The trends for young adults with an associate degree or higher followed the same pattern, rising from 38 to 54 percent for whites but only from 22 to 31 percent for blacks, and from 13 to 26 percent for Hispanics. In short, the educational levels of blacks and Hispanics are not only much lower than those of whites; the gaps have widened rather than narrowed over the past 20 years. Immigration will do little to lessen these differences.
Much the same is true of the levels of educational attainment achieved by members of different income groups. Among Americans born between 1979 and 1982, 54 percent of those from high-income families earned a BA degree or higher compared with only 9 percent of those from low-income families. Larger increases have occurred in the percentage of low-income students graduating from community colleges. Yet these gains, though beneficial, do not result in career opportunities or average earnings premiums as great as those achieved by graduates from a four-year college.
The gaps in educational attainment between children of rich and poor parents have also widened over the years. In part, this tendency reflects differences in academic aptitude between these groups of children. Yet substantial disparities remain even after such differences are taken into account. Thus analysts have found that among students who all scored in the top quartile in tests of mathematics proficiency, 74 percent of those from families in the top third of the socioeconomic scale graduated from a four-year college compared with only 41 percent of high-scoring students from the bottom third of the scale.
The resulting differences in economic opportunity run counter to the ideal of an America in which all people have an equal chance to succeed according to their ability, ambition, and effort. Raising educational attainment levels will not automatically remove these gaps. Still, it is hard to imagine that current differences will ever narrow significantly without a substantial rise in the overall level of educational attainment. In this sense, raising attainment may not be sufficient to bring about greater equality of opportunity, but it is surely a necessary condition.
Beyond Economic Growth. There are also powerful reasons apart from economic considerations for increasing the percentage of Americans with college degrees. Some of these benefits have to do with personal gains other than increased earnings. According to a large body of research, college graduates enjoy better health, not only for themselves but for their spouses and children. They tend to live longer than those with only a high school diploma. They suffer less from depression, get divorced less often, and enjoy greater happiness. Fewer among them commit suicide or indulge in substance abuse. They are also more likely to enjoy their work and find it meaningful.
Increased education likewise contributes far more to the society than increased productivity. College-educated adults tend to pay more in taxes, go to prison less often, receive fewer unemployment benefits and food stamps, and spend less time on welfare than those with less education. They also volunteer more often in their community, exhibit greater racial tolerance, and give larger amounts to charity. They are less likely to have children before the age of twenty, and their offspring are more likely to do well in school and go to college themselves, extending the consequent personal and social benefits to another generation.
Finally, according to yet another large body of research, valuable civic benefits are associated with higher levels of education — less corruption, more efficient government services, more respect for property rights, and greater belief in political freedoms. As citizens, college graduates not only vote more; they are also more informed about political matters, more open to other points of view, and less susceptible to political propaganda than those who did not go to college.
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Excerpted from "The Struggle To Reform Our Colleges"
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Copyright © 2017 Princeton University Press.
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