College Productivity

An Interview with Labor Economist Anthony Carnevale
Representatives of the initiative sat down recently with Anthony Carnevale, director of the Center on Education and the Workforce at Georgetown University, to find out how labor market trends and the current economic crisis will affect higher education.

Looking ahead, how much will the economy's demand for college-educated workers increase?
More than we think. The problem is that the Bureau of Labor Statistics (BLS) undercounts its projections for the postsecondary education needs of the future workforce in two critical aspects. First, education requirements for specific occupations are assigned to the middle education level of current occupants. BLS throws away the top and bottom 20 percent of workers (including graduate-degree recipients and high school dropouts). So an occupation will be listed as requiring high school and some college when in fact it might require more postsecondary education. Second, in their predictions, education requirements are essentially static. They do not reflect how educational requirements that have been increasing pretty significantly in recent years.
Our center is currently developing new projections that better account for changing realities, both at the national and state level. We are essentially going into the BLS model and doing some remodeling of education demand evaluations and predictions. In the next month or two we will have educational demand annualized out to 2018.

What’s been happening to postsecondary requirements in the current labor market?
In the current recession, temporary job loss (when people lose jobs but go back to the same occupation) has essentially disappeared. The jobs being permanently lost are the jobs that don’t require a postsecondary education.
Meanwhile, a whole series of occupations, including fields like welding and manufacturing, once considered low-skill jobs, are requiring postsecondary credentials. When you are building oil tanks and nuclear facilities that pose real dangers, states want to make sure that their welders are educated. This is what we economists call “skill bias technology change,” or sustained increases in the level of education and training demanded by occupations.
There is something bigger at work, too. Our center has been looking at Baby-Boomer retirement in the context of occupational shortages. The biggest shortages will come out of the public sector, with a large demand for firefighters, police, school teachers, and so on. There will be shortages in the private sector, too, but those companies usually get first dibs at the graduating workforce because they pay more.

Is our higher education system on track to meet these shortages?
Probably not, but I’m not really worried about how the economy will cope. Labor markets are resilient. Providers (including corporate and for-profit) will step in to meet the need for workers, and employers that can offshore jobs will find their labor elsewhere. The bigger concern is the social consequences. Not educating the number of Americans we need to be competitive internationally will increase social stratification, which has serious ramifications for government and society at large.
Today, partly because people have to go to college or trade schools to earn credentials, it seems to take forever for youth to make the transition into adulthood. Young people used to move from family dependence to independence – landing a job that pays enough to start a family – by age 25. Now it isn’t until age 32. This longer transition ends up sorting kids and favoring affluent young people, who end up “making it” much faster than others.
On top of that, legislatures are cutting postsecondary education budgets, which forces institutions to only take people who finish quickly, pay in full, and increase accountability numbers favorably. So over the next three years or so, there will likely be a push to get rid of the low-income and non-traditional students. This will come at the very time we need more, not fewer, of these students to enter and graduate.

Will higher education systems have to change to meet the increased need for graduates?
The problem is that the vast majority of Americans require some kind of postsecondary education or training, but the nation has no idea how it can afford it. So the dynamic that we are about to see is the federal government fighting with the states over who will put money into a declining budget for postsecondary education and training. It will be a game of tit for tat. Colleges will seek more money from states; states will seek more money from the feds. And everybody will continue to attack institutions for spending and charging more. It’s going to be this merry-go-round of finger pointing.
We are coming to the point where education is more than half of a state’s budget. We may be getting close to being tapped out. The state can’t carry any increases in their education budget, so we are potentially in store for a revolution in the sense that there is a fiscal federalism crisis here we haven’t seen since the 1970s.

But is it just a matter of giving institutions more money? What about encouraging states and institutions to better use their resources to ensure we have the graduates we need?
We need to put the money where it will produce results and reach the students who need it. To be really blunt, we need to engage in a form of bribery to institutions to move in the right directions, cutting through some of the bureaucracy that runs rampant in higher education.
My bias is that we need to be focusing less on changing higher education institutions and more on helping them respond to the demands from the economy. Monkeying with colleges and universities about the basic rules of the road will take a lot of time and may not offer much in the way of results. We ought to urge the states to help community colleges respond to the skill demand in health care, instruction, and the trades, and build public-private partnerships between public colleges and employers in those areas.
But, unfortunately, much of the money coming in is not flexible. Ideally, instead of spending state money on another research university, the money would go toward instruction. But the problem is, the money for construction is a different pot of money than funds for instruction. So if you cancel the plans for the new research university, you won’t gain the money you saved by not building it.
We should be giving money to institutions to maintain and improve programs that work and to fund missions that the market won’t pay for. One idea I have is to create a federal program that gives colleges extra money for educating hard-to-educate kids, such as low-income and non-traditional students, because that is exactly who is going to community colleges.

What is your view of the federal stimulus package as it relates to higher education? Will it help?
At the very least, the bill will create jobs, 3.7 million by the Council of Economic Advisors’ estimate. Now the majority of those jobs are going have significant skill, training, and education requirements. Over half are going to require some form of higher education while others will require significant amounts of work experience and on-the-job training. All of this means that in the coming years we’re going to continue to see a high demand for higher education.
Overall, though, I have to admit I’m disappointed with the bill. While there has been a significant investment in state higher education data systems, it comes up short in terms of connecting the data from higher education and the workforce. I also would put family income and socioeconomic status in all of our higher education databases, so we could watch this process of stratification and at least guilt people out of it. We really need this information, and it's unfortunate that the federal government is not willing to step up. But our center will continue its efforts to fill this gap.

What do you say to people who argue that a postsecondary education is not necessary?
Right now, this is the time to go to school and stay there. We are going to have quantity problems in the workforce coming out of this recession. But to me that’s good news. States and institutions will have to respond. Worker shortages will lead to investments in training. All the stuff we talk about in education that has been undervalued will get funded. Policymakers are going to beat the hell out of the education system and blame them, but in the mean time the necessary investments will be made. Ultimately, they always are.