John Cassidy’s
New
Yorker article
“The College Calculus: What’s the real value of a collegeeducation” does a good job at revealing many of the popular myths currently
circulating around the country concerning college degrees, jobs, and
inequality. Drawing from Claudia Goldin and Lawrence Katz 2008 book
The
Race Between Education and Technology, he examines the logic behind the idea that we are failing to produce
enough high-skilled workers with college degrees to keep up with technological
progress. As Goldin and Katz have
argued: “Not so long ago, the American economy grew rapidly and wages grew in
tandem, with education playing a large, positive role in both. The challenge
now is to revitalize education-based mobility.” The problem
with this theory linking education to technology and social mobility is that it is false and misleading.
As
Lawrence Mishel has stressed, since
the mid-1970s, we have seen a constant separation between wages and
productivity. The following graph shows
that as workers using new technologies produce more goods and profits, their
wages have remained relatively flat:
(click on image to enlarge)
Thus as education levels and technological advances have
increased since 1970, the profits generated from these activities have not been
shared with the average worker. The
problem then is not a question of education or skills or even technology, the
issue is how profits are distributed.
In an act of great ideological deception, business leaders
and politicians have been able to turn our attention to higher education as the
solution to wage stabnation because they do not want us to look at some of the
real causes, like profit hording, de-unionization, financial speculation,
executive pay, regressive taxation, and outsourcing. Cassidy points out that in place of dealing
with these real economic issues, we are told that America has a fair
meritocracy, and the key to economic advancement for individuals and the
country as a whole is to produce more people with college degrees.
The myth of the meritocracy is an effective ideological tool
because it tells us that if someone does not have a good job, it is their own
fault.
After all, we have a fair system
of equal opportunity, which provides everyone the chance for social
mobility.
The reality of the situation
is that our economic system is enhancing inequality and higher education is
making things worse.
Looking at the
relation between family income and college attainment since 1970, we see that
people in the top quartile income bracket who enter college have increased
their degree attainment from 55% to 99%, while people from the bottom bracket
have moved from 22% to 21% during the same forty-three-year period:
Therefore after trillions of dollars spent on financial aid
and student loans, the people in the bottom 50% have seen virtually no gain in
degree attainment, while the people at the top have experienced a massive
growing advantage.
One reason why our meritocracy does not work in higher
education is that many admissions decisions are based on SAT scores, and SAT
scores are highly correlated with wealth.
The following chart reveals this tight connection between parental
income and SAT scores:
Since many college ranking systems like The US News & World Report rely heavily on SAT scores,
universities and colleges who want to move up the ladder or maintain their high
position have a huge incentive to only accept high scoring students, and this
means for the most part, wealthy students.
In fact, in order to both enhance their revenue and increase their
status, these institutions, including selective public universities, have
increasingly replaced need-based aid with merit aid, and once again merit is
often defined by SAT scores:
Public universities are therefore competing with each other
for wealthy students by replacing low-income students who need financial aid
with wealthy students who do not need aid but get it anyway.
As higher education continues to reward wealthy students
with admissions to selective institutions, low-income students are mostly
attending low-funded community colleges with low graduation rates.
This system turns the meritocracy back into
an aristocracy as the wealthy are able to use higher education as a way of
further enhancing their positions of social power.
Meanwhile, lower- and middle class families
are putting themselves into debt in order to compete in a rigged game.
In fact, the following chart shows that
lower-income students are holding most of the student debt:
According to this chart, 58% of all student debt is owned by
people whose household net worth is in the bottom 25%, and we should remember
that this is also the same group with the lowest graduation rates and the
lowest prospects of gaining a high-paying job.
Promoters of higher education as the solution to our
economic inequality argue that it is still worth it for everyone to go to
college because on average, people with a college degree make so much more
money than people without a degree. To
examine this claim, we can look at the following graph:
Since 1980, the gap between people with bachelor degrees and
people without these degrees has gone up, but 65% of the difference is due to
the decreased in median wages for people without college degrees. The real reason for most of the college wage
premium can thus be explained by outsourcing, globalization, automation, and
de-unionization; in short, there are very few middle-class jobs available to
someone without a college degree, but this has little to do with education;
rather, in the global race to the bottom, employers have simply sought to
increase profits by decreasing labor costs.
Returning to Cassidy’s New
Yorker article, what is so striking is that he continues to argue that we
really do not know why workers are not making more or why college is not
leading to higher wages: “If higher education serves primarily as a
sorting mechanism, that might help explain another disturbing development: the
tendency of many college graduates to take jobs that don’t require college
degrees. Practically everyone seems to know a well-educated young person who is
working in a bar or a mundane clerical job, because he or she can’t find
anything better. Doubtless, the Great Recession and its aftermath are partly to
blame. But something deeper, and more lasting, also seems to be happening.” Although
Cassidy makes it seem like it is a giant mystery why there are not enough
well-paying jobs for college graduates, we know the answer concerns a set of
governmental policies and employer practices that drive down wages and benefits
for everyone but the people at the top.
Some economists argue that companies simply have to decrease
wages and employment opportunities in order to survive in an increasingly
competitive global market.
However, we
also know that US companies are currently sitting on trillions of dollars of reserves,
and they are using hundreds of billions of dollars of profits each year to buy
back their own stocks in order drive up their company valuations and increase
executive bonuses:
This practice of hording profits and then using it to
increase executive compensation has helped to drive the stock market up as most
workers see little if any wage gains. Once
again, having more people with a college degree will not change this situation.
As many of us now know, 10% of Americans hold over 50% of
the wealth, but what most people do not know is that up to 80% of all wealth is
either directly or indirectly due to inheritance.
As Thomas Piketty has argued, one reason then
for the lack of social mobility and the increase in inequality is the way we
allow the wealthiest families to retain and enhance their advantages.
To highlight this issue, we can look at the
top tax rates since 1913 and compare it to income inequality during the same
time period:
Clearly, we can associate high levels of taxation for top
earners with increased inome equality, and so tax policy, and not higher
education, plays a huge role in increasing social mobility and decreasing
inequality.
Of course, the wealthy have used their financial advantages
to not only game higher education but also the political system, which helps to
enhance wealth through tax policies and anti-labor practices. Yet, even with all of the ample evidence that
most of the wealth and wage inequality is being driven by corporate hording and
governmental policies favoring the super-rich, Cassidy continues to argue that
we really do not know what is going on: “Why is this happening? The short answer is that nobody knows for sure.
One theory is that corporate cost-cutting, having thinned the ranks of workers
on the factory floor and in routine office jobs, is now targeting supervisors,
managers, and other highly educated people. Another theory is that
technological progress, after favoring highly educated workers for a long time,
is now turning on them.” Here we see how the focus on technology and education
blinds us from seeing how human greed is driving the exploitation of labor, and
without any counter-force, like strong unions, governmental regulations, and
progressive tax policies, there is nothing to stop the concentration of wealth
at the top.
Instead of hoping that higher education should be the
solution to all of our economic problems, we should follow Cassidy’s advice and
return to the notion that college is a public good and an end in itself: “Being more realistic about the role that
college degrees play would help families and politicians make better choices.
It could also help us appreciate the actual merits of a traditional broad-based
education, often called a liberal-arts education, rather than trying to reduce
everything to an economic cost-benefit analysis.” If we focus on making higher
education more accessible and affordable as we enhance its quality, we can at
least make sure that it does not enhance inequality and decrease social
mobility. The first step is to stop
believing that college degrees produce good jobs.
