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December 1995, Vol. 118, No. 12
Are more college graduates really taking 'high school' jobs?
John Tyler, Richard J. Murane, and Frank Levy
Upward mobility through education is a central belief in American society. Since World War II, this belief has centered increasingly on the value of a college education. But twice in the last 25 years, the economic value of college has been called into question by labor market developments.
The first challenge arose in the late 1960's and continued through the 1970's as college-educated baby-boomers surged into the labor market and sharply depressed a college diploma's economic return.1 By the early 1980's, however, wages for workers with fewer years of education had plummeted while the earnings of college graduates held their own. A college education looked like a good investment once again.
The second challenge came in a 1992 Review article by Daniel Hecker, a Bureau of Labor Statistics economist. Using occupational and demographic data from the Current Population Survey, Hecker estimated that in 1990, 20 percent of all workers with college degrees were either unemployed or employed in jobs requiring only high school skills.2 This figure, he argued, had risen significantly since 1970 when only 11 percent of college-educated workers were similarly "underemployed." Put simply, there were too many college graduates.
Hecker's article, published during the 1989-92 white-collar recession, was quickly taken up by the popular press. For example, in an August 1992 Newsweek column, economics reporter Robert Samuelson wrote that Hecker:
... convincingly demolishes the notion that there's a scarcity of college graduates and that sending more Americans to college will automatically create a more productive economy... [If] more people had gone to college in the 1980s they would have competed mostly for lower-wage jobs that usually don't require a degree.3
Similarly, the New York Times reporter, Sylvia Nasar, wrote a story in which she emphasized the irony of Hecker's findings coming at a time.4
when college enrollments are at record levels, tuition is at an all-time high and the most costly item in Bill Clinton's economic plan is a program to send everyone to college who wants to go.
Hecker's message was updated and reinforced in 1994 by BLS economist Kristina Shelley who warned:
The employment outlook for college graduates between 1992 and 2005 is like a weather forecast in the midst of the summer doldrums: Tomorrow will be a rerun of today or a little worse.5
Each of these articles contains the same warning: the economy is generating college graduates faster than it is generating jobs for those graduates; potential college students and those who design educational policy ignore this fact at their peril.
This article demonstrates, however, that the warning is largely misguided and that a college education continues to have significant economic value.
This excerpt is from an article published in the December 1995 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 See Richard B. Freeman, The Overeducated American (New York, Academic Press, 1976), for the most widely recognized development of this theme.
2 Daniel E. Hecker, "Reconciling conflicting data on ' jobs for college graduates," Monthly Labor Review, July 1992, pp. 3-12.
3 Robert J. Samuelson, "The Value of College" Newsweek, Aug. 31, 1992, P. 75.
4 Sylvia Nasar, "More College Graduates Taking Low-Wage Jobs," The New York Times, Aug. 7, 1992, p. 5.
5 Kristina J. Shelley, "More Job Openings-Even More New Entrants: The Outlook for College Graduates, 1992-2005," Occupational Outlook Quarterly, Summer 1994, pp. 4-9.
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