High unemployment and the education deficit

July 28, 2010

graduation photo USE THISThe following is a guest post by Bruce Yandle, distinguished adjunct professor of economics with the Mercatus Center at George Mason University and dean emeritus of the College of Business & Behavioral Science at Clemson University. The opinions expressed here are his own.

Last month’s report on U.S. employment growth brought no cheer to job-seekers with a high school education.

In June 2010, the unemployment rate for adults 25 or older with a high school diploma was 10 percent. Whereas unemployment among college educated adults was 4.4 percent. (Overall unemployment was 9.5 percent.)

Part of what’s making the unemployment number so high, aside from a dismal economy, is an education deficit. The idea of lining up shovel-ready jobs with stimulus money may sound good, but our economy is not a shoveling one. Instead, our economy is calling for a more educated workforce.

The gap between the U.S. unemployment rate for Americans with high school diplomas and those with college degrees shot through the roof with the Great Recession (See figure 1). Because of this education deficit, the overall unemployment rate will not sink anytime soon.

Education graphOf course, a four-year degree is not the only route to improving employment prospects. Adults with a two-year technical education do far better than those with just a high school education. The June unemployment rate for that group of adults was 8.2 percent.

Since December 2009, some 593,000 jobs have been filled in the nation’s economy, including 163,000 in manufacturing. While each job is important, the numbers look pale against the 7.9 million jobs that have disappeared since December 2007, when the recession started.

A quick inspection of Bureau of Labor Statistics data tells us where the action is. Employment gains have occurred in professional and business services, partly accounted for by firms that supply temporary workers, and in education and health services. The last two sectors have been recipients of stimulus money. They also generally require knowledge that goes beyond a high school education.

But the churning of labor markets revealed by the unemployment gap between holders of a bachelor degree and those with a high school diploma reflects more than a stimulus. Hard times bring a sharper definition of the U.S. comparative advantage. As we observe the shuttering of some businesses and the stability or expansion of others, we are seeing U.S. economic muscle laid bare. And, what we see is a knowledge-based economy.

America’s economic edge has come partly from having a competitive education system with the freedom of choice at the post-secondary level. Young people can shift fields of study and go for more education, depending on the employment and earnings prospects available to them. Right now, the higher payoffs for staying in school and building human capital are sending a strong signal to young people to get more education. At the same time, wages forgone are the largest element of cost adults face for continuing in school. When there are no wages to lose, education is on sale.

With the unemployment rate for college graduates at 4.4 percent and the rate for high school graduates at 10 percent, the message is clear: As tough as it may seem, this is the time for young people to find the means to become prepared for the new knowledge economy.


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Someone please tell PR Governor Fortuño… although I don’t understand why this is such ‘breaking news’… this goes into the “uh… duh” file for me.

Posted by rrodriguez78 | Report as abusive

The good professor is talking from an “University of the 20th century” lectern, I suspect, and the employment chart is skewed toward 20th century corporation models, I assume.

The fact is, with the maturing of new knowledge data bases on the internet, any high school graduate can quickly master college material through free lectures as those presented in MIT’s excellent open courseware without ever stepping into a class in an university campus, socializing with peers, or patronizing professors in their 20th century ivory towers.

In 10 years, I suspect we will see a group of highly erudite and astute professionals who were self-taught in a variety of unorthodox methods who will seize the reins of our global economy, operating small businesses with zero overheads and huge profit margins.

All those Ivy Leaguers won’t have a clue what hit them, worse still, start to wonder why they spend all that money on a 20th century education !

I sure hope I am wrong, but the way our children communicate and gain access to data they seek, and the accelerated growth in IT and data delivery systems and tools like the iPad and the Kindle,tuned to the ever evolving world wide web and its capabilities, the chances are we are witnessing a sea change as new generation of young, highly capable “texting”, “naturally multitasking” “dual and triple professionals”(doctors with law degrees and architects with engineering and accounting skills and scientists with liberal arts and philosophy at their core) take over a far more sensitive economy, without ever having seen a class room, let alone an university.

We might call them nerds, but they’ll be….laughing all the way to the bank.

Posted by googolplex | Report as abusive

Higher education counts when your are talking about job specific training, otherwise what employers want is not so much someone with a college degree but someone who has the traits that lead to getting a college degree an ability to work independently and wrap ones head around new ideas. The degree becomes a symbol of a culture. In order to get a better idea of how valuable those degrees are one really needs to match the degrees to the jobs taken after graduation. If one does this and finds a significant percentage of people whose degrees don’t match the jobs they take then I think it is fair to make the argument that the $80,000.00 to $180,000.00 dollars spent to get the degrees was largely wasted.

I wouldn’t argue that we need intellectual as opposed to physical labor assets, but I don’t think that intellectual assets are created by higher education as much as by the culture that values higher education.

Posted by ERhoades | Report as abusive

[…] High unemployment and the education deficit. […]

Posted by Morning Constitutional – Thursday, 29 July 2010 – Verities and Vagaries | Report as abusive

With computer and IT technologies growing at an alarming rate, the Labor Supply is currently demanding a highly-educated, computer savy employee. Advanced computer technologies will soon takeover meaningless manual labor jobs, like construction workers and grocery cashiers, so it is time for our labor supply to adapt to our economy’s changing demands.
It is a scary outlook for those with only a High School diploma, even worse for those without their GED

Posted by JR02 | Report as abusive

Okay guys and gals to attack the author on the premise that education is the cure-all is rather simple though many of you bring up good points, some very good. But what we should really attack his premise on are his facts; take the graph that he uses or that he mentions that the stimulus money was spent on a select few sectors of the economy.
In the graph the author looks at the difference in unemployment between Collage Graduates (CG) and High School Graduates (HSG), but what he fails to point out at 4.4% unemployment that would put CGer’s at the top point of what most economists would call normal or seasonal unemployment rates(usually 2 to 4% for normal job turnover rates). So when the government used OUR money for the so-called stimulus/ Job Creation Bill; well, it was politically skewed in favor to the progressives favored segments of the work force, not those that needed the help most or those most hurt by the Recession.
Nor does he mention that Colleges and Universities have become nothing more than wealth transfer vehicles, from the Middle Class to the Social Elites at the Schools. Where costs have grown exponentially since the ‘70’s with no real increase in net worth of their product.
Really sad when you think about it that we have let this happened for so long.

Posted by futureops6 | Report as abusive

[…] High unemployment and the education deficit | Reuters Blogs – Again, it’s like they have knuckleheads writing headlines over at Reuters. The story here is not that there’s higher unemployment as education declines. That story is, like, forever old, and the historical gap is around 2% (high school vs college). The story – and it’s a story – is that the gap got massively wider. Massively. Since the Great Recession, the gap almost tripled, approaching 6%. What’s more,  unemployment of those with college degrees went down in 2009 while it continued to increase for high school grads. I can’t help but wonder what role is played by colleges that charge $20k / semester to deliver an education that’s not materially different from old State U. ======= […]

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Posted by New Jobless Claims now up to 500,000 – Page 2 – US Message Board – Political Discussion Forum | Report as abusive

[…] telling when you consider the number of unemployed individuals with a high school diploma is almost twice that of those with some form of college education. Simply put, we are moving towards a world where […]

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