Subsidies Create Glut Of College Grads
Posted 01/28/2013 07:13 PM ET
Higher Education: A
new study finds almost half of Americans with college degrees are
working at jobs that don't require one. It's the latest example of how
federal subsidies are creating a massive higher-education bubble.
The study, by the Center for College Affordability and Productivity, found that an incredible 48% of college graduates — about 13 million of them — hold jobs that don't require a bachelor's degree. About 5 million have jobs that don't even require a high school diploma.
There are, for example, roughly a million sales clerks, 300,000 waiters and 100,000 janitors with college degrees.
This mismatch is up sharply from four decades ago, the study found. While 1% of taxi drivers had a college degree in 1970, to take one example, 15% do today. Back in 1967, fewer than 11% of college grads were overqualified for their jobs.
And this problem is not likely to get better anytime soon. Only seven of the 30 occupations projected to see the biggest growth over the next decade require any post-secondary education, the study found.
As a result, while colleges will churn about roughly 19 million college graduates between 2010 and 2020, the market will likely create fewer than 7 million new jobs that require at least a bachelor's degree.
Weirdly, at the same time, the country faces a shortage of skilled labor — plumbers, electricians, carpenters and the like.
A study by Deloitte out last year found manufacturers couldn't fill as many as 600,000 jobs due to the lack of skilled workers.
Another by the Boston Consulting Group found that this shortage could reach 875,000 by the end of the decade.
In a normal market, a huge excess in supply would send a signal back up the chain to produce less, and as a result, demand for expensive college degrees would drop. At the same time, the number of people learning a skilled trade would increase to fill that shortage.
But while college enrollment has declined slightly in the past year, it continues near historic levels. College costs continue to skyrocket, shooting up at three times the rate of inflation, which in turn has led to a doubling of average student debt.
In fact, the amount of student loan debt now tops $1 trillion, and is growing fast, while default rates are climbing.
If this all looks strange and mysterious, it is. Until, that is, you realize a big reason for all these distortions is the massive federal effort to encourage and subsidize college education.
Over the past three decades, financial aid has rocketed 438% — and that's after adjusting for inflation — driven largely by huge increases in federal grants, education tax breaks and subsidized loan programs.
It's worked. Where only about 10% of 25-year-olds had a college degree in 1970, more than 30% have one today.
But, just as with the federal effort to encourage home ownership, which led invariably to the disastrous housing bubble, these federal policies have wildly distorted the education market. It's not far-fetched today to talk of a higher-education bubble.
The problem is that President Obama wants to pump in still more air. He's nearly doubled Pell Grant spending, for example, added another college tax break — the $2,500 refundable American Opportunity Tax Credit—took over the student loan business, and promises more of the same in his second term.
None of this is to say that a college degree isn't a valuable thing. For many, if not most, it clearly is.
But pushing more and more people to get degrees ends up hurting many of those who are supposed to be helped — the millions of college students who will graduate with a huge pile of debt but few good job prospects.
The study, by the Center for College Affordability and Productivity, found that an incredible 48% of college graduates — about 13 million of them — hold jobs that don't require a bachelor's degree. About 5 million have jobs that don't even require a high school diploma.
There are, for example, roughly a million sales clerks, 300,000 waiters and 100,000 janitors with college degrees.
This mismatch is up sharply from four decades ago, the study found. While 1% of taxi drivers had a college degree in 1970, to take one example, 15% do today. Back in 1967, fewer than 11% of college grads were overqualified for their jobs.
And this problem is not likely to get better anytime soon. Only seven of the 30 occupations projected to see the biggest growth over the next decade require any post-secondary education, the study found.
As a result, while colleges will churn about roughly 19 million college graduates between 2010 and 2020, the market will likely create fewer than 7 million new jobs that require at least a bachelor's degree.
Weirdly, at the same time, the country faces a shortage of skilled labor — plumbers, electricians, carpenters and the like.
A study by Deloitte out last year found manufacturers couldn't fill as many as 600,000 jobs due to the lack of skilled workers.
Another by the Boston Consulting Group found that this shortage could reach 875,000 by the end of the decade.
In a normal market, a huge excess in supply would send a signal back up the chain to produce less, and as a result, demand for expensive college degrees would drop. At the same time, the number of people learning a skilled trade would increase to fill that shortage.
But while college enrollment has declined slightly in the past year, it continues near historic levels. College costs continue to skyrocket, shooting up at three times the rate of inflation, which in turn has led to a doubling of average student debt.
In fact, the amount of student loan debt now tops $1 trillion, and is growing fast, while default rates are climbing.
If this all looks strange and mysterious, it is. Until, that is, you realize a big reason for all these distortions is the massive federal effort to encourage and subsidize college education.
Over the past three decades, financial aid has rocketed 438% — and that's after adjusting for inflation — driven largely by huge increases in federal grants, education tax breaks and subsidized loan programs.
It's worked. Where only about 10% of 25-year-olds had a college degree in 1970, more than 30% have one today.
But, just as with the federal effort to encourage home ownership, which led invariably to the disastrous housing bubble, these federal policies have wildly distorted the education market. It's not far-fetched today to talk of a higher-education bubble.
The problem is that President Obama wants to pump in still more air. He's nearly doubled Pell Grant spending, for example, added another college tax break — the $2,500 refundable American Opportunity Tax Credit—took over the student loan business, and promises more of the same in his second term.
None of this is to say that a college degree isn't a valuable thing. For many, if not most, it clearly is.
But pushing more and more people to get degrees ends up hurting many of those who are supposed to be helped — the millions of college students who will graduate with a huge pile of debt but few good job prospects.
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