Many recent studies and reports have lamented the relatively meager job market open to graduates, especially those outside of rapidly growing fields.
In an exhaustive research review of the return on investment of a college education available at the NBER website, the University of Toronto’s Philip Oreopoulos and Uros Petronijevic find that not only does the research find college boosts wages and is a good long term investment, but that those returns have stayed constant, and even grown as the supply of graduates has exploded.
The most convincing argument as to why that’s happened? Technology. As computers and information technology get adopted, there are more jobs that require non-routine, abstract thinking — exactly what colleges hope to develop. In about 1980, the demand for college-related skills started to beat supply, and that’s never stopped.
Here’s the evidence. The author’s chart highlights that despite a massive increase in the supply of college graduates relative to those with some college, or only a high school degree, the wage premium — the difference in wages between those groups and college graduates — has continued to rise:
That’s a massive increase in supply. But employers have been willing to keep paying more and more despite having a bigger pool.
2010 was a peak, but a long-term decline in demand doesn’t seem likely. McKinsey predicts an 18-million-person shortage of college-educated workers by 2020.
This trend doesn’t come from an increase in college quality, or a reduction in high school graduate quality. And even in low skill jobs, wages for college graduates trend much higher. Part of it might be that graduates expect higher salaries, but the market wouldn’t support that over time if they didn’t earn them.
The premium isn’t constant across all schools and jobs, but it exists in all major occupational sectors:
As for evidence of how technological shifts have impacted the job market, McKinsey published a chart showing how automatable jobs, many of which didn’t take college degrees, have plummeted:
College isn’t just about developing skills. It’s also about either developing or signaling that someone has abstract and multi-level skills, and the ability to do or be trained to do something that can’t easily be automated.
Unless you think that the march of technology has halted, or that a college education doesn’t help boost what Oreopoulos and Petronijevic call “non-routine, abstract skills that require problem solving, multi-tasking, and creativity,” then that premium, and the demand for college students isn’t going anywhere.
Not everybody should go to college. People unlikely to complete it shouldn’t go, and going into serious debt for a lower quality degree takes its own toll.
But research shows even students on the margin of going due to financial or academic constraints see a benefit. There hasn’t been some drastic shift that’s made a college degree worthless.
In weak or changing economies, those who haven’t tailored their degrees to the job market are likely going to have a tough time right out of school. That’s unfortunate, and a sign that schools have work to do in tailoring their offerings and reducing costs. But turning that into an argument against going at all is taking it too far.
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