taxi speeds by on 42nd Street at Times Square in New York 31.
(photo credit: REUTERS/Peter Jones)
It’s a parent’s nightmare: shelling out big money for college, then seeing the
graduate unable to land a job that requires high-level skills.
situation may be growing more common, unfortunately, because the demand for
cognitive skills associated with higher education, after rising sharply until
2000, has since been in decline.
So concludes new research by economists
Paul Beaudry and David Green of the University of British Columbia and Benjamin
Sand of York University in Toronto. This reversal in demand has caused
high-skilled workers to accept lower-level jobs, pushing lower-skilled people
even further down the occupational ladder or out of work altogether. If the
researchers are right (which is not yet clear), the consequences are huge and
troubling – and not just for college grads and their parents.
with some basic facts.
There have always been some graduates who wind up
in jobs that don’t require a college degree. But the share seems to be growing.
In 1970, only one in 100 taxi drivers and chauffeurs in the US had a college
degree, according to an analysis of labor statistics by Ohio University’s
Richard Vedder, Christopher Denhart and Jonathan Robe. Today, 15 of 100
It’s hard to believe this is because the skill required to drive a
taxi has risen substantially since 1970. If anything, GPS technology may have
had the opposite effect. (Acquiring “the knowledge” of London streets, as taxi
drivers there are required to do, is cognitively challenging, but it may no
longer be necessary.) Educated firefighters Similarly, in 1970, only about 2
percent of firefighters had a college degree, compared with more than 15% now,
Vedder and his colleagues found. And, according to research by economists Paul
Harrington and Andrew Sum of Northeastern University, about one in four
bartenders has some sort of degree.
Beaudry and his colleagues say such
change has been driven by a decline in the demand for highly skilled work – the
opposite of the conventional wisdom about such demand. The employment rate in
“cognitive” occupations – managerial, professional and technical jobs –
increased markedly from 1980 to 2000, their research found, but it has since
stagnated, even as the supply of skilled workers has continued to
What has changed? One possibility is that the effects of a
globalizing workforce are creeping up the income scale. Many jobs that once
required cognitive skill can be automated. Anything that can be digitized can be
done either by computer or by workers abroad. While the “winner take all”
phenomenon may still mean extremely high returns for workers at the very top,
that may be relevant for a shrinking share of college graduates.
the explanation, the Beaudry team argues that an excess of skilled workers has
led them into the “routine” job market – such as sales and clerical jobs –
reducing wages there and pushing less skilled workers into “manual” jobs in
construction, farming and so on.
What’s puzzling here is that it seems
inconsistent with evidence that the wage premium enjoyed by college graduates
has persisted. For example, a recent paper by Philip Oreopoulos and Uros
Petronijevic of the University of Toronto (yes, Canadian economists seem to
dominate this aspect of the US labor market) found that the earnings premium for
college graduates has risen substantially over the past several decades and that
investment in college “appears to pay off for both the average and marginal
The still-strong earnings premium strongly suggests that the
demand for skill has not collapsed. After all, if cognitive skills became less
valuable in the labor market, wouldn’t one expect wages to fall more for college
graduates than for others? Falling wages Not necessarily, Beaudry and his
colleagues argue. They find that while wages for jobs requiring cognitive skills
have declined, the shift of highskilled workers into those jobs has depressed
wages for manual workers even more.
That’s a provocative argument. Still,
it may be that the Beaudry team’s results are sensitive to the way they define
“cognitive” jobs and “manual” ones. Also, it’s not entirely clear how much the
recent recession has influenced their results.
In any case, the findings
will do little to calm the nerves of graduates who are anxious to find
The cold comfort I can offer is this: Going to college may still be
worthwhile – if not to be sure of qualifying for skilled jobs, then at least to
avoid the even worse prospects of those who don’t get a degree. (Bloomberg)
Peter Orszag is vice chairman of corporate and investment banking and chairman
of the financial strategy and solutions group at Citigroup Inc. and a former
director of the Office of Management and Budget in the Obama administration.