The Undereducated American and the Implications for Policy

I want to draw your attention – not just to the controversy surrounding the issues of supply and demand for college-educated Americans – but to the policy implications associated with supply and demand. What prompts these comments is the most recent publication of the Georgetown University Center on Education and the Workforce: The Undereducated American.

This study directly addresses the issues about whether we are producing too few or too many college-educated citizens. It does so with the thesis that the United States has been under-producing college-going workers since 1980 and that supply has failed to keep pace with growing demand. The result of under-production, the Center argues, has been precipitous growth in U. S. income inequality. The growing wage inequality of developed countries like the U. S. has been the topic of a number of articles in The Economist, including “Rich and Poor, Growing Apart.” But the Georgetown Center’s publication draws the link directly between inequality and our declining growth rate in college education with 1990 having been the inflection point.

Noting that demand for the college-educated grows at +2.0% per year while supply grows at 1.5% per year, the Center points out the following: “The evidence is clear that the U. S. needs more, not fewer college graduates. Proof is apparent when applying the most fundamental concept of economics: supply and demand.” With data that support a conclusion that income inequality is driven largely by access to college, the Center addresses the argument that we have an overeducated population by pointing to forecasts such as Richard Freeman’s 1976 book, The Overeducated American. That earlier forecast, like other previous ones, depended upon declining wages for the college-educated as an outcome of oversupply, something that just has not occurred. The college-educated earned 40% more than the high school-educated in 1980. In 2010, the difference was 74%. The forecast, using this trend leads to a 96% difference in 2025.

And it is in 2025 when President Obama has set a goal of 60% of Americans with a college education. That goal requires 16 million more graduates than we are currently producing. How we get there will depend upon changes to policy. It was some years ago that a study from the State Higher Education Officers (SHEEO) pointed to the limitations in the ability of traditional bricks and mortar colleges of our states to produce the needed growth in college degrees. Yet, we have not altered policy in ways consistent with the goal and consistent with encouraging growth.

What policies are required? First, we should support, encourage and incent the growth of online programs from traditional colleges and universities. That means making it easier to offer these programs with regulations that recognize that traditional concepts like the credit hour based on seat time are obsolete. Second, we should recognize that states cannot regulate online programs merely because a resident of one state enrolls virtually in education from another state. Thirdly, we should make available funding for students that is blind to the particular corporate status of an educational institution; the focus should be upon quality of education, not whether a college is for-profit or not-for-profit. Fourth, we should encourage and reward universities for their improvement in output – i.e., graduation rates, rather than enrollment rates. Fifth, we should recognize and incent the growth of more institutions, like for-profit colleges, that have made education more accessible to working adults and students from at-risk backgrounds.

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