When did average end?

There was a dramatic negative structural break in college graduates’ employment rates, beginning around the 2005 entry cohort, that shows no sign of abating.

Here is the full NBER paper from Jesse Rothstein.

Comments

RE 2005 break: It's almost as if a college degree is a signal and having too disparate of a population with that signal lowers the value of that signal.

People I know who hire recent college grads complain that it's a lot more work than it used to be.

Lot more work in what way?
- More work to find ones not already employed?
- More work to get them to be useful?
- Something else?

(Not sarcastic or rhetorical question either way, was just curious and not 100% sure which you meant).

You need many more interviews to find people who are good at pretending that they always wanted to work for you and your s'tty company, and who can credibly BS their way through the interview process. That's because da yout' has 1. been educated to be truthful in interactions with anyone, including employers, which was a bad idea and 2. you're not pretending any more that you treat workers as expendable cogs in your company; or in any case if you do, applicants see through your BS (they have access to the internet you know)

Mr. Tyler Cowen really nailed it with "Average is Over". Technology magnifies the capabilities of winners, and shrinks the relative abilities of losers. You have still have to be decently smart to get a college degree, probably at least above the median IQ, but decently smart isn't enough to guarantee a home, health and a retirement. We see this in the flood of applications to a sliver of "good ass jobs"; there are many more people unsatisfied with their quality of life than there are jobs they are qualified for to raise them up.

You don't have to be smart to get a degree. Better factors are:

1) Wealthy parents. If your parents can foot the bill, or better yet are generous alumni, it's easier.
2) Wealthy neighborhood. If you went to a good school with a good reputation, your actual abilities matter less. A genius who only has an SAT score but whose area had few extracurricular activities is still behind.
3) Brown nosers. The top voted best teacher at my university was a horrible professor. Totally useless at teaching. But he had a connection to Google to get people jobs. So he got every award kids could throw at him if it would get them a recommendation.

"Good jobs" tend to be soaked up by immigrants intentionally pulled over to lower wages (yes it's a conspiracy - I saw it in action at that time). What jobs are left go to too many brown nosers and alumni with the right background but no actual merits.

I'd wager the data shows kids with merit but lower prestige are in areas like open source, where merit has a place. And the gig economy, where they can pull in good money with no strings attached. But benefits like health care are worse for them, so they're screwed if they have a medical emergency.

"2) Wealthy neighborhood. If you went to a good school with a good reputation, your actual abilities matter less. A genius who only has an SAT score but whose area had few extracurricular activities is still behind."

What? If you go to a good high school ti doesn't matter what grades or SAT you get? Really?

SATs are not required at many good schools

A lot of lefty, snotty comments here. You lost the election. Tech, math, science are in. Social science is out, along with your snot-nosed ideology...

Corollary: People I know who are recent college grads complain that it's a lot more work to get a job than it used to be.

Baseless assertion: A variety of macroeconomic trends including but not limited to explosions in cost of housing, healthcare and education are conspiring to keep young people poor and old people grumpy (don't forget complacent).

How do recent graduates know how much work it used to be to find a job?

True... but then, I knew a guy back in the 1960s who decided to take a motorcycle vacation Across America after graduating from high school. Upon returning home in Michigan, he put his name on the list at the local Ford plant. He was hired that afternoon.

Back when HR was called "personnel" and consisted mainly of paper pushing, when background checks were an expensive hassle and done only for very sensitive jobs, and drug testing was unknown, it was oftem possible to apply, be interviewed and be hired for a job in the same day.

A degree means just about nothing. A major means very little. You have to dig into transcripts to differentiate between people who took advantage of pathways to a degree without meaningful education and those you might want to interview,

I don't ever recall being asked to submit transcripts when I was newly out of college (that would be the early 90s). I did include my major (physics) and my GPA plus a noteworthy university toward on my resume.

"People I know who hire recent college grads complain that it's a lot more work than it used to be."

Odd that businesses who have demanded schools stop costing them so much to train workers for manufacturing, construction, engineering, and demanding at least half the population of consumers have way too little income to ever be customers of those businesses.

Further, they have sought to destroy unions which have directly or indirectly trained workers to work for these employers and ensure consumers have enough income to afford to buy goods from these employers to keep up demand for what the trained workers can produce.

Why economists since circa 1980 demand over half of aall consumers gave so little income they can't afford to buy from US businesses, not to mention economists demanding no one in the US be trained to do anything that requires manual labor, because anyone born in the US should join the intellectual right where no one ever produces anything requiring manual labor.

Eg, no one on the intellectual right creates car companies that produce cars.

No one on the intellectual right pays workers to get their hands dirty with any dangerous medical fluid even with their hands covered with polymer gloves, which the intellectual right can never product in quantities of hundreds, much less in volumes of billions.

Instead the intellectual right argues they should get paid a fee for every transaction because they have a government monopoly on ideas like vaccines and antibodies to stop viruses killing people because they thought of the idea first, before they told genius Trump is knows more than everyone and though of it first.

Tanstaafl.

+1 postmodern babbling
"No one on the intellectual right pays workers to get their hands dirty with any dangerous medical fluid even with their hands covered with polymer gloves, which the intellectual right can never product in quantities of hundreds, much less in volumes of billions."

Why are we still stuck on the labor theory of value?

I mean do you seriously believe that the median household income in the US is 61k a year because unions tell business to pay more?

Are you really that deluded? What is the rate of unionization in the US economy?

Also how does this theory square with all of the high paying jobs like iron work and electrical line work that pay between 50-80k a year that few American Domestics want to take?

At a certain point, you can’t keep burying your head in the sand.

How exactly does offering an iron worker 55k a year square with the idea that business are trying to offer Malthusian wages?

i dont at all respect a college eduation anymore uness they are STEM.
i do think very smart people major in poly scie and econ, but unlike STEM, those fields can not keep the dummies out. so in the past you had to be smart to major in any degree, even history, today you can be stupid and major in history or econ, etc.

and then there are the completely worthless degrees, like african american studies or queer studies. what real skills do you think they learn where every single class is "assume white men are opressing, go and cherry pick the data to validate use buzz words liberally."

it seemed the masters turned into the new BA/BS but even now they are useless. ive met a lot of unimpressive people with their MA In public administration.

What part of STEM can I not learn everything about without a college?

most STEM fields have labs. that would be hard to replicate
outside the university

STEM is very much foundational. Someone might be really interested in astrophysics but if they have not put in the hours mastering a lot of mathematics and lower-level physics, hell higher level physics, they are only going to go so far.

So I know some self-taught people. One is perhaps the closest anyone here is going to get to the world's expert on Roman and other Classical bows. He could probably get a teaching job if he cared to take a pay cut. The other is really interesting on the creation of the universe and the Big Bang. He works in a convenience store.

You need a university for STEM if only to tell you what is important for you to learn and in what order. But a good historian just needs to read, and to think, and all the college can do is challenge him from time to time. A function they have largely given up.

how do you learn to "decolonize light" without college

From Inside Higher Ed: "The December 2019 unemployment rate for individuals aged 22 to 27 with a bachelor’s degree or higher was, at 3.9 percent, slightly higher than the 3.6 percent unemployment rate for all workers between the ages of 16 and 65. However, it was lower than the 6.5 percent unemployment rate for 22- to 27-year-olds without a four-year degree. The unemployment rate for all college graduates up to age 65 was 2.2 percent."

So, before the lockdowns, employment for recent college grads was below 4 percent, and well below non-grads the same age. College grads overall were well past full employment. Not seeing any un-abated structural problem.

I left out an "un-" in my first line.

What makes you think college grads have the same "full employment" as the general percentage?

Referring to the 3.9% unemployment.

Seems legit that 4% unemployment does not signal a huge problem.

I don't have access, but I'd also look at how it breaks down by major/field. It's only malinvestment when graduates (broadly) suffer.

He's using CPS, which has some limitations. There's no way to use this data set to break it down by field, unfortunately. Would be interesting to see.

Critically, he's looking at wages and employment rate (not unemployment rate!). That's where the cohort effects show up, which means not only are their wages lower but they are employed at lower levels.

If the additive decomposition in (2) is correct, the most recent entrants will have employment rates that are five percentage points lower over the course of their careers (through age 40) than the 2000 entrants did, even holding labor market conditions constant.

That's a really low bar; it includes graduates working as baristas. What percentage of college graduates have jobs where a college degree is required? What percentage of college graduates have jobs where a college degree should be required, i.e. uses skills acquired in college? What percentage of college grads are making that middle class salary they were promised by the college when they applied?

But those questions could have been asked in 2005 as well. Besides, the excerpt that Tyler cites does not make it sound like the author is writing about rising employment coupled with a decline in job quality.

The college wage premium remains. Yes, there are college graduates who work as baristas and there are high school graduates who make six figures working as car salesmen or skilled technicians. However, these are outliers.

One of the things that really opened my eyes when I went into the private sector (defense-related industry) was the number of secretaries and assistants that had undergraduate degrees. Moreover, the number of administrative jobs in general (purchasing and procurement, HR, logistics, etc.) that don't really actually require a college degree filled by people that had one. I mean do you really need a procurement specialist or a production manager that has a college degree?

It's been said-to-death on this blog many times and other blogs before, but the educational-degree-complex is in many cases the solution to a question that no one is asking. Huge numbers of jobs - high-paying jobs - can be done better by people with more experience than education. Therefore, it follows that those people and those positions are better-served by getting those jobs filled earlier and those mistakes made younger instead of spending 4-5 years at a university hemorrhaging both current and future cash-flow.

University allows young people to co-ordinate a lot of leisure at the same time. It's like Alex's idea of an extra holiday, except for people who can really appreciate it.

How can you initiate a decent conversation with them about "systemic racism" and "cisnormativity" if they don't have college degrees?

I was going to say why don't those companies hire 18-year old high school graduates to do their purchasing and procurement? But presumably they're hiring people who have experience at it.

Which leads to the question: how does a person get an entry-level job in purchasing and procurement? I don't know the answer to that, but it occurs to me that college can be thought of as a tournament at a larger scale and lower level than the tournaments that theoretically justify the very high salaries of CEOs: the high salaries attract a lot of junior executives who work hard to be the winner of the tournament.

And similarly, college gives the 18-year old high school graduate a chance to enter a tournament where they may emerge a winner four years later with greater employment opportunities.

Or they may fail to emerge with greater employment opportunities. But it's a tournament; not everyone wins. Not everyone gets to become a CEO, or to win the vaccine prize that Tyler and Alex are advocating.

Some of those students are better off not entering the tournament. But that leads back to my first question: what is the route by which future purchasing and procurement specialists gain entry level jobs?

Army, Navy, Air Force, Marines, Coast Guard.

And of course my beloved Space Force.

They don't because the smarter kids wouldn't take the jobs -- they want to go to college. And that's rational on their part because 4-years of experience as a non-degreed purchasing agent is not going to transfer well to most other employers.

1. Logistics and supply chain is a major with high demand for therelatively few that major in it.
2. Probably half the people in procurement are hired as industrial engineers and later move into procurement.

I know almost nothing about purchasing and procurement but those descriptions make them sound like careers that do -- and should --require a college degree.

I'm not able to see the full paper, but does it distinguish between the majors of college degrees? Are we seeing any shift in the proportion of degrees in art & humanities vs. STEM or business degrees, for example?

Also need to know what schools the degrees come from or at least how far the school has been around. Second and third tier state schools have been growing for a long time and community colleges began adding four year and masters programs in the late 90s. As an employer, I can say with certainty that the quality of graduates even within STEM fields varies from university to university with Ivy and big state school graduates mostly being high quality. However, many of the big state schools you wouldn't know about if you don't live in said state produce total garbage. FWIW, I think we should look at time to hire and duration continuous employment by department and stop funding departments that produce garbage with taxpayer funds.Would go a long way towards reducing the liberal stranglehold on university as many schools would be left with only STEM and business schools.

You can use google to get the answer, you do not need to access the paper. The biggest change over the over recent decades is the Large increase in number of degrees in health care, the number getting STEM degrees are too small to have much of effect on average statistics.

Who are in the "2005 entry cohort"? Those entering college in 2005 or those entering the employment line in 2005? Law students graduating from elite law schools during the great recession were scarred for years; indeed, are still scarred. The elite law schools went to extraordinary lengths to help the graduates, and themselves, by secretly paying all of part of the salaries of these graduates for years. Paying $100,000 per year or more in tuition and then not getting a job upon graduation must affect the confidence of the graduates, both for not getting a job and for being such a sucker for paying all that tuition. Down here in the South, I've been impressed by the Univ. of Alabama, which relies on a superior football program to lure out of state students (to the college) who pay much higher tuition than in-state students. Stupid Yankees. Roll Tide!

"Stupid Yankees." - University of Alabama enrollment by state, in order:

57.2% Alabama
10.4% Georgia
5.2% Florida
4.9% Texas
4.4% Tennessee
2.2% Virginia
1.8% North Carolina
1.3% Illinois
1.2% Louisiana
1.1% California

https://www.collegefactual.com/colleges/the-university-of-alabama/student-life/diversity/chart-geographic-diversity.html

But please continue, do not let me stop you.

Middle 50% SATs/Median earnings 6 years after graduating:

University of Alabama 1060-1280 / $44,500
The George Mason University 1120-1320 / $59,900

Alabama hands out tons of merit aid to decent out of state students, so a top half GMU applicant can go to Alabama for about the same price (or significantly less, depending on your stats...4.O and perfect SAT gets you a free ride at Alabama).

Roll tide.

He’s referring to the cohort that entered the labor force in 2005, not school.

Stupid Southerners (from states other than Alabama). Of course, down here there are no states other than Alabama, North or West, just imposters that deserve to be scammed. Up North, the elite schools have long scammed their students with high tuition, and smart Yankees like Plamus have caught on to the scam. You have, haven't you, Plamus?

Perhaps it's me, but I am having a hard time parsing this. Are you trying to say that:
a) you are in Alabama ("down here"), and
b) Alabamians think of Georgians and Texans as "Yankees"?

As for me catching on to the scam - does not apply, I went to school in West Virginia on full tuition plus room and board.

U. of Alabama made an effort to attract out-of-state students by giving them free tuition and just charging them room and board.https://www.usnews.com/education/best-colleges/paying-for-college/articles/2018-06-04/schools-that-offer-merit-based-tuition-waivers-to-out-of-state-students

In 1969 my buddies and I decided it would be a good idea to visit New Orleans during Christmas Break. I have never forgotten what I saw on the gulf coast of Alabama and Mississippi. The destruction was unimaginable. A wall of water 24 feet high had hit the area in August, killing almost 150. Highways and bridges moved as though there had been an earthquake. Large ships sitting on dry land hundreds of yards from water. All of us are at the mercy of nature, whether a massive hurricane, an earthquake, or a pandemic. We recover from these events only with the expertise of educated people, wherever they are educate, North, South, East, or West. Belittling higher education as little more than signaling is not only insulting but stupid. Who are you gonna call when a catastrophe hits home?

Shhhh! Big storms only started happening about ten years ago, because of climate change.

So the Boomers kept all that inflated "wealth" to themselves and gatekept the other generations out. At least everyone is equally liable for the bill at the end.....

I vaguely remember reading a piece that looked at structural breaks in tolerance of lesbian / gay communities that dated the big push to 2004-5. Was there a larger social break then? What happened?

And was it tied, maybe, to the boom?

I remember a piece that looked at defense spending which crossed $500b that year. Crowding out other employment?

In 2004 gay marriage was on the ballot in 11 states and was a key element of Bush's re-election strategy. It was rejected by all 11 states. So maybe college age students were rebelling against that.

I don't think it has anything to do with being A gay unless you're feeding the ducks. Am I right? Lesbian and a gay rights have always been notoriously thwarted by Republican agendas, starting with the AIDS crisis during the Reagan administration. Perhaps the 2004-2005 phenomena was a resurgence of this? Most large conservative movements, especially those religious right rooted in true Thomistic Theory, would uphold that homosexual acts and homosexual inclinations are disordered.

>And that was of course before the financial crisis and great recession.

The 2005 entry cohort would, however, be *graduating* right at the start of the Great Recession.

BS = Bull shit
MS = More shit
Ph.D. = Piled higher and deeper

All the soft majors were exposed for their lack of value. Who would hire an X studies social science major outside a few activist organizations?

Do you need a safe space? You wanna cry?

yes please thankyou
can we come over and sleep on your futon

The WSJ reports that Chief diversity officers are in great demand. So there you have it , the social science majors will be perfect for the jobs of the future. Diversity officers, Woke officers ... and even though it's not hard to be not racist, it's not easy to be anti-racist, so anti-racists trainers will be needed to coach the white privileged masses at work.
and who will referee the scientific papers of the future for the " correct " interpretation? ... yep these same people. They have a bright future.

"a dramatic negative structural break": in English does that mean a sudden drop?

Nothing could be more damaging to a philosopher (or an economist) than to be clearly understood.

So....right when Millennials showed up in the work force? Hm.

Jerry Brown did a two tiered pension reform, basically shafting the new young teachers and favoring the boomers. The result has been the militancy of the teachers union as boomers retired.

A lot of sane economists told him this was a bad idea, mostly out of state economists.

It sounds like "2005 entry cohort" is "entry into job force". So what happened in 1999-2001 that made those kids suddenly less employable? Was there a dramatic shift in the distribution of college majors that 2005 and beyond cohorts chose?

The fear of having to lay them off again if another bust happens.

I think several of the guest worker programs expanded around this date. OPT is the big one in 2008, They could explain some of this especially OPT.

Don't forget that the OPT increases had to do with the fact that H1Bs were so oversubscribed that the old, 1 year OPT often meant you didn't get to keep the worker no matter how much you wanted to. Even in the current situation, with 2 years, chances of being able to keep an extraordinary OPT worker are low: About 20% get through the lottery, so 0.20 + 0.8*0.2. So 1/3 OPT workers that are sponsored for H1Bs get to stay at all.

This is a key reason many tech companies have growing offices in Toronto or Montreal: The international university student gets a US education and if they don't get through the lottery, they can instead do the very same job in Canada, where getting a visa for tech workers that are young, have an employer lined up and know english is quite easy.

I don't know about you, but I'd rather have the same 22 year old Indian doing the work from, say, the Boulder office, paying US taxes, than taking their job and their taxes to Toronto.

" basically the dod owns them both": or vice versa.

Trade agreements with Asian countries in the early 2000s as well as increased guest worker programs caused companies to outsource their lower-skill, formerly entry-level work. Continentally (or not) at the same time that the huge baby boom echo (millennials) started to hit the work force. Well, at least the early Millennials didn't have to pay that much for college.

Business process outsourcing was due to improved telecom infrastructure and high-speed internet rather than trade agreements. It is also something more common among big corporations than SMEs.

Maybe the recent cohorts were indoctrinated rather than educated??

Although most of the comments are from the usual trolls, a lot do seem to make the point that our system of financing retirement, disability, health care and unemployment benefits with a wage taxes rather than a consumption tax is an important factor in holding down wages, especially in jobs where the MP is low both unskilled and recent entrants to the labor force.

So starting with the 2005 cohort the "Garbage In = Garbage Out" effect became the dominant trend.

I wonder what could have caused that ??

Where does "Progress Studies" fit in?

I wonder why Millennials are feeling so positively about Socialism these days...

Comments for this post are closed