Bryan Caplan  

The Great Malemployment Debate

Happy birthday, Ludwig von Mis... Henderson's Godwin's Law...
From an early age, my father warned me that if I refused to major in engineering, I could easily end up driving a taxi.  As I matured, I discovered that his over-the-top warnings had a firm basis in fact.  Many B.A.s do wind up driving cabs, waiting tables, and tending bars.  Only recently, however, did I discover that this phenomenon has a name: malemployment

The term has in turn inspired a lively academic debate.  My favorite: Team Northeastern  - Paul Harrington and Andrew Sum -  versus Team Georgetown - Anthony Carnevale, Nicole Smith and Jeff Strohl.

Round 1: Team Northeastern.  Highlights:

The Georgetown measure of the college labor market includes all employed college graduates, irrespective of the occupation in which they are employed. So for the Georgetown analysts, all the college graduates working as bartenders are part of the college labor market. Indeed, those college grads working in cashier, retail sales, clerical, health aide, moving and transportation occupations, landscape and janitorial services and the like are all part of the college labor market.

BLS analysts disagree. They would not assign any bartender employment to the college labor market because, although one in four bartenders are college graduates, these jobs do not typically utilize the knowledge, skills and abilities acquired in college. Most of us would agree that college graduates working as bartenders are not utilizing their college education. We would regard many, though not all, of these individuals as underutilized with respect to their education or what labor economists refer to as malemployed. Amazingly, in the current labor market environment characterized by a high incidence of malemployment among young college graduates, the Georgetown analysts argue this type of skills underutilization problem simply does not exist.
Malemployment denialism isn't just counter-intuitive; it defies the earnings data:

If malemployment among college graduates simply does not exist, as the Georgetown forecasters argue, then there should be little difference in the earnings among college graduates regardless of whether they were employed in college labor market occupations or not. We examined the issue of malemployment in greater depth using data on annual earnings of employed adults during the 2006 to 2008 period to determine if earnings varied systematically by our measure of college graduate malemployment. Not surprisingly we found very large and statistically significant difference in the annual earnings of college graduates based on their malemployment status. Specifically, we found that:

  • At the associate degree level, those graduates employed in a college labor market occupation had expected annual earnings that were 60% greater than those of high school graduates, while their counterparts who earned an associate degree but were employed in a non-college labor market-related occupation had expected annual earnings that were just 10% higher than those of high school graduates.
  • Among bachelor's degree recipients, those who worked in college labor market occupations had expected annual earnings that were 88% higher than their high school graduate counterparts, while the earnings premium for those who were not employed in a college labor market occupation was only 15% higher.

Round 2: Team Georgetown.  Highlights:

To the contrary, since the 1980s we have been underproducing college talent, and the college wage premium is the proof. Degree production in the 1980s flattened out after baby boomers reached college graduation age, and has remained flat ever since, at slightly above 40% of the labor force. Over the past decades, employers have responded to scarcity in college talent by raising college wages relative to the wages of workers with no more than high school diplomas. Yet in spite of the growing economic advantage of college degrees, the overproduction, over-qualification or "malemployed" school of thought still has a strong following.

"Malemployment" makes little sense in our dynamic modern economy:

The difference between Harrington and Sum and BLS and our method is that we believe that we should not define the "college labor market" as "essentially a set of occupations," in keeping with the elite, traditional, white-collar and professional jobs. The notion of the "college labor market" as a fixed set of occupations is remarkably static. In contrast, we assume that job and skill requirements are dynamic. Technology and other economic forces are constantly updating the skill requirements in jobs.  We view a college job as any job that brings substantial, positive earnings returns to a college degree, irrespective of occupation--whether an individual is an insurance agent or a rocket scientist. 

Bottom line:

The only way to reconcile the BLS projections with what actually happened is to assert, as BLS, Harrington and Sum argue, that BLS is predicting the number of college degrees that employers require, not the actual numbers of college educated workers that employers hire. If this is the case then not only did employers hire these "extra" workers, in 2006 and 2008, but paid them more than 70% wage premiums for postsecondary degrees they didn't need.   This would be cause for concern--it would mean that in 2008, 22 million workers--or more than a third of all workers with postsecondary education--got an appreciable economic benefit from their degrees that they didn't earn. It would mean that employers were smart enough to cut back the college wage premium in the 1970s when they experienced an oversupply, courtesy of the baby boom, but the same employers started throwing money at degrees in the 1980s and continue to do so. If Harrington and Sum are correct, crisis abounds, markets don't work, employers are irrational, and preparing your children for college is naive for all but a very select few.

Round 3: Team Northeastern.  Highlights:

...Carnevale points to... the long-term rise until recently (2000) in the economic return to a college degree, suggesting that we think that college does not pay-off. Again, we have argued that college pays off on average and have written plenty of papers about this. The results of our recent multivariate analysis of the annual earnings premiums of college graduates in New England during 2009 summarized in the Chart 1 below reveal very large earnings payoffs to college graduates. However, the findings clearly reveal that, whether a given graduate's degree pays off, depends on the success of the individual becoming employed in an occupation that has a substantial set of duties and tasks that utilize the knowledge, skills and abilities that they acquired in college. The estimated annual earnings advantages over and above a high school graduate for those who earn a degree and become employed in the college labor market were 55% for those with an associate degree, 71% for those with a bachelor's degree, and 107% for those who earned an advanced degree. Among those graduates who were malemployed, however, we found very modest annual earnings advantages ranging from only 5% to 8%.

On my reading of this debate, Team Georgetown's Round 2 blatantly ignores the heterogeneity of returns that Team Northeastern documents in Round 1.  Team Northeastern could have fairly replied, "Please re-read our original piece."  But perhaps I'm biased.  Question for anyone who takes the effort to read the whole exchange: Does Team Georgetown ever directly confront Team Northeastern's heterogeneity evidence?  Please back up your case with direct quotes.

COMMENTS (14 to date)
mobile writes:

I dunno. The college I went to was a great place to develop bartending skills.

BC writes:

I think both teams are not explicitly recognizing the heterogeneity of skills across college graduates. I believe Team Georgetown's argument in Round 2 is that the college wage premium itself is evidence of a shortage of college graduates. The direct quote would be, "To the contrary, since the 1980s we have been underproducing college talent, and the college wage premium is the proof." They probably should have said that we have been underproducing college talent *that is qualified for Team Northeastern's "college labor market occupations"*. If the allegedly malemployed, college-graduate bartenders were qualified for the "college labor market occupations", then why would employers pay the college wage premium, given the oversupply of qualified college graduates?

So, even though Team Georgetown was not explicit in distinguishing between qualified and non-qualified college grads, their overall point seems valid: the college wage premium itself is evidence of a *shortage*, rather than an oversupply, of [qualified] college graduates to fill the "college labor market occupations". Then, it would also seem incorrect to label the college-graduate bartenders as "malemployed": they are employed in the occupations that are appropriate for their skills.

BC writes:

Team Georgetown also asserts that they do look at earnings of college graduates in non-college labor market jobs and find a college wage premium. Direct quote: "That’s why we use the actual earnings of college to determine the demand for postsecondary education...instead of relying on the BLS’s...designations of college and non-college occupations. We reason that if the wages of people with postsecondary education are high and/or rising relative to people without postsecondary education within an occupation, there is an advantage that postsecondary education confers...while all degrees may not produce equal returns, in virtually all cases, that return is far greater than the cost of obtaining the degrees."

Prakash writes:

This is visible much more in the developing countries, where the upper middle classes want to send their children to engineering, medicine, accountancy, business and other degrees with a career path only.

Brian writes:

"However, the findings clearly reveal that, whether a given graduate's degree pays off, depends on the success of the individual becoming employed in an occupation that has a substantial set of duties and tasks that utilize the knowledge, skills and abilities that they acquired in college."

It would appear that Team Northeastern does not believe in signaling model as a dominant contributor to the college premium. And indeed, if college primarily signals intelligence, conformity, etc. without imparting skills, why would malemployed college grads to so much worse? In fact, the stats they cite support the idea that human capital improvements in college outweigh signaling by as much as 5:1.

Daublin writes:

The "dynamism" argument in round two strikes me as weak. The Northeasteners used a crude measure of "uses your college skills" because, I presume, it's hard to have a more precise measure.

The crude measure is pretty reasonable, though. You would think that bartenders mostly do not use their college skills. Without further information, we don't really know what a more "dynamic" measure would tell us, but we do know what the best available evidence tells us right now.

Also, yes, I think the article supports capital versus signalling. If signalling were the main thing, then you would think college-educated bartenders would get more than 10% of a bonus. It's not as clear as it could be, though. The people who bartend after college tend to be the worst students and to have fluffy majors.

Roger Sweeny writes:

No, the stats they cite support the idea that "intelligence, conscientiousness, and conformity" (Caplan's college trinity) matter five times more in "college labor market occupations" than in jobs like bartending.

Silas Barta writes:

I thought we already had a term for malemployment, and we called it 'underemployment' -- unless I'm mistaken about the referent of the former? (Spellcheck recognizes the latter but not the former.)

Jim Chappelow writes:

It sounds to me like the problem isn't malemployment at all, but maleducation. People whose personalities and abilities suit them best to work as bartenders, janitors, or sales clerks, should not be wasting four years on college. They've malinvested in highly specific human capital for which they do not possess the necessary complementary factors of production. To call this malemployment is to mistake the symptom for the disease.

RPLong writes:

I'm with Silas Barta. Are these two different concepts? I've never heard the word "malemployment" before.

Aaron Zierman writes:

@ RPLong & Silas Barta.

Yes, these are different concepts. Underemployment refers to a lack of "full" employment. For example, someone who wants to work 40 hrs/week but they can only find a part time under 32 hrs/week job. Malemployment, as it is used here, I believe is speaking to a misalignment between education received and the utilization of that education in the job market. Picture a doctor flipping burgers instead of helping sick people.

@Jim Chappelow

I think that you do have a good point. I think perhaps that the education system overall (specifically prices and loans) is out of whack, contributing to further malemployment. Additionally, I would add that the loss of jobs in the recession has probably forced some college grads to take whatever job they can find, often not in the field that they were hoping.

Russell Nelson writes:

Let's say that a working career is 40 years. If you take 4 years to earn a degree, and only start working after those years are past, you have reduced your total compensation by 10%. And a college degree gets you an additional 15% even though it's not needed, and that 15% justifies getting a degree even though you have 10% fewer years to earn it? I'm not seeing this math work out. 5% is close enough to zero as to BE zero.

Not to mention that Team Georgetown has nothing to say about the cost of getting the degree. It's as if a university education was free of cost.

Silas Barta writes:

@Aaron_Zierman: I've always heard (what you called) malemployment referred to as "underemployment" -- the latter would refer not just to someone selling fewer hours than they'd like, but to people working jobs that don't really use their specialties.

Alan writes:

I suspect that the 10% or 15% premium for college graduates in fields that do not require a degree is neither irrational nor a result of the degree, but rather the two characteristics share a common cause: the sort of person who could stick it out through college is likely to be a better employee than the person who did not, and thus is worth a little more regardless of whether they have a degree or not.

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