Bryan Caplan  

The Most Educated Poor in History

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Garett Jones and Charles Tiebo... From the Horse's Mouth...

1. "As the adults migrated up the educational bins, they took the poverty into the higher educational bins with them:"

2. "Over this period, the share of poor adults with "less than high school" education plummeted 20.1 points from 48.3 points to 28.2 points. Every other educational bin saw share gains of 2.6 to 5 points."


In sum:

Adults these days are as educated as they have ever been, but poverty is no lower than it was in 1991. This is not because the few lingering people with "less than high school" have soaked up all the poverty. Quite the contrary: poverty has simply moved up the educational scale. The poor in 2014 were the most educated poor in history.

Diagnosis:

First, handing out more high school and college diplomas doesn't magically create more good-paying jobs. When more credentials are chasing the same number of decent jobs, what you get is credential inflation: jobs that used to require a high school degree now require a college degree; jobs that used to require an Associate degree now require a Bachelor's degree; and so on...

Second, having more education does not necessarily increase people's productive capacity. Those in the know will identify this as the old "signaling v. human capital" point. The short of it is that, even if jobs did automatically pop into existence to match people's level of productive ability, it's not at all clear that college education necessarily does a lot to increase people's productive ability. Instead, what college education does (at least in part) is signal to employers that you have a certain level of relative "quality" over others in society. As more people get degrees, the value of this signal declines, but more importantly, the point is that the degree was always a signal, not a productivity enhancer.

Third, poverty is really about non-working people: children, elderly, disabled, students, carers, and the unemployed. The big things that cause poverty for adults over the age of 25 in a low-welfare capitalist society--old-age, disability, unemployment, having children--do not go away just because you have a better degree. These poverty-inducing circumstances are social constants that could strike anyone of us and do strike many of us at some point in our lives...

My only caveat is that Matt's first and third points hinge on his second point - which, not coincidentally, is the heart of the book I'm now wrapping up, The Case Against Education.  If extra education really did transform people from bad workers into good workers, employers would have a strong incentive to create more good-paying jobs.  Profit-maximization, not "magic," would make it happen.  The same goes for non-workers.  If school sharply increased the productivity of the young, old, disabled, parents, and the unemployed, employers would be more interested in hiring them.  These issues wouldn't literally "go away," but employers are a lot more willing to accommodate good workers than bad ones.

Question for Matt: Are you willing to join me in calling for lower education spending to roll back credential inflation?  If not, why not?

HT: Nathaniel Bechhofer


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COMMENTS (13 to date)
Kumar Mayank Jha writes:

I wouldn't say that education in itself is bad but government spending on education along with common core is what creates this problem.

First of all, create a common core which does not add human capital ( Reason being that Government Education Department officials just have tick boxes to fill rather than actually provide value).

Next, throw money in the same direction.

Emil writes:

Hmm...

The stats seem to be about relative poverty and about percentage of the relatively poor with or without a degree. It seem completely tautological that a smaller share of the of both the total population and of the relatively poor with < highschool has to be made up with a higher share of the others. The real measure of productivity surely has to come from looking at absolute levels?

[fixed the problem. You can't use the keyboard less-than symbol. See our FAQ.--Econlib Ed.]

Emil writes:

Apologies, the full comment didn't seem to be posted so trying again

Hmm...

The stats seem to be about relative poverty and about percentage of the relatively poor with or without a degree. It seem completely tautological that a smaller share of the of both the total population and of the relatively poor with below highschool has to be made up with a higher share of the others. The real measure of productivity surely has to come from looking at absolute levels?

Education is overrated. The myth that education would solve most human problems was a central idea of the Enlightenment. But it all depends on what you educate people for. Education is a vector, not a scalar.

BC writes:

"If not, why not [lower education spending to roll back credential inflation]?"

What if it turns out that employers have (downward) sticky nominal credential requirements, i.e., once a college degree becomes a requirement to be a bartender, police officer, etc., it's hard to remove that requirement even if the number of people with college degrees starts to decrease? In this case, tightening the supply of college degrees awarded could actually lead to unfilled positions. Maybe, we need to create ever higher degree levels to *facilitate* credential inflation, with the highest degree level rising at about 2% per year. :)

Michael York writes:

Not quite savvy enough to share this somehow privately, so I will use this forum to thank you for this and many, many other posts that have broadened my horizons and opened my eyes.

emerich writes:

Good post but how did it become normal to refer to "good-paying jobs"? Why not "good-playing athletes," and good-writing authors, etc.? Sorry, I guess I'm old fashioned.

jon writes:
Are you willing to join me in calling for lower education spending to roll back credential inflation?

Another alternative - reduce the time commitment of education.

Couldn't we challenge kids to finish high school at 17? Does a BA/BS really require 4 years? And why not make the one year MA/MS the norm instead of the exception. If we made all three of these changes, we could have people entering the workforce at 21 with advanced degrees.

I get, and agree, that not everyone needs a college degree to be qualified for their job. But I also think that a big part of the harm of "overeducation" is the unnecessary time and expense of it all.

Jim Dow writes:

Jon makes a good point in that it depends on how you cut spending. Three years of college is probably as good a signal as four and has significant cost savings. On the other extreme, eliminating public universities would likely result in less signaling/screening, which are still valuable activities.

Similarly, online education can be much cheaper, but in practice seems to be not a very good screener. Online universities send a signal of low quality. I could easily imagine a reduction in spending on education resulting in public universities being predominantly low-quality high-pass-rate online institutions with the result that the masters degree would become the common credential.

Another margin of adjustment would be to shift college education towards more useful skills. GMU could spend less time on economic theory and more time on personal finance, public speaking, writing and business skills such as networking, motivation and team skills.

Maha Elhini writes:

I think that the first problem lies in learning as opposed to education. What most graduates earn are degrees that may well fall short of the skills that employers are looking for in the labor market. More on linking learning with market needs would be useful since more spending doesn't necessarily mean more learning.

JustAnotherEconPHDStudent writes:

Bryan, in response to your last question, here was Mr. Bruenig's response to a similar question from Matt Yglesias.

[Minor html edit. Please see your email.--Econlib Ed.]

DougT writes:

There's a prisoner's dilemma at work in credentialing. It's in everyone's interest to stop requiring that waiters learn calculus, but it's in the individual's interest to have a higher degree. Whether it's signaling or learning, whatever it takes to get my resume to the top of the pile is what I'll do.

As a result, we have an educational arms race, pursuing ever-higher degrees to compete with ever-cheaper emerging-market labor--or automated systems.

What's the solution? Of course, it's government regulation! Congress should establish average and maximum credentials for every job--at least their own jobs. Nuclear sub inspectors really only need a BA. After all, how much schooling do you need to shine a flashlight in a ballast tank? Most statisticians only need high-school algebra. And service work should be reserved for people who drop out of high school.

Problem solved!

Duncan Frissell writes:

And of course price inflation in Education is much worse than mere dollar terms would indicate because of the dramatic drop in quality that falls with every grade level at least through BA degree. Since one can now learn most things for free (as one could ever since libraries and the Inter Library Loan system were developed) only more so with a free universal library and instrument package in one's hand. The argument for reduced spending should be strong.

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