February 7, 2021
Indiana’s Lagging Educational Attainment
A common belief I hear repeated often is that too many young people go to college, and that more should go into the trades where they can avoid the wasteful debt of college and still earn a good living. The problem with this argument is that the few parts that are true are largely benign, and the parts that are demonstrably false guide much of Indiana’s education policy.
It is clearly true that a young person can earn a decent living in the trades or other careers that do not require a college degree. There are plenty of anecdotal examples of clever, industrious people enjoying a successful and financially secure life without a college degree.
But, that is far from the typical experience.
From 1992 to the end of 2019, the U.S. was a job creation engine. Among workers older than 25, we saw a cumulative growth of 39.8 million jobs. Of those, 31.7 million jobs went to workers with a bachelor’s degree or higher, and a further 11.4 million of those workers had been to college without earning a bachelor’s degree. That means the economy lost over a half-million jobs for workers with only a high school diploma, while shedding a full 2.8 million for those without a high school diploma.
Since 1992, a full 108 percent of new jobs went to those workers who’d been to college. That’s right, over the past 28 years, more than all the net new jobs created in America went to workers who had been to college. Of course, that is pre-COVID. As of Summer 2020, so many jobs were destroyed that college graduates alone accounted for 124 percent of job growth since 1992.
The percentages of jobs by educational attainment tell the same story. In 1992, 27 percent of jobs were held by college graduates, and today it is 42 percent, while only 33.3 percent of adults hold a college degree. The share of workers who’d been to college without receiving a bachelor’s degree barely rose from 25.1 to 26.2 percent. Workers with only a high school diploma crashed from 35.6 percent of the workforce to just 25 percent, while those who didn’t graduate from high school dropped from 12.2 to 6.7 percent.
Now, a thoughtful reader might ask whether the disproportionate share of college jobs meant that many graduates were underemployed. That’s a good question. If an increasing share of college grads are underemployed, then wages for college grads must be in relative decline as more of them take over jobs formerly held by non-graduates. This would also cause the wage premium between college graduates and non-graduates to shrink.
As it turns out, average wages have risen substantially more for college grads than for any other category. More to the point, since 1992, the college wage premium actually grew. This is clear evidence that the employment growth among college graduates is not driven by underemployment of college educated workers. It is driven by higher demand for better-educated workers.
These facts debunk the notion that too many people are attending college. In fact, labor markets across America are screaming loudly for more college graduates. Moreover, despite what many businesses say in public, as evidenced by wage growth, there is an excess supply of workers who have not been to college.
This broad, unambiguous, multi-decade trend in American labor markets seems to have had no influence on Indiana policy or budgets. Over the past decade, Indiana has substantially cut per student funding at both the K-12 and college level. In inflation-adjusted dollars, we now spend less per K-12 or college student than we did in 2010. Yet, these figures understate the magnitude of the budget situation. Were Indiana to spend the same share of GDP on education in 2019 as we did in 2010, Indiana’s schools would have 15 percent higher budgets, or $1.28 billion extra per year. And, if we did the same for our colleges, spending would be 29.4 percent higher, with another $583 million per year.
Another way to frame this is that Indiana’s longest economic expansion was accompanied by its most systematic and largest reduction in educational funding in state history. The effects of that are now being felt across the economy. From 2018 to 2019, the United States saw its share of college graduates rise a tad bit over 1.0 percent to 33.3 percent. In shocking contrast, Indiana’s actually declined by 0.2 percent to 26.9 percent of adults with a college degree. Today, Indiana ranks 43rd among the states and territories for college educational attainment, sandwiched between Tennessee and Puerto Rico.
The effects of this disinvestment in human capital weighed heavily on Indiana’s economy. During the nation’s longest economic expansion, from 2010 to the end of 2019, our state grew employment at a rate 30 percent lower than the nation as a whole. Over the same time, our relative per capita income saw its biggest decline in history. To top it off, Indiana’s Gross Domestic Product grew at just over half the rate of the United States, and slower than every Midwestern state. So, despite what you are likely to hear from politicians touting our state’s economy, even the Illinois economy outperformed Indiana’s over the past decade.
Some readers might suppose a college professor’s focus on education is an elitist position. It is not. It is true that places with better-educated workers are more prosperous, but the best place for a high school graduate to work is a place surrounded by lots of better-educated workers. After all, the best way to boost wages for less-educated workers is for them to be a smaller share of the labor force.
Finally, it may well be that Hoosiers prefer lower taxes to higher educational spending. That is the type of choice that must be made by voters, not economists. But, it is important that everyone understand that choice has caused, and will continue to cause, Indiana’s economy to perform poorly. In order for the Hoosier economy to create more jobs and prosperity, it will take a substantial and sustained focus on educational attainment. That focus will have to be guided by research and will require substantially more funding.
If voters are content with an economy in which Indiana continues to become relatively poorer, with fewer and less-productive workers, there’s no need to change our educational policies or budgets. The status quo virtually guarantees that outcome.
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