October 24, 2021
Deep Worries About Education and Employment Are Still With Us
Today’s tight labor markets, which seem especially pronounced among low-wage jobs, have led to considerable speculation about the future of work. Of course, the labor market shocks of the pandemic set new records of unemployment, and the disease likely caused a million Americans to die early. It is natural that we should anticipate many long-term economic changes. However, the likelihood that the pandemic has radically altered the prospects for low-wage workers seems pretty modest.
It is true that pay and benefits for traditionally low-skilled jobs are rising, and likely to continue to increase over the coming months. This will be welcomed by many, but there’s a catch. The new higher wages must be accompanied by higher productivity from these workers. These are markets; employers can only sustain higher labor costs if the workers are actually producing more value in the workplace. As this occurs, there’ll be fewer jobs available in these occupations.
That dynamic is normal in a market economy. History is full of occupations that disappeared due to rising wages that were not matched by productivity growth. That’s really the story of economic growth, captured well by Agatha Christie’s quip, “I couldn’t imagine being too poor to afford servants, or so rich as to be able to afford a car.” It seems crazy today, but we should be at least considering what those extra workers might do to sustain themselves and their families. Recent evidence gives us a hint about a return to existing trends.
Over the past 12 months, 44 percent of new jobs went to those with a college degree. This is remarkable because the bulk of pandemic job losses occurred in occupations with few college graduates. The big job losses were among front-line workers in retail, accommodations, and restaurants. Notably, the only category of workers to enjoy employment that is higher now than before the pandemic are those with a four-year degree or higher.
This post-pandemic recession trend simply continues a decades-long shift in the demand for workers. Over the past 30 years, more than 8 out of every 10 jobs created in the United States went to college graduates. The remaining 2 out of every 10 jobs went to adults who’d been to college, but didn’t have a four-year degree. For the remaining workers—everyone with a high school diploma or less—there are actually fewer jobs today than 30 years ago.
That trend is too strong and based in far more fundamental economic conditions to be derailed by a pandemic. History offers some insight into this. From the dawn of time until the industrial revolution, the prime source of wealth was arable or mineable land. From the early 19th century until the late 20th century, wealth flowed to those who owned productive capital, such as factories. Today, wealth comes from knowledge, or what economists call human capital.
Human capital is a slippery thing to measure. Much of it comes from home, taught to us by parents. Some of it is intrinsic; it comes in our genes, reflected in our intellect and mental health. This is why it is critical to choose your parents wisely—and, whether or not you chose the right mom and dad, the easiest way to improve your stock of human capital is through formal schooling.
That is why increased access to higher education is so important to individuals and to the nation as a whole. It is worth pausing here to note that Indiana is struggling with this. Relative to the nation, our educational attainment numbers fell during the long recovery from the Great Recession and worsened during COVID. We will start 2022 with three consecutive years of declining educational attainment of adults. It will be the worst stretch in the state’s history.
I share these data this often, repeating as frequently as I can that a college degree is among the few gateways to an economically successful adulthood. But, I am often confronted with the question about skilled trades and the ready employment options they possess. This is a good question. Skilled trades can be a great option for many young men and women. They pay well and offer job security, satisfaction, good benefits and a pathway to business ownership.
I can hardly write enough good words about the future of many of these crafts. If I could invest money in a high school student pursuing a career as a plumber, electrician, masonry or carpentry, I’d do so. I also respect the grit and work ethic of those who do that work. I am hardly alone in expressing these sentiments, but there is an intractable problem in viewing trades as a remedy for our low rates of college attendance.
Indiana has 38,020 masons, electricians, plumbers and carpenters, but in a typical year 39,000 Hoosier kids turn 19 with no plans to attend college. The trades are a good option for motivated, smart, hardworking kids, but these jobs will absorb only a tiny fraction of those Hoosier kids who don’t go to college. This is precisely the same story nationwide; in fact this sort of belief is a formal logical fallacy taught in introductory economics course.
The fallacy of composition tells us that it is an error to think that because one young person can make a career in the trades, all can. This fallacy motivates far too much of our discussion about college and careers. We’d be far better off leaning heavily on the actual data about job creation and educational attainment, and give up the anecdotes about the trades.
Today, as employers struggle to fill vacant positions and face paying higher wages, we see the very conditions that prompt the dislocation of workers. We shouldn’t fear it; indeed, we should call it by its proper name: economic growth. While we see some formerly low-wage workers benefitting from higher pay, we also must be ready to consider the many men and women affected by this recession.
I realize that today’s tight labor markets make the concern about longer-term unemployment a distant worry. It should not be. We have yet to suffer through a recession that didn’t deeply affect millions of workers. This one, the worst since the Great Depression, will ultimately prove no different.
About the Author
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