Last week, the Minnesota Economic Association held its annual meeting, which it does every October. I look forward to it every year, since the conference holds a special place for me: I first attended it as an undergraduate in 1982, and the experience was one of the factors that encouraged me to do graduate work in economics.
This year, my colleague Dora Saha and I invited a group of students from the College of Saint Benedict and Saint John’s University to make the trip to Hamline University. There they heard a lively talk on modern macroeconomics; a thorough presentation on current labor market conditions; and a distinguished panel on the past, present, and future of the Affordable Care Act and MNSure.
I hope the students were inspired as I was 32 years ago, because one presentation, in particular, knocked me out.
Steven J. Davis of the University of Chicago delivered the Heller Distinguished Lecture — and I’ve been thinking about it ever since. Over the past 25 years, Davis and John Haltiwanger of the University of Maryland have studied the nitty-gritty of American labor markets, using increasingly detailed data to examine how people flow into and out of work, and how these movements affect the U.S. economy.
Davis presented their most recent data, linking reduced movement into and out of jobs (what they call labor market fluidity) to the decline in the proportion of Americans holding jobs (what economists call either the employment-population ratio or simply the employment rate) since the 2001 recession.
Davis packed a terrific amount of information into a one-hour talk, yet one set of graphs struck me as especially important and worthy of your attention.
Let’s start with the big picture, the employment rate since 1977:
(Davis and Haltiwanger’s data begin in 1977 so that’s where I’m beginning my discussion as well.) The U.S. employment rate peaked in 2000, with ups and downs that correspond to the recessions of 1981-83, 1990-91, 2001, and 2007-2009.
The drop during the current recession was especially large, and it hasn’t been followed by a return to earlier levels of employment. Davis and Haltiwanger hypothesize that the fall since 2000 is due in part to reduced labor market fluidity.
I think their hypothesis is intriguing, but what really caught my attention was their data on employment rates by age, education and sex. These reveal a story that needs to be told — and understood — if we’re going to make good economic policy: the destruction of labor markets for men without a college degree.
Let’s start with the employment-population ratio for all men:
For the period we’re looking at, employment rates for men peaked in 1979, and with each recession they took a tumble, never rising to their pre-recession peak. (If we go back further, the employment rate for men peaked at 84.5 percent in 1950.) The drop since 2006, before the latest recession began, is large: It goes from 70.4 percent in December 2006 to 63.3 in January 2010, with a rate of 65.1 percent in September 2014.
All of these data are easily available via the web. But here’s where Davis and Haltiwanger give us something to think about: They breakdown the employment rate by age and education, starting with men 18 to 64 who have less than a high school diploma:
The blue line shows employment rates for men with less than a high school diploma from 1977 to 1979. The employment rate for these men is around 80 percent for 20-, 30-, and 40-year olds; follow the blue line to the right and you’ll see that the employment rate starts to fall for men in their 50s. This tells us that in the late 1970s, if men did not graduate from high school, the vast majority still found gainful employment.
Now, look at how that line shifts down in the late 1990s (the yellow line) and down even further in 2009-2011 (the green line). In particular, the green line slopes downward starting around age 40; by age 50, only half of men who did not graduate from high school are employed.
Now take a look at men who graduated from high school:
It doesn’t look much better. The same shift hit high school graduates, pulling employment rates down from 90 percent among 40-year olds to about 75 percent. And we see the same thing for those with some college:
What about men with a college degree? There’s still a drop but it’s not nearly as big:
Thus, the falling employment rate among men is concentrated among those with the least education.
When I see these data, two facts stand out. First, public policy must acknowledge the labor market for men with less than a college education is not working. We can’t simply close our eyes and hope that things will get better.
Second, we need to close the achievement gap in Minnesota (and the nation) and reduce the number of men in the pool of men in this situation. Otherwise, we are in deep trouble. The labor market prospects for men with high school diplomas, and especially those without them, is much dimmer than it was for their fathers and older brothers. And the sad fact is that in Minnesota, men of color are much more likely to be in this group than are white men.
This kind of presentation reminds me why I wanted to be an economist. I hope some of the students at the conference feel the same way.
If you’re comparing those with just a high school education against those with a traditional college degree you’re making an argument no one is challenging.
However you have omitted an area where there is still great opportunity for those who, for whatever reason, do not go to “college”.
There is a huge call for trade and technical school trained men and women in this country. In fact, within the industrial automation and control industry, of which I’m a part, there are distinct advantages to *not* hire traditionally trained engineers.
EE and ME programs have failed miserably in keeping up with the market and the technology. Graduates of my generation had the advantage of starting at the dawn of the digital era; we “grew up” with this stuff.
Today’s engineering grad is woefully lacking in many of the most basic skills they need to compete and be successful. Employers, myself included, know that it’s going to take a year’s investment in a kid fresh out of school before he, or she is going to be in any way effective.
Dollar for dollar, there is no better investment for a kid interested in a technical career than an education in a technical school. Better still, most traditional colleges will transfer credits for those who wish to invest in a four year degree after they’ve established themselves as technicians.
To state, without exception, that “First, public policy must acknowledge the labor market for men with less than a college education is not working.” is really not the case.
I agree with you that technical colleges and job training programs should be expanded and more young people should consider these paths, however I differ with you on your view of engineering eduction.
To take your example, industrial automation and control, an electrical or mechanical engineering graduate of today is by and large not going to be taught how to operate those systems on an assembly line or even implement them in a real world application, but rather is going to be taught the theory behind their operation, and how to design, build, and improve upon the hardware and software that comprise them. I don’t see this as a failure of engineering programs (job opportunities for an engineer in their field are better than ever), but just a misunderstanding of what they are trained to do. For example, an electrical engineer of today is probably going to be a better fit working for Siemens designing a programmable logic controller, rather than actually implementing one on a factory assembly line. More theory, and less real world application, is going to be needed in a job like that.
I do agree there is a gap there that needs to be filled however, and some traditional colleges recognize this and offer “engineering technology” programs, that focus more on hands on applications and less on theory.
Your point is well taken, Jonathan.
I agree that the theory taught in engineering schools today is well suited to detailed electronic design, and I’m certainly not questioning the quality of the grads I see today. But the fact is that for every EE designing PLC hardware (or software, for that matter) there are 100 or more out implementing it.
Neither is more important than the other, it’s a matter of capacity.
And that’s the crux of my argument. I’ve interviewed lots of very well educated, clever new graduates that can explain the theory of an electron hole in detail but very few that can design a PID control circuit. We need engineers that are skilled in theory to make the discoveries that propels our technology, no argument; but not as many as we need to implement theory into practice.
Engineering technology programs are helpful, and ISA is jumping on-board in assisting colleges in crafting curriculums that are of “off the shelf” value both students and their future employers.
Mr. Swift seems to be assuming two things: that the charts’ listing of “college” does not include post-secondary training in skilled labor (they usually do, in my experience), and that employers who are looking for skilled laborers should depend on post-secondary schools and colleges to train them for the employers.
For much of the U. S. industrial past, employers did their own training of new hires for the specific skills required of their jobs. Now, they seem to demand that taxpayers fund post-secondary programs that will do that job for them It’s rather like private employers like McDonald’s that advise their low-paid workers to apply for food stamps in order to live (taxpayers thus pay for what the company refuses to pay: a good wage).
Connie, I’m addressing the topic as it was presented, ie: “college degree”. In the absence of something concrete, I must observe you’re making as much an assumption as I am.
I’m curious though, can you give us an example of the type of skilled labor employers used to accept people off the street to train them for?
Mr. Swift have you heard of unions?
They use to be responsible for training and with them you got well trained workers pretty much right off the street.
Now I think Connie is quite right – businesses are asking to government to foot the bill for their pre on the job training. Become a union shop and you won’t have to worry about training.
Thanks Jody, but unions are not employers. Besides, society itself foots the bill for their “services”…not a good example.
I’d like to see a comparison of the employment population ratio and unemployment rates for women alongside these. Could one factor in this be that women have been supplanting men since the 1970’s when they started entering the workforce in large numbers?
I wanted the same comparison on seeing the chart, but there…
…was no link to the sources in the article. So I jumped to the Dept. of Labor site but couldn’t dig my way through to the exactly corresponding data.
Mr. Johnston: please do a followup column showing comparison and offering your analysis.
Here’s the same graphs for the females.
http://www.kc.frb.org/publicat/sympos/2014/083014-1.pdf
Correlation is not causation
There is NO correlation between a college education and getting a job. The correlation is between motivated learners and jobs, and since most motivated learners are told by everyone they have to go to college to succeed, they go.
There is a full-blown crisis of unskilled to skilled laborers in just about all of the trades – nobody can find people who want to do plumbing, electrical, HVAC, building, roofing, and most other skilled and semi-skilled labor. Every business owner I know has more work than they can find people to do. One who owns a painting company can teach someone to paint in a few hours, but can’t keep people on the payroll once they have a paycheck or two.
If you’re going to attempt to make a direct correlation between college and employment, you must include all the other potential factors. For instance, if you look at homes with absentee fathers, and children born out of wedlock, you will see the rise of those demographics coincide with the rise in unemployed people without college educations. I’m guessing there are a dozen other factors that would parallel your trends as well.
But one thing we know for sure – education by itself is not keeping people from being employed. From my research, it’s much more related to lack of motivation to find a job. To demonstrate the point, it would be great if someone did some research to find out what percentage of undocumented immigrants are employed. My guess is it’s MUCH higher than the norm, and almost all of them have no college education.
More on the subject – http://www.inc.com/chuck-blakeman/traditional-education-the-sacred-cow-is-slain.html