Higher Education and the School-Work Mismatch in an Evolving Labor Market

In the United States, a widespread belief that a traditional college education is a “human capital investment” that pro­duces greater lifetime earnings has led to proposals for a significant expansion in higher ed funding aid. In “Higher Education and the School-Work Mismatch in an Evolving Labor Market,” Veronique de Rugy and Jack Salmon chal­lenge this view as they address the college payoff, graduates’ skills and market needs, and education alternatives.

The Payoff from a College Education versus a High School Diploma Has Flattened

For the past 15 years the relative economic returns from a college degree have grown very little. During this same time, the cost of education has grown by more than 50 percent.

  • For the one in four college enrollees who fail to graduate, the college payoff can even be negative, with stu­dents incurring a large debt burden with little or no wage premium.
  • STEM (science, technology, engineering, and mathematics) graduates still enjoy high wage premiums. However, they account for only one-fifth of students.
  • An advanced degree, however, can double the wage premium and more than compensate for the addi­tional burden of student debt incurred.

The Future of Work Will Not Be about College Degrees—Increasingly It Will Be about Skills

There has been a mismatch between the abilities of graduates and the in-demand skills of an evolving labor market.

  • The current higher ed model does not effectively match graduate skills to labor market demand—especially for graduates with degrees in the humanities, languages, and the arts.
  • The top-down push to increase college enrollment rates has led to underemployment. Most employment gains among graduates have been in low-skilled (and often low-pay) jobs.
  • A traditional college degree will not protect future generations from the unpredictability of technological change and disruption.

There Is a Need for Nontraditional and Vocational Education Options

Continual training, work experience, and apprenticeships provide important alternatives.

  • Skilled tradespeople, engineers, IT professionals, and technicians have ranked among the hardest jobs to fill in recent years.
  • Many of these in-demand jobs do not always require a college degree, but rather continual up-skilling as traditional roles are supplemented with new technologies.
  • Legal and regulatory modification to facilitate new and innovative private financing options would allow people to fund their skills-based education instead of relying on one-size-fits-all federal financial assis­tance programs.