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Shortage of college graduates? More evidence is needed.

In "Reconciling conflicting data on jobs for college graduates" (Monthly Labor Review, June 1992), Daniel E. Hecker examined the seemingly conflicting evidence about the supply and demand of college graduates in the work force.[1] On the one hand, an increasing proportion of college graduates is employed in jobs that typically do not require a bachelor's degree. This seems to imply a growing excess supply of college graduates who must settle for jobs with lower skill requirements (and, presumably, lower pay). On the other hand, the earnings of college graduates have increased dramatically relative to those of high school graduates. Such evidence seems to imply an excess demand for college graduates on the part of employers who bid up the wages of college graduates in order to recruit the scarce workers they need.

My argument is that neither piece of evidence justifies the conclusion about excess supply of or excess demand for college graduates. For example, John Bishop and Shani Carter contend that the evidence implying excess supply is questionable. They argue that the process of identifying occupations which require a college degree is inherently arbitrary and idiosyncratic.[2] They maintain that it is difficult to estimate the number of workers in such "college level" occupations because of limitations in the occupational coding system and in the measurement of educational attainment. They believe that such a system would not necessarily result in "yes, this job requires a college graduate" or "no, this job does not require a college graduate." Rather, it would extract an answer that reflects a matter of extent - that is, that a smaller or larger fraction of a particular job requires a college degree. Finally, Bishop and Carter point out that the wide range in the quality of college graduates (that is, their intellectual talents and abilities) further complicates the extraordinary difficult task of identifying college level jobs .

I would argue that the limitations in occupational coding and measurement of educational attainment should not necessarily result in a rising trend in the proportion of college graduates in jobs that do not require college degrees. In part, this rising trend may occur as the result of new technologies that altered job functions such that they now require more skill - such as the skills embodied in college graduates. Similarly, it is possible that, with an increasing fraction of high school graduates continuing on to college, the dispersion in the quality of college graduates may have grown wider, with relatively more graduates in the lower part of the distribution. Here again, this would be reason to expect the proportion of college graduates in jobs that do not require college degrees to increase. Given the limitations and complications summarized above, it would be prudent to rely on a broader range of evidence to support a conclusion of an excess supply of college graduates.

As for the evidence used to support a conclusion of excess demand for college graduates (that is, a shortage) - the widening earnings gap of college graduates relative to those of high school graduates - I would also argue that this evidence is insufficient. Earnings differentials reflect a variety of factors of which market conditions are but one. The neoclassical theory of earnings differentials implies that they also reflect such nonpecuniary factors as prestige; the commodiousness of the work environment; the ability required for effective performance; and pecuniary and nonpecuniary costs associated with training. Thus, earning differentials can change if any of these factors changes. And the implicit assumption underlying the inference of shortages derived from increases in the earnings differential is that factors other than market conditions are held constant.

One can clearly identify other possible factors that might widen the college graduate - high school graduate earnings differential. Because the differential is estimated from the earnings of workers who have completed 16 years or more of school, the widening could reflect an increase in the proportion of individuals with graduate degrees (a possible indicator of quality). An alternative explanation can be derived from the rising cost (both in time and money) of acquiring a college degree, making a college education somewhat nonaffordable for some individuals - a phenomenon that is painfully evident to parents of college-age children. There may be other factors. The essential point is that more evidence about these factors must be examined before a conclusion of a shortage of college graduates can be drawn from an observed increase in the earnings of college graduates relative to those of high school graduates.

To summarize, I do not believe that the evidence is sufficient to conclude either that many college graduates are employed in jobs that do not require a degree or that there is a shortage of college graduates in the labor market. We need to examine a broader range of indicators before making definitive statements about the labor market for college graduates. It is entirely possible that the data are not conflicting at all.

Footnotes

[1] Daniel E. Hecker, "Reconciling conflicting data on jobs for college graduates," Monthly Labor Review, July 1992, pp. 3-12. [2] John Bishop and Shani Carter, "The Worsening Shortage of College Graduates." Educational Research and Policy Analysis, Fall 1991.
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Author:Fechter, Alan
Publication:Monthly Labor Review
Date:Feb 1, 1993
Words:856
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