Can Higher Education Solve America’s Economic Crisis?

Part 7: We Have the Skill — But Do We Have the Will?

For the past six weeks, these essays have been examining the relationship between our national economy and the level of educational attainment of our national workforce. But before we transition from what we need to change to how we can actually achieve our higher education goals — which are both to strengthen the national economy and to provide better-paying jobs for many more people — let’s review just why this issue is so important.

As I noted earlier in this series, the percentage of adult Americans with a four-year degree at the end of World War II was just 5 percent. That percentage had changed only marginally during the preceding 100 years, and if that same model had been kept in place, we would have expected only modest growth in the percentage of college graduates over the past 70 years.

Instead, the percentage of college graduates increased by a factor of six — but only because the federal government created a plan (combining the G.I. Bill with the report from Truman Commission on Higher Education for American Democracy) that was then jointly implemented by the federal and state governments working together. Government then did what only government can do: It took on a problem of immense size and changed the infrastructure of higher education in America. The result was the most prosperous era in the history of our country.

America needs to do this again. And recognizing the need to change the higher education infrastructure is the first step in fashioning a plan to achieve our goal for a dramatically different outcome.

Let’s look at current data, for both traditional age and adult learners, to learn why we need to do better. [1] There are several important reasons:

  1. Our Current Educational Outcomes Are Woefully Inadequate

Consider the transition from high school to college:

  • About 70 percent of high school graduates enter a two-year (25 percent) or four-year (44 percent) school in the fall semester following their graduation.
  • African-American students are more likely to start at two-year schools (39 percent) than are white students (33 percent).
  • Students from the top quartile of family income are significantly (78 percent) more likely to start college immediately after high school than are students from the bottom quartile of family income (46 percent).
  • College graduation rates vary considerably by race and economic level. The six-year graduation rate for white students is 62 percent, but only 45 percent for Hispanic students and 38 percent for African-American students.
  • The graduation rate for students from the top quartile of family income is 60 percent (across all races and ethnicities), but just 14 percent from students from the bottom quartile of family income.
  • Since many more low-income students receive inferior K-12 educations than do high-income students, it is useful to compare the graduation rates of those high- and low-income students who are, by virtue of standardized test scores, deemed ready for college-level work. Among these populations, academically strong high-income students have a 74 percent graduation rate, whereas academically strong low-income students have just a 41 percent graduation rate.
  • About 36 percent of white students are part-time, compared to 42 percent of students of color.
  • The six-year graduation rate for full-time students is 65 percent; for part-time students it is 18 percent. [2]

What these data tell us is that the current infrastructure of higher education in America works quite well for relatively affluent white students who attend college on a full-time basis. Conversely, that same infrastructure is shamefully inadequate for students who are of color, part-time and/or low-income.

Putting greater effort into increasing the number of graduates from affluent white families, however desirable in the abstract, will have much less impact on increasing the overall percentage of the adult American public with at least a four-year degree than would a focus on low-income and/or students of color.

  1. Increasing the Educational Level Increases Economic Strength

It is widely accepted that there is a strong (and growing) correlation between the level of educational attainment by an individual and his or her personal economic success. Economists have translated this statement into actual dollars, and it is generally agreed that the typical four-year college graduate has lifetime earnings that are hundreds of thousands — and quite possibly over a million — dollars more than the typical high school graduate [3], and that the gap in lifetime earnings has grown over time, not shrunk. This is certainly one reason, and perhaps the primary reason, why so many parents are so anxious for their children to attend and graduate from college.

But, to be entirely correct, the relationship between education and individual economic success is best interpreted as correlation, rather than cause and effect. A college degree does not guarantee economic success, any more than the lack of a college degree guarantees economic failure.

Moreover, the value of a college degree is in having completed the degree: Anything less than a full degree is of only limited economic value, and if the non-completer has borrowed money to attend college, and has student debt but no degree, he or she may well be worse off economically than if that person had never started college in the first place. (The student loan default rate on loans under $5,000, typical of a non-completer, is 31 percent, compared to a 17 percent default rate for loans over $100,000, a level of debt typical of someone with a graduate or professional degree. [4] The point is: Students who don’t complete their academic program often have no way to repay their loan, even when it is quite small.)

And that is why, in these essays, I have consistently stressed the need for colleges and universities to improve their students’ graduation rates dramatically.

But there probably has been too much attention placed on the economic value of a college degree to the individual, at the expense of considering what a high percentage of college graduates in a given geographic region or state means to the economy of that region or state.

Consider two examples:

  • Of North Carolina’s 100 counties, the proportion of adults with at least a bachelor’s degree exceeds 40 percent in only three counties — Durham, Orange and Wake — the homes of Duke, the University of North Carolina, and North Carolina State, respectively, as well as the Research Triangle. Of all the new jobs in North Carolina since 2008, 40 percent have occurred in Wake and Mecklenburg Counties (the latter is home to Charlotte, the state’s banking center). These counties are thriving while most other North Carolina counties are struggling because, as one observer noted, “employers don’t want to relocate without the promise of a skilled workforce.” In other words, success breeds success, and a well-educated workforce is a necessary prerequisite for economic success in a given geographic region. [5]
  • Of the 10 states with the highest level of educational attainment (bachelor’s degrees plus graduate and professional degrees), eight are also among the 10 states with the highest median per capita income. [6] If we improve college completion rates, we will enhance the economy of the state, the region and the nation.
  1. Doing Nothing Means Abandoning an Important Part of Higher Education’s Mission

The consequences of our failing to address today’s huge disparity between the skills needed by corporations and the actual skills possessed by the workforce is to open the door to two real possibilities:

  • About 30 years ago, traditional higher education failed to respond to the growing demand for adult education, leading to a proliferation of for-profit entities, many of which disproportionately drained federal support dollars while too often providing precious little of value to their students. In time, many of those for-profit schools crashed and burned, and taxpayers ended up bailing out students who had borrowed money, but who no longer had a school at which to continue their education. This could happen all over again, if traditional higher education proves its unwillingness once again to adjust its business model to include a parallel track for adult learners.
  • Even today, some businesses and corporations have grown tired of waiting for traditional higher education to respond, and have developed corporate training programs of their own, siphoning off students who would be, in the long term, better off earning a recognized degree from an accredited institution — but that would require the institutions to provide the students the means to do so. In short, traditional higher education seems unwilling to recognize both that it no longer has a monopoly and that new markets are opening to which it is failing to respond (or responding too slowly).
  1. The Level of Higher Education Affects Community Health and Wealth Inequality

It’s not only the economic well-being of the local community that is affected by the percentage of the working population with a college degree. Another matter entirely relates to health and longevity.

Since 2000, one-third of all manufacturing jobs in the United States — more than 5 million jobs, paying an average of almost $21 per hour — have been lost. Service jobs, paying about half as much, have increased (though not by 5 million). But the displacement of workers and the loss of income — especially on the part of white, non-college educated workers — has contributed to a rapid increase in mortality rates in those 50 to 54 years of age. [7] In less than 20 years, mortality rates for non-college educated white workers have almost tripled for both men and women, relative to the mortality rates of college-educated white workers. [8]

Education directed at the job market of the future, not the job market of the past, may literally save lives.

Finally, there is the issue of growing income and wealth inequality. [9] This is a hot-button topic for many people who are philosophically opposed to any notion of resource redistribution. But rather than arguing for splitting the economic pie more equitably, I would instead suggest growing the pie.

I have noted several times in this series of essays that wealth and income inequality have grown markedly over the past 40 years to the point that in 2014, the top 1 percent of the population had 39 percent of all of the wealth, whereas the bottom 90 percent had just 27 percent. (In 1978, the top 1 percent had about 22 percent, and the bottom 90 percent had almost 40 percent.) [10] In the years since 2009, 52 percent of all growth in real income has gone to the top 1 percent. [11]

There are multiple causes to this rapid and unwelcome shift in overall wealth and income distribution, principal among them being our tax code, but a major contributor has also been the loss of middle-class jobs, particularly in manufacturing, as I just noted.

The challenge that we are facing today is not so much that the nature of the job market is changing, but the rate at which that change is occurring. What we are seeing today in no sense replicates our nation’s earlier shift from an agrarian economy to a manufacturing economy — a shift that we measured in decades, if not centuries. Technology and a global marketplace means that entire professions now come and go within a few years. (At different times in the relatively recent past, there was great concern we would exhaust the labor market before meeting the demand for telephone operators and key punch operators, two job categories that today essentially no longer exist.)

But an educational system that is designed to respond slowly and passively to shifts in student interests will be spectacularly inadequate to respond in a timely fashion to the rate at which today’s job market is changing.

Moreover, the traditional model of higher education was that it was something you did once, for four years. Then you secured a job using the skills you had obtained as a student, and those skills kept you employed until you retired. Higher education has yet to catch up to the fact that growing numbers of people will repeatedly need infusions of new skills throughout their lifetimes, and that means we must redesign our higher education institutions to provide those educational opportunities we know our society will require.

Far from waiting to respond to shifting demand, we must be out in front, anticipating how best to prepare students for the jobs of the future, not the jobs of the past. [12] Ironically, the easiest and best place to start is not with traditional-age students and the hidebound system we now use to educate them, but with adult students, through the use of stackable certificates that do not require a wholesale remaking of the curriculum.

  1. The Problem Will Worsen While We Debate Our Next Steps

Our challenge is compounded by the fact that whatever answers we develop must reflect not the realities of today, but the realities of tomorrow. We have to think as hockey great Wayne Gretzky famously said: “I skate to where the puck is going, not where it has been.” While we are dithering, here are just some of the changes that will further disturb the higher education landscape:

  • Federal Policy
    • Education Secretary Betsy DeVos [13] and President Trump himself, in his State of the Union address, [14] have encouraged both students and colleges to focus more on vocational training, and less on obtaining baccalaureate education. Encouraging high school graduates without plans to continue their education to think about vocational education is entirely proper, but encouraging students who now plan to obtain a four-year degree to obtain a vocational education instead will exacerbate our current shortage of workers educated at the bachelor’s level. [15],[16]
    • Lamar Alexander, R-Tenn., chair of the Senate Education Committee, is overseeing the rewriting of the Higher Education Act, and is promising significant changes. Among them is a reduction of federal oversight of for-profit institutions, a group that historically has used disproportionate amounts of federal student aid dollars, leaving fewer resources for students attending not-for-profit institutions. [17]
    • Alexander’s counterpart in the House, Rep. Virginia Foxx, R-N.C., echoed his concerns when she said that the current student aid system represented a “luxurious hammock in which students can repose” and “the trough at which universities feed.” [18] She added that there is “growing evidence that generous federal subsidies have driven tuition increases” — a canard that will not die despite repeated studies that don’t support such a conclusion. These views will not give comfort to those hoping for more federal assistance to produce more college graduates. As it now stands, the House bill is estimated by the Congressional Budget Office to reduce total federal spending on education by $14.6 billion over 10 years. [19]
  • State Efforts
    • Several states have, [20] or hope to have [21], programs which in various ways waive tuition for some students at some community colleges and/or public universities. There are now more than 200 such programs and proposals across the country, [22] with more in the works. [23] All such programs will increase the competition for students for colleges in the private sector; New York is already proposing to eliminate a state program to assist private colleges, in order to augment the funds supporting the public institutions of the state. [24] These policies could have the effect both of fatally wounding some private colleges and of increasing demand at public institutions, requiring the construction of new facilities and the addition of new faculty and staff — all at taxpayer expense but without any net increase in the overall number of college students.
  • Corporations
    • Various corporations are expanding programs with community colleges to train technical workers [25]—and that’s laudable, but only if these workers add to, rather than subtract from, the current population of students seeking four-year degrees.
    • Some corporations are providing their employees access at various educational levels to for-profit companies (unlike Starbucks and its relationship with the not-for-profit Arizona State University), as a recruiting and retention incentive. But the quality of some of these programs is questionable. [26] Moreover, these are now students who will be unavailable for recruitment by traditional higher education institutions, placing further strain on their business model.
    • Yet other corporations are designing specific courses and educational programs to be delivered by traditional higher education institutions, or online providers, because higher education is currently “failing to keep pace with the changing needs of the economy.” [27] At least one large corporation is not even waiting for students to complete high school. Oracle has built a charter high school at its corporate headquarters. [28] This arrangement may serve Oracle well in its quest for excellently trained future employees; it remains to be seen whether it will be in the best long-term interests of the students. We can expect to see many more corporate interventions in the future, if we in traditional higher education continue our focus on the educational models of the past.
    • Corporations are raiding higher education institutions for training and education talent. [29] And when the raider is Amazon, and the goal is to “create a path-setting adaptive system for employee learning,” it may be worth considering whether Amazon will keep what they learn “in-house” or whether this is the first step toward “Amazon University.”
    • On the other hand, some corporations are expanding their current programs of educational support for their employees at traditional higher education institutions — an opportunity for such institutions to expand their overall enrollments. [30]
  • Credit Rating Agencies
    • Both Standard & Poor’s [31] and Moody’s [32] have reduced their rating for higher education in general to a “negative outlook,” the effect of which is expected to be higher interest costs on bonds issued for construction projects — an additional strain on already very tight campus budgets.
  • New Educational Models and Technology
    • Boot camps [33] are targeted at both college graduates (as an alternative to a graduate degree) and those with just a high school diploma, with an educational focus on computer coding, although they are expanding into other fields as well. A few traditional universities, such as Northeastern, have developed their own boot camps, but most are in new educational providers such as Flatiron (recently acquired by the work-space company WeWork) or 2U (now also a partner of WeWork). [34] Will these be a flash in the pan, as MOOCs were a few years ago, or a new model of education that competes directly with traditional colleges and universities? It’s too soon to tell.
    • The future role of technology in higher education is all but impossible to predict, beyond saying that it will be considerable. Just one example: YouTube did not exist 13 years ago, but now boasts 1 billion hours of content watched every day. [35] That is an average of 8 minutes, every day, for every one of the 7.5 billion people on the planet. How will we be spending our time 10 years from now? We can’t say, other than to assume it will be different than how we spend our time today—and the relationship of time spent web browsing to education will surely grow closer.
  • Strategic mergers of institutions — to leverage different skills and complementary interests, rather than to avoid imminent extinction — bear close watching, especially where the institutions involved are led by entrepreneurial thinkers. To that end, the recent merger between Philadelphia University and Thomas Jefferson University may be of particular interest. [36] 

Consider this quote from a consultant of the merger: “The new focus of higher education must be learning agility, which includes adaptability, collaboration skills, and entrepreneurial outlook. It is a mindset that must precede the many skill sets that will be layered and shed over the longer arc of the career.” Might that accurately describe the role of higher education in the future?

  • Changing Social Structures
    • Finally, the nature of business interaction is changing rapidly. For decades, suppliers that were scattered all over the country shipped parts and materials to assembly sites, meaning that jobs existed in cities and towns of all sizes. But as we have moved from a manufacturing economy to a knowledge and service economy, where young educated people are choosing to live is changing. Digital products don’t have a supply chain and, increasingly, jobs are being centralized in “megacities,” where wages are rising disproportionately, at the expense of jobs in smaller cities and towns. [37] So on top of everything else, traditional colleges and universities may find their future inextricably linked with their location — and how they respond may determine if they even have a future.
  1.  We Must Be True to Our Democratic Ideals

There is one more reason why we must change the infrastructure of higher education, and it speaks to our governing philosophy as a country. It is easy to create a nexus between the virtues of a high level of educational attainment and the principles that underlie our democracy. Our aspirational goal as a nation, and one toward which we have struggled for more than two centuries, is focused on the ideals of justice, freedom and truth — and the liberty to pursue all three.

Our history as a nation, as I discussed in Part 4 of this series, included incremental steps that extended educational opportunities to more and more people to allow them to capitalize on their inherent abilities and thereby to strengthen our country and its economy. Even in times of war, visionaries such as Lincoln, Franklin Roosevelt and Truman looked to the horizon in charting a course for creating the capacity to enhance the educational level attained by our people.

But the ideals that, at various times in our history, have motivated us to serve ourselves by serving others have also periodically withered and been replaced by goals that are far less ambitious — and far more self-serving and shortsighted.

For example, opportunities for immigrants, hard-won over many decades and several generations, ultimately enhanced not only the lives of the children and grandchildren of those immigrants but also the fabric of American society itself.

Yet what of today’s immigrants? What of those for whom past efforts were insufficient to move them out of poverty? Are we becoming inured to the presence of a permanent underclass, with successive generations forever destined to live in poverty, or on its edges? Why aren’t we trying harder to bring people on the margins into mainstream society by giving them the educational tools they need to be successful and independent? Surely we can see the value to ourselves in maximizing the number of people who are economically self-sufficient.

I think the answers to these questions are complex but resolvable. Rising levels of income and wealth inequality, to levels not seen since the days of the Robber Barons of the 19th and early 20th centuries, are leaving too many people economically marginalized, with barely the capacity to address their own day-to-day needs, let alone to worry about the long-term needs of others. And in the absence of a compelling vision for our nation’s future, articulated by our elected leaders, we become focused on the problems of today, not the possibilities of tomorrow.

It was not always this way.

Consider: Eisenhower championed the interstate highway system in 1956, knowing full well that he would never see its completion (which took 35 years). Kennedy promised to send astronauts to the moon, but even if he had served two full terms, the lead time of this project was such that it happened only after he would have been out of office.

Today, however, the political considerations behind particular initiatives give primary attention to whether the project can be completed before the next election. And the result is that our political priorities are focused on things that could happen today, or next week, but never on things that won’t happen for a decade.

In his recent book, “The Gifted Generation: When Government Was Good,” [38] David Goldfield examines this point at length. He focuses on the generation of Americans immediately after World War II: the first “baby boomers.” Goldfield is particularly attentive to the work of Truman, Eisenhower and Johnson as presidents who “believed in the commonwealth ideal” — that federal legislation could result in a better and stronger nation by encouraging individual opportunity.

Intentionally or not, Truman, Eisenhower and Johnson were following the advice of the economist John Maynard Keynes, who wrote, “The important thing for government is not to do things which individuals are doing already, and do them a little better or a little worse; but to do those things which at present are not done at all.” [39] (Eisenhower, presumably not a fan of the liberal Keynes, was fond of quoting a similar sentiment from a source he found more acceptable — Abraham Lincoln — who said: “The legitimate object of government is to do for a community of people whatever they need to have done, but cannot do at all, or cannot so well do, for themselves, in their separate and individual capacities.”) [40]

The years immediately following World War II were a time of great optimism in America. Goldfield cites a Pew study that found, in the mid-1960s, almost 80 percent of Americans believed that government was good.

But by the 1980s, the pendulum had swung. President Reagan, for example, had a very different opinion about the role of government: “In this present crisis, government is not the solution to our problem; government is the problem.” [41] Similarly, in a 2001 radio interview, Grover Norquist, the founder of Americans for Tax Reform, famously said, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” [42]

It is perhaps not surprising that, by 2015, fewer than 15 percent of Americans still believed that government was good. The problem is that if the primary role of government is to take on problems that are too large for individuals to solve on their own, in the absence of citizen support government will do nothing, and the largest problems facing society will not only remain unresolved, but they won’t even be addressed.

It is one thing to develop a vision for how higher education could end the economic crisis; it is quite another to imagine how collective public support might be mustered for government to take on a project of that magnitude in today’s political climate. How tragic to have a solution at hand, but to lack the political will to implement it!

Perhaps the problem is that we are still inclined to rely on a political infrastructure that has proven inadequate to solve some of the most important problems of our day. Perhaps instead of waiting for Washington to provide the answers, those answers should come from the grassroots, in the hope that, if they are compelling enough, they will be incorporated into the national conversation.

Next time: How do we achieve our higher education goals? It’s time to forge a new social contract.

[1] Except for the last bullet, all data are from the website of the National Center for Education Statistics

[2] “The Future of Undergraduate Education,” American Academy of Arts and Sciences, November 2017

[3] “The Changing Business Model for Colleges and Universities,” Forbes, Feb. 6, 2018

[4] “When any debt (including college debt) is too much,” University Business, Dec. 18, 2017

[5] “The 2 North Carolinas,” The Chronicle of Higher Education, March 31, 2017

[6] U.S. Census Bureau, 2017

[7] “Higher Education: Your Life May Depend Upon It,” Academic Impressions, Sept. 19, 2017

[8] “A Dying Town,” The Chronicle of Higher Education, Jan. 5, 2018

[9] There are many recent books that treat this subject at length. A particularly good example is Makers and Takers: How Wall Street Destroyed Main Street, Rana Foroohar, 2017, Crown Business, New York, 388 pp.

[10] “The Tax Bill That Inequality Created,” The New York Times, Dec. 17, 2017

[11] “Striking It Richer: The Evolution of Top Incomes in the United States,” National Bureau of Economic Research, June 30, 2016

[12] This point is examined at length in “The New Education: How to Revolutionize the University to Prepare Student for a World in Flux,” Cathy N. Davidson, Basic Books (2017)

[13] “DeVos says U.S. has emphasized four-year degrees at the expense of work-force training,” Inside Higher Ed, Nov. 28, 2017

[14] “Trump calls for converting community colleges to vocational schools,” Inside Higher Ed, Feb. 2, 2018

[15] “Community colleges emphasize their missions beyond training and including transfer,” Inside Higher Ed, Feb. 5, 2018

[16] “Trump says community colleges should be called ‘vocational’ schools. Um, they aren’t the same thing,” The Washington Post, Feb. 5, 2018

[17] “Alexander White Paper Lays Out Framework for Higher Education Accountability,” Inside Higher Ed, Feb. 2, 2018

[18] “Taming the tuition tiger,” Washington Times, Jan. 22, 2018

[19] “CBO: House Bill Would Reduce Spending by $14.6B,” Inside Higher Ed, Feb. 7, 2018

[20] “Tennessee Gov. Wants 15 to Finish in Promise,” Inside Higher Ed, Feb. 1, 2018. New Jersey, New York, and Rhode Island are among the other states with some form of tuition waiver.

[21] “’Pennsylvania Promise’ proposal could significantly reduce college tuition for 137K Pennsylvania students,” AASCU EdLines, Jan. 30, 2018

[22] “The Changing Business Model for Colleges and Universities,” Forbes, Feb. 6, 2018

[23] “A Serious Push for Free College in California,” The Nation, Feb. 7, 2018

[24] “Governor proposes cuts to private college financial aid,” Watertown Daily News, February 6, 2018

[25] “BMW seeks more humans to maintain Greer plant’s robots,” Greenville Online, Jan. 31, 2018

[26] “Restaurant Group, Pearson to Offer Free Education to Employees,” Inside Higher Ed, Jan. 23, 2018

[27] “Impatient with universities’ slow pace of change, employers go around them,” The Hechinger Report, Dec. 18, 2017

[28] “A Public High School of a Tech Giant’s Campus,” The New York Times, Dec. 4, 2017

[29] “Amazon’s high-profile hire from higher education: Candace Thille,” Inside Higher Ed, Jan. 29, 2018

[30] “Disney to give $1,000 bonuses to 125,000 employees and create a higher education program,” LA Times, Jan. 23, 2018

[31] “Outlook for Higher Ed Is Bleak, Ratings Agency Says,” The Chronicle of Higher Education, Jan. 23, 2018

[32] “Moody’s warns that lackluster state support will strain university budgets,” Washington Post, Jan. 30, 2018

[33] “Boot-camp sector keeps growing while influencing higher education,” Inside Higher Ed, Jan. 31, 2018

[34] “New partnership between WeWork and 2U aims at lifelong learners,” Inside Higher Ed, Jan. 23, 2018

[35] “7 Ed Tech Trends to Watch in 2018,” Campus Technology, Jan. 11, 2018

[36] “The Revolution Has Started,” Innovator, Summer 2017

[37] “The Megacity, Untethered,” The New York Times, Dec. 24, 2017

[38] Bloomsbury Publishing, New York & London, 2017, 534 pp.

[39] “Essays in Persuasion,” Macmillan, 1931

[40] Goldfield, The Gifted Generation,” p. 5

[41] Inaugural address, January, 1981

[42] NPR’s Morning Edition, May 25, 2001

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