Rising tuitions met with fewer jobs

March 7, 2011

From Paul Krugman: Degrees and Dollars.

The fact is that since 1990 or so the U.S. job market has been characterized not by a general rise in the demand for skill, but by “hollowing out”: both high-wage and low-wage employment have grown rapidly, but medium-wage jobs — the kinds of jobs we count on to support a strong middle class — have lagged behind.

The notion that putting more kids through college can restore the middle-class society we used to have is wishful thinking. It’s no longer true that having a college degree guarantees that you’ll get a good job, and it’s becoming less true with each passing decade.

We have a growingly disastrous dynamic in this country, where rapidly rising tuition costs are being met with a steadily declining pool of jobs for those degrees. We’re saddling kids with tens-to-hundreds of thousands of dollars of debt before they even enter the workforce, and then offering them fewer and fewer opportunities to earn enough income to pay it off.

I suppose this is one of the consequences of allowing vast amounts of the country’s wealth to collect at the extreme upper echelons of the pay scale. The only way to keep the economy moving is to lend that wealth back to the lower classes (a la housing boom) – since the lower classes can’t earn a wage to keep it moving themselves.

This dynamic is not sustainable. Eventually we’ll reach that tipping point (again), where debt load weighs so heavily on income that demand crashes and the economy enters a tailspin.

While I’m a libertarian at heart, I can’t deny that any economic system that funnels so much wealth to so few is doomed for disaster and, ultimately, revolution. This can’t be a good thing. So much societal wealth is wasted in the process. Perhaps we need to re-think our ideas about property and freedom, at least in an economic sense.

p.s. By the way, just to be clear, the problem is not that productivity advances (via technology) are putting people out of work (any more than it was a “problem” that early agrarian food production put hunters and gatherers out of work). Productivity improvement is always welcome — it represents increased wealth. A wealthy society is one that achieves a high standard of living while toiling less to maintain that standard.

The problem has more to do with fungible wealth (i.e. money) gravitating toward the few, while heavy debt is spreading over the many. Not only is this unsustainable, but it’s hindering our ability to fully utilize and improve upon the wealth we already have (i.e. insufficient aggregate demand).

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One Response to “Rising tuitions met with fewer jobs”


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