‘Hope and Change,’ Meet ‘No Hope, Cosmetic Change’ (Part II)

[Link here for part 1.]

“The need to dramatically elevate college attainment is an urgent one – for our students, our families, our communities, and ultimately our nation’s future. Every capable, hard-working and responsible student should be able to access and afford higher education – and we all have a role to play to keep college part of the American Dream.” – Education Secretary Arne Duncan (18)

Economic Mobility

Eberly and Martin define, “economic mobility,” the second reason for mass-higher-education, as “the ability of children to move up and down the economic ladder independent of their parents’ economic status” (15). The authors use this chart, which looks more like death-by-credential inflation than what they argue:

Eberly and Martin Figure 6

…And in Eberly’s and Martin’s defense they, don’t appear too convinced either, “[E]ducation among those born in the top quintile plays a strong role in maintaining higher levels of income across generations. Children born in the top quintile who do not obtain a college degree are almost equally likely to end up in any of the five income quintiles.” Aside from the fact that this is a snapshot of generational and education levels in 2011 and not time-series data, “The Case for Higher Education” is starting to resemble the case for RBIs in baseball. Although the number of runs a batter hits home appears to indicate his offensive skill, it’s a mirage because it depends on luck and where the batter was in the lineup. Batters in the one-slot always have few RBIs because they’re guaranteed at least one at-bat where no one is on base. There are better ways of measuring offensive power in baseball.

Likewise, educational attainment doesn’t cause people to remain in the same income zone as their parents; rather, it indicates the kind of leverage wealthy families have over their children’s opportunities. Everyone else either gets lucky or hosed. Thus, if I were to predict what this graph will look like in 10 years, I’d say that in the right panel, the green, fifth quintile segments will shrink in the first four bars as the descendants of college degree-holders are less and less able to find high-paying work in a polarized society.

In the previous post, I asked you to wonder why TreasurED was going to the trouble of crafting such weak, halfhearted, and circuitous arguments for higher education. Only 5 out of 33 full-text pages are devoted to the economic argument. By contrast, 12 pages out of 33 are dedicated to “Financial Aid and Higher Education Policy,” which features a section on President Obama’s higher education actions, like accelerating the changes to IBR.

Pondering all this—to say nothing of the paper’s title-change—one might think that “The Economics of Higher Education” is more about assuaging public fears about the affordability of higher education than its necessity. Just look at the “Student Loans in Aggregate” insert on page 30:

Eberly and Martin Figure 15

In the second quarter of 2012, U.S. households owed an estimated $914 billion in federal student loans, making it the second largest component of household debt.51 While larger than credit card debt ($672 billion [I get $850.7 billion]) and auto loans ($750 billion), federal education debt is relatively small, only about one-ninth, compared to the size of mortgage debt ($8.1 trillion [I get $9.6 trillion]). The growth in aggregate student debt is driven by increases in the total number of individuals enrolled in college as well as increases in the percentage of students who borrow and the amount they take out. As we have discussed elsewhere in this report, financing college education is an investment: college graduates earn more and have a lower unemployment rate than those with only a high school diploma. In the United States, the average increase in lifetime earnings for an additional year of education is 7 to 10 percent.52The college wage premium is currently at its highest point since at least the mid-1960s. As with all borrowing and investment decisions, however, students and their families should carefully consider and understand the financial commitment they are making. Federal loan programs have per-year and lifetime borrowing limits, deferral options, and income-based repayment contingencies that distinguish these loans from other types of lending.

Take that, Zero Hedge doomsdayers!

You have to admit it takes a lot of finesse to say that even though we have record-shattering proportions of the population taking on debt for higher education, we simultaneously need even more to do so. Even part II of the paper shows the rapid increase in higher education enrollments in the last few years.

Eberly and Martin Figure 1

So why isn’t the paper titled, “Things Are Great Because We’re Sending, Like, Four Million More People to College Than in 1999”?

If I didn’t know any better, I’d say that the study’s authors don’t really believe what they’re saying but have to say it anyway because it’s their job. I concede that’s a harsh, basically unfalsifiable assertion, but if the Treasury is so concerned about our “competitiveness” in the global economy, why not publish a policy paper advocating weakening the dollar? The current account deficit is one of our economy’s biggest problems, and the Treasury could certainly address it a lot more easily than sending even more people to college than we already are.

Some Real Data

If high-skill jobs were in demand, then we’d expect the BLS’ employment projections to not show vast surpluses of college graduates for college-requiring jobs, so here’s the breakdown of all 54.8 million jobs that are expected to open between 2010 and 2020 by education required. (Table 1.7)

Total Job Openings (Growth & Replacement) by Education Required (2010-2020)

Just over a quarter of the jobs will require some kind of higher education, which should terrify us already, but just how many degrees will be conferred between 2010-2020? According to ED’s own Digest of Education Statistics, Table 279, it’s barbaric. Avert your eyes children!!

  • Associate’s degrees (8,904 – 3.0x graduates/jobs)
  • Bachelor’s degrees (18,065 – 2.1x graduates/jobs)
  • Master’s degrees (7,606 – 8.4x graduates/jobs)
  • First-Professional degree (1,100.7), Doctor’s degrees (848.4) (~1,949.1 total, 1.1x graduates/jobs (and don’t you dare say this means the law grads will be employed))

This horror raises the question: What is going to happen to college-educated Americans who can’t get skill-biased-technological-changey jobs? Will they instead take some of the top 30 jobs by growth and replacement listed in the BLS’ Table 10, which includes the all-time greats?

  • Retail salespersons (1,957.7)
  • Cashiers (1,775.9)
  • Waiters and waitresses (1,324)
  • Registered nurses (Whoah! You need an Associate’s degree for that! Back to school, again!) (1,207.4)
  • Combined food preparation and serving workers, including fast food (Can you dig it?) (1,146.5)
  • Office clerks, general (first on the list to require a high school degree) (1,011.5)
  • Laborers and freight, stock, and material movers, hand (980.2)
  • Customer service representatives (Be sure to finish high school) (959.6)
  • Home health aides (837.5)
  • Janitors and cleaners, except maids and housekeeping cleaners (682.0)
  • Personal care workers (675.2)
  • Childcare workers (HS required) (665.8)
  • Heavy and tractor-trailer truck drivers (HS required) (649.4)
  • Postsecondary teachers (McAdjuncts require doctoral or professional degrees) (586.1)
  • Etc., it’s too depressing to continue.

How is higher education supposed to increase the wages of the souls with these jobs? Who will advocate for the material movers (hand)?

That’s a dreary quip to close on, but perhaps there is a silver lining: “The Economics of/Economic Case for Higher Education” represents the dying wheeze of the government’s we-can-be-neoliberals-too game. After you’ve borrowed money to buy stock in a bullshit Internet startup, to throw a third HELOC on a house in the desert, and to take courses on “law and the anarcho-syndicalist commune,” there will be nothing left to buy with borrowed money. In the post-debtpocalyptic wasteland, Democrats will have to run candidates who know something about wealth creation rather than ape those who redistribute it.



  1. I hope you saw the recent NYT article on Veterinarians. I am disappointed, Matt Leichter, that the NYT, which is a propaganda mouth piece, has finally stated the obvious, that Veterinary School is a scam, and yet you have not.

    1. Alex, you might not realize this, but I don’t have infinite resources to dedicate to my writing. If I did, then I might write about professional schools generally.

      As it is, I read the NYT article and came across this line:

      The last refuge for rosy forecasters is the most recent Bureau of Labor Statistics report. It states that “overall job opportunities for veterinarians are expected to be good.” As Ross’s public relations office points out, the report’s data suggests that the country will need 22,000 new vets by 2020, far more than will be produced under the current system.

      But many people believe that the bureau’s report, which was written in 2009, is badly in need of an update. One of them is Henry Kasper, the economist at the Bureau of Labor Statistics who helped draft the report. There are others.

      “We’ve gotten several calls from disgruntled vets who say, ‘What is wrong with you guys? Are you completely blind? There is no demand for vet services,’ ” says Mr. Kasper. “This is pretty high on our list to really home in on the effects of the recession and see if there are long-term trends that have changed.” Mr. Kasper said the full impact of the economic downturn had not yet hit when the bureau published its report [BTW, this can’t be true as the BLS only published the most-recent Occupational Outlook Handbook last year]. Also, the bureau looks at long-term trends, rather than short-term business cycles. Research at the time suggested, as Mr. Kasper put it, that “people will always spend money on pets because they view them as part of the family.”

      …Which makes it sound as though the BLS made a good-faith mistake projecting future job prospects based on available evidence at the time, i.e. that the government would not tolerate mass-unemployment for a protracted time period and allow a large backlog of vets to hit the market at once. Mass-unemployment means people don’t buy pets or purchase vet services, unlike in a normal economy. For lawyers, it’s much worse, for demand for legal services has stagnated since the early 1990s, which means the scandal is much more significant. The same BLS economists have been saying so for decades—no need for Segal to take a road trip to the Caribbean to sensationalize a lone for-profit university.

      Because I don’t have the resources to trash vet schools for you, by all means please start the world’s first vet school scamblog. But for your first posts, please answer the following two questions: (1) Why does the Digest of Education Statistics show that tuition for private vet schools has been ~$24,000 in constant dollars (you’ll have to do the inflation-adjustment manually) since at least 1988 (don’t bother with public universities, their tuition increases are due to states cutting funding, not just programs hiking costs), and (2) What percentage of vet school graduates would be employed but-for the current depression? If you don’t answer these questions, then vet schools will be able to blame veterinarian underemployment on the depression, and your vet-school scam argument will be utterly unconvincing.

      I’ve taken the time to answer these questions for my readers since I began this blog in 2010; you should do the same for yours.

  2. I understand that you do not have countless hours to spend on blog posts. However, given the facts, I would have thought that you would make a comment modifying your position on vet schools.

    I will answer your two questions.

    Question 1) It is indeed the case according to the government statisics you put up that private veterinary school tuitions have remained constant inflation adjusted. However, here is tuition for the following schools; Tufts – MA resident roughly $41000, $44000 for non-residents.
    For Cornell, instate is $29400, out of state $44250. For UPenn, it is $38250 for in-state, around $48000 out of state. There are 28 Veterinary schools currenly, with over 20 of them being public universities. For Western University, it is over $45000 per year. The other unversities I could locate were all public universities. So, here are four more or less private schools, and their tuitions are definitely over $24000, so I have no idea how that data was compiled. For the public schools, sure, the tuition is lower, but definitely not for the private schools.

    For question 2. Roughly 90% of Veterinary school graduates had job offers or were accepted into residency positions in 2000. For 2012 it fell to 61.5% from 74.3% in 2011 and 78.9% in 2010. At the same time, for the 90% of graduates with loan debt, it has been increasing by around 5-6% a year in the past few years.

    Source – https://www.avma.org/news/pressroom/pages/Veterinary-school-graduates-see-drop-in-job-offers-starting-salaries.aspx

    In terms of placement and the great recession, a few things stand out. For one, placement has deteriorated greatly in the face of a slight rebound. One would expect job placement to plummet in light of the immediate downturn, which happened across other professions (law, finance, manufacturing, etc.), with a slight rebound, or slower job loss. Instead, as the economy got slightly better, things became far worse. And it cannot be soley attributed to the economy.

    For one, Vet schools have been increasing class sizes by 1.9% per year on average over the past 10 years, and this is expected to continue. Also, Americans have been spending less per over the past number of years (the same thing has happened with Dentistry, with fewer visits per person, and dental income slippage beginning in 2005-2006, before the great recession).

    So, given that the number of graduates continues to climb, and Americans are spending less per pet, since before the great recession, this does not bode well for vets.

    As for the BLS’s miscalculations, if they make large adjustments for other health care professionals as well, save for nurses and physician assistants, large adjustments downwards, and then explain for engineering jobs that competition will be stiff (if there is no increase in the number of engineering degrees awarded, there will be roughly 250-300000 more engineering grads than engineering jobs by 2020, representing a surplus approaching 20%), then yes, they will have made a good faith mistake. If these other issues I have pointed out are not remedied as well, then clearly the BLS is not acting in good faith.

    I do apologize for the bellicose nature of the post above.

    1. Alex,

      I should’ve told you this before, but the only time I’ve come close to calling law school a scam was when describing a Bloomberg piece on Kaplan’s online program, which was targeting veterans and doing things like not telling them that they would be ineligible to sit for the bar in their home states with an online law degree. Thus, I’m not going to call vet school a scam either.

      If you’re asking me to modify my opinion about vet schools, then you have it. I thought the profession did a better job of managing its numbers than it was actually doing.

      However, in my defense I believe some professions have been more culpable than others in ignoring oversupply. The BLS didn’t think there was anything wrong until recently, and the NYT article talks about the study on the future workforce needs in veterinary medicine, which appears to show that there won’t be the kind of demand the VMA envisioned when it underwrote the study. By contrast, the ABA has never admitted that there are more law schools and graduates than necessary, and it makes “anti-trust” excuses for limiting their numbers based on job placement rates. (I suppose it’s implausible for a vet school dean to say that a D.V.M is versatile.) As a result, I think there’s more good faith on the vets parts than the lawyers, so I’m more credulous of the excuses made by non-for-profit vet school administrators. Whether there will be concrete action is a different issue, and it would make for a good comparison.

      Anyway, I’m still waiting for you to start your blog. I’ll link to it and read it.

  3. Matt,

    As you point out, it is definitely the case that the ABA and Law Schools have been more egregious in their manipulation of data, and acted more callously, than other professional organizatons.

    Unfortunately, other professions have begun gravitating in the direction of the ABA and Law Schools.

    In the case of Veterinary Schools, the AVMA has made statements recently about the prospect of opening new Vet Schools just like the ABA, that they are bound by anti-trust laws to accredit them.

    This has also occurred in the realm of Pharmacy. In 2000, there were roughly 7000 pharmacy graduates a year. By 2015, there will be roughly 140000 pharmacy graduates a year. Ever more pharmacy schools have minimal standards for admission (2.5 GPA and 40% on the PCAT).

    The case of Optometry is quite similar to that of Veterinary, as previous studies of supply and demand are inaccurate, and the BLS is going to need to modify their projections. Optomtery schools are expanding at a faster clip than Vet Schools (something like roughly 3% a year), and there are two new schools being proposed for accreditation.

    The only professional institutions that appear to have some control are the AMA and AAMC. This is due, however, not to them, but to the nature of training for physicians, who require residencies. The limitation on the expansion of residencies (due in significant part to the freezing of Medicare funds by Congressional Budget Acts in 1996-1997) means that there is a constraint in place on production of physicians.

    Current match rates are 95% for Allopathic (MD) students, 75% for Osteopathic (DO) students, and between 40-50% for international students and Americans studying abroad. Given the massive expansion of DO graduates (roughly 4000 a year currently, from under 3000 a year in the early mid 2000s, to around 5000 a year by 2016-2018), it would appear that there will be a growing match-residency crisis for DO graduates. If only 75% are matching now, then the rates will fall even further, and re-match rates are around 40%.

    So, yes, unfortunately the law school model is spreading. If only the federal government would cease backing unsustainable student loans,
    as well as supporting the creation of supply gluts for the benefit of large corporations.

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