Our Obsession With College Degrees Is Helping Fuel Unemployment

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Jul 4, 2014

I saw an interview with Starbucks CEO Howard Schultz where he announced that the company would pay for most employees to get a degree online from Arizona State University.

This seems like a benefit few of the company’s employees would need. Aren’t most of their baristas already people with worthless degrees?

This is the type I’ve described as Generation U (unemployed and underemployed), but it seems that Mr. Schultz is just echoing a sentiment that suggests that a college degree is required for most people to have a good career. This starts at the very top in America — the White House’s education imperative states that “Earning a post-secondary degree or credential is a prerequisite for 21st century jobs.”

Ignoring reality

But while a laudable goal, the pursuit of this means ignoring reality.

The U.S. Bureau of Labor Statistics estimates that only 27 percent of jobs in the U.S. economy currently requires a college degree. By comparison, the U.S. Census Bureau reports that 47 percent of workers today have an associate degree or higher. The BLS projects that the proportion of jobs requiring a college degree will barely change — increasing to only 27.1 percent by 2022.

Even the most optimistic projection – a study from Georgetown University, projects that at most, just 35 percent of jobs will require a college degree by 2020.

The skilled worker shortage

While we’re pushing more people to get college degrees, we’re also facing a worsening shortage of skilled workers in many categories that don’t require a college degree. In manufacturing, as many as 600,000 U.S. manufacturing jobs remained vacant across the U.S. due to shortages of skilled workers, according to the Manufacturing Institute’s most recent “skills gap” report.

This situation exists across all categories of trades. A study by Manpower Group shows that the hardest segment of the workforce for employers to staff with skilled talent are the skilled trades — the welders, electricians, machinists, etc. who are so prevalent in manufacturing and construction.

Far more shortages exist in these categories than in professional jobs like registered nurses or engineers or even web developers. Even jobs like truck drivers are hurting for workers. Nationwide there are about 30,000 unfilled truck driving jobs, according to the American Trucking Association.

And the problem is going to get much worse.

The average age of a skilled manufacturing worker in the U.S. is 56. The skilled trades have far fewer 65-and-older workers (1.9 percent) than the total labor force (4.8 percent) — because these jobs are more physically demanding than most others. So many workers in the skilled trades can’t delay retirement because they need the money or like working. They will start to retire in droves within five years.

Vocational school vs. College

The hourly pay for a manufacturing worker is almost $24, compared to about $9 for a barista at Starbucks. Given that spread, one would think more people would seek work in manufacturing than settle for a job making coffee.

But, we’ve managed to create a culture where a college degree is supposedly a magical ticket to the good life, while vocational education is something to be sneered at. Consequently we now have the average college grad carrying a debt of almost $30,000 upon graduation and outstanding student loans of over a trillion (with a “t”) dollars.

Even among those opting for college, about a third pick majors that have very poor job prospects, including social sciences (11 percent), education (6 percent), psychology (7 percent), and visual and performing arts (6 percent). By contrast, only 2.4 percent pick computer science, 5 percent choose engineering, and 1.4 percent graduate with degrees in the physical sciences.

Yet, we do everything possible to encourage people to go to college, whether it works or not. The federal Pell Grant program in the U.S., intended to help low and moderate-income students finance college — costs over $35 billion annually, though almost 40 percent of Pell Grant recipients never graduate.

The German model

It doesn’t have to be this way. Germany has a very successful system that directs high-school students into vocational education, for the ones who don’t need, don’t want, or don’t have the aptitude for college.

Yes, there are many who don’t. Imagine that! This approach recognizes that everyone won’t benefit from college, but they can still be successful and contribute to society. Germany has a system in place to make this work — a partnership of employers and unions with government — to match students with the right vocation and provide the necessary training.

The benefits of this system are very visible. Few Germans find themselves unemployable. The youth unemployment rate in Germany is just 7.2 percent, well below that of the U.S. (16.2 percent). Overall unemployment in Germany is just 5.4 percent. A majority of German students (52 percent) opt for vocational training.

We, on the other hand, seem determined to perpetuate the illusion that a U.S. college degree should be the goal for all.

But we may be able to solve the problem another way: the city of Seattle has now mandated that the minimum wage will rise to $15/hr. So, perhaps those baristas in Starbucks’ hometown will get more competitive with manufacturing workers after all.