November 02, 2015 | By Peter Cappelli
TAGS: hiring outlook, journal
NACE Journal, November 2015
The idea that college is the path to a better life is firmly rooted in the American psyche. Government policies like the G.I. Bill, the rise of state universities, and federally backed financial aid were all designed to create more opportunity for more people to go to college and advance in society. The notion that a college education pays off in the form of much higher wages has also been the justification for having individuals and their families pay more of the costs over time: You should pay because you are going to benefit from it.
Yet new graduates in recent years have struggled to get their careers and their adult lives going, no doubt in part due to the lingering effects of a weak job market since the Great Recession. But other factors might be at work as well. Almost two-thirds of recent graduates report that they don't have a job that is closely related to their field of study. Almost one in four already believe that their education was not worth the financial costs.1 Defaults on student loans have soared, in large part due to the fact that graduates cannot get jobs that pay enough to support their loan payments.
Students and their parents know something has changed about hiring, and they look to colleges to help them solve the problem. Colleges themselves confront a dysfunctional supply chain, flanked by with worried families on one side, and some employers complaining loudly to politicians about not seeing enough of the graduates they want on the other.
One development that contributes to the worsened circumstances for new college grads is simple supply and demand in the labor market, something that is beyond the downturn of the Great Recession.
The supply of college grads has risen sharply, especially in recent years. Bachelor's degrees have doubled since the early 1970s, and that increase pales in comparison to the rise of two-year associate degrees and master's degrees have also increased far faster than bachelor's degrees. Even if we exclude the students in "college" just to get a certificate rather than a degree, the proportion of young people in college continues to rise. In 2006, 37 percent of individuals age 18 to 24 were in some form of degree-granting program. By 2012, that figure had increased to 41 percent. Seventy percent of recent high school graduates were in college in 2009, the highest amount in U.S. history.2 The rise in college education comes despite the fact that costs have gone up, almost twice as high as the rate of inflation over the past generation. U.S. students and their families pay far more for college than do students in any other country.3
At the same time, the demand for college graduates is not up. Despite the heated rhetoric, the economy today is not demanding more college-based skills. In fact, the Bureau of Labor Statistics projects that of the new jobs expected by 2022, about three times as many will require a high school degree or less than require a bachelor's degree.4 Neither are STEM degrees a sure ticket to a good job. Science and math undergraduate degrees have never been much in demand, and they are not particularly so now. Of traditional college degrees, engineering grads face a strong market. Engineering jobs constitute less than 1 percent of the jobs in the United States.5 Moreover, which engineering majors are hot at any particular moment is unpredictable and moving across them is not possible: A civil engineer cannot do the job of a computer science engineer and vis a versa.
In the meantime, employers with jobs requiring just high-school-level skills find themselves with lots of college grads applying for their jobs, and they hire them over the high school grads, bumping those with only high school degrees to even lower-level jobs or out of the market altogether. That is one big reason why high school grads are doing so much worse than college grads—much higher rates of unemployment. That also helps explains the rise in the "college wage premium," the difference between what the average college grad (roughly age 46) and the average high school grad in the economy is earning. (Note this says nothing about what happens for new college and new high school grads.) It has risen because wages and job prospects for high school grads have been down even more than they are for college grads. It is possible to earn more than a high school grad and still not earn enough to pay off the cost of college, which creates a terrible dilemma for parents and their college-bound kids.
The second major change driving the above developments—and this may be the most important—is that employers no longer scoop up new graduates and give them the skills that would make them into lifelong employees. The days when employers grew their talent from within and hired new grads based on potential to start in their talent pipelines are over. Most of their vacancies now are filled from the outside, by experienced hires already working somewhere else. What employers are looking for are candidates who already have the skills to start contributing.
Many employers still come to college campuses to hire graduates, but what they want from college graduates now is the same thing they want from applicants who have been out of school for years—job skills and the ability to contribute right away. That change is fundamental. In the process, it pushes the problem of getting job skills onto individuals, and that includes students.
The main response from colleges to these new developments has been a torrent of very practical and specific degree programs focused on a guess as to what employers want. Literally thousands of new majors in fields like tourism, healthcare records administration, supply chain management, and TV production have popped up. They seem practical because they sound like job titles. This vocational spin is particularly so at the for-profit colleges, which now enroll 12 percent of all college grads. What is actually required to deliver these practical majors is not clear, and so far, we have no way of knowing whether they are being done well. What we can say, however, is that any college that offers a proliferation of new majors is unlikely to be able to deliver any of them well. It takes time and resources to execute a program.
On the student side, contrary to what some pundits have said, students are trying to find out where the jobs are and chase majors that lead to those jobs.6 Fields like computer science have about 20 times as many majors now as in 1970, as do fields like law enforcement and fire prevention, because that's where the jobs are. Business became the most common major in 1980 and remains so today, accounting for one in five students. Other fields have declined, and not just classic liberal arts majors like English and foreign languages but also fields like math and physical sciences. The decline in the latter had a lot to do with the change in government policies; they boomed when the government provided lots of money for sciences and math programs during the Cold War and for fields that barely exist now, like military technologies. They declined after the fall of the Soviet Union.
The mistaken belief that students are just not pursuing fields where the jobs are has led state legislatures in places like Florida, Texas, and Wisconsin to think about somehow pushing more students into majors where employers say they want graduates. The employers aren't promising to hire graduates, of course, and this idea of pushing students toward certain fields assumes that the education system can somehow predict what jobs will be in demand when those students graduate, which requires the ability to forecast the economy accurately as well as business needs within the economy. This has never been government's forte. Nor is it the case that students are so malleable that we can take a student who wants to do history and turn them into a good engineer.
The simple-minded view that colleges should just teach what employers want and students should just take those courses is not any kind of answer to the problem of how to help students make the transition from college to the job market. Students are already chasing the job market, and colleges are already throwing up new majors that sound like job titles to meet the job market. There are many reasons why this approach is not going to work. The first is simply that the job market is extremely hard to predict, especially years out. The average college student takes five years to finish a four-year degree, and applies to college a year before entering.7 So the student's college choice—and potentially career choice—is decided six years before the student's first post-graduate job will start.
We also need to recognize that the focus of these vocational majors is only in getting the first job. What happens after that? Many of those first jobs don't last very long. High-paying jobs for new grads in fields like engineering and information technology have long-term prospects that aren't very attractive because the skills go out of date quickly and the jobs don't lead to obvious career progression later on. One reason why these jobs don't have such good long-term prospects is because employers can go back to campuses every year and hire new grads with even more up-to-date skills. Narrow, job-oriented majors like animation, property management, or invasive cardiovascular technology lock students into a single occupation. If the jobs aren't there at graduation, their narrow degree might make it difficult to do anything else.
But the main reason why these vocational programs aren't going to work is because employers don't seem all that interested in them. When employers are asked what they look for in new college graduates, only one out of the top five criteria—college major—has anything to do with academics. Their first priority is work experience: in internships first, if not there in other jobs, or in volunteer activities or extracurricular programs. A stunning 70 percent said that they would overlook the lack of a college education altogether in a job that had a college degree listed as a requirement if the candidate had the relevant experience.8 Even in practical fields like nursing, many employers only want to hire candidates with prior experience, not fresh college grads.
All this might suggest that the right move for colleges is toward traditional co-op programs that combine work experience and classroom learning. Evidence from the field, however, suggests that participating in such programs, which pair work experience to particular course work, requires long-term commitments that employers don't want to make, which is why co-op programs of any size remain remarkably rare. The best solution for the students and for the economy as a whole would be for employers to take a bigger role in providing work experience and training, but until that happens—and nothing on the horizon suggests that it will—we need to do something else.
What can we do that would improve outcomes? Employers may well change what they are after when hiring. A more-robust economy would improve prospects for college students considerably, as employers would not be able to be so picky and would have to hire graduates who have less work experience. However, a bet that employers will return to the model of hiring for potential and training candidates for lifetime careers so that colleges could go back to just focusing on education is not a good one. If anything, the pressure on colleges to do better at getting jobs for their graduates is likely to grow as the Obama Administration pushes for regulations that require colleges to report information on what graduates do after they finish college.
Instead, the focus on campuses need to shift from marketing to potential students on the admissions side to delivering on the career side. Certainly that includes getting better at building the communication and decision-making skills that both educators and employers believe are important. It also includes building better relationships with employers to know what they are after and to persuade them that our graduates can be good employees. Part of that is explaining what goes on in college classrooms that is relevant for employers. To illustrate, many classes make considerable use of IT skills and data analysis even though none of that is in the course titles. A public policy course, for example, may require students to use software to forecast the demand for housing, the same basic skills that are useful in marketing. An art history course may require students to develop multi-media presentations. Logic classes teach judgment and decision making.
What we can do going forward is help students acquire portfolios of education, credentials, and experiences that help them fit into what employers are asking for now. That begins with acknowledging that not everything relevant to getting a job is based on the classroom. Here's what that might mean in practice.
A history major, for example, might take a few practical courses outside her major in web design or programming in senior year. That might well be all an employer needs for an entry-position, if that student can get in front of that employer and make the case that her communications and interpersonal skills are good.
A philosophy major with an interest in medical school later on might get some experience volunteering in a hospital and picking up a few "badges" or credentials from an online provider in the technical aspects of hospital records administration. That might be enough to get the student an entry-level position in a hospital that would let him decide whether medicine as a field is the right fit.
Internships are likely to remain crucial to building job prospects, and career offices might be the bridge between students and employers for internships. But college leaders need to recognize that building those bridges can be expensive. It requires time and effort to visit employers who might have an interest hiring students for the summer and persuade them that our school is a good place to look. Giving college credit for work experiences, which can help for-profit companies offer unpaid internships, is certainly a possibility, although we need to recognize that these are very expensive ways to give students work experience as they are paying tuition to get it.
An alternative is for careers offices to help students use their own resources to find internships. This is especially relevant for smaller, rural schools that do not have a local base of employers from which to draw. We can also get better at helping students shop among the array of programs for work experience that are offered by providers off campus. Some of these can be a great fit for the right student; some are disasters.
There is a lot that can be done to help students make the transition from campus into a job. Turning college, an institution designed to educate for life, into a job training provider shortchanges students and isn't likely to work in any case. Paying more attention to the career side makes much more sense, and guiding students in how to make use of off-campus options is the most reasonable way to do so.
1 These results come from a survey of recent school leavers: Board of Governors of the Federal Reserve System, In the Shadow of the Great Recession: Experiences and Perspectives of Young Workers (November 2014).
2 See National Center on Education Statistics (NCES), The Condition of Education, tables 20 and 233; and NCES Digest of Educational Statistics, table 302.60.
3 Private spending on postsecondary education also includes any donations to private colleges. For more on the relative position of the United States, see OECD, Country Note: Education at a Glance—US 2012 (Paris: OECD).
4 See Bureau of Labor Statistics. Table 1.4 Occupations with the most job growth, 2012 and projected 2022. http://www.bls.gov/emp/ep_table_104.htm.
5 Labor Force Statistics from the Current Population Survey Table 11b, Employed Persons by Detailed Occupation and Age. http://www.bls.gov/cps/cpsaat11b.htm
6 For evidence, see James A. Freeman and Barry T. Hirsch, "College Majors and the Knowledge Content of Jobs," Economics of Education Review 27 (2007): 517–535.
7 NCES, "Fast Facts: Graduation Rates," n.d. http://nces.ed.gov/fastfacts/display.asp?id=40 (accessed September 2014).
8 See Chronicle of Higher Education, "The Role of Higher Education in Career Development: Employer Perceptions," 2012, http://chronicle.com/items/biz/pdf/Employers%20Survey.pdf.
NACE welcomes comments and opinions. Contact Mimi Collins, firstname.lastname@example.org.
Peter Cappelli is the George W. Taylor Professor of Management at the Wharton School and director of Wharton's Center for Human Resources. A research associate at the National Bureau of Economic Research, he has long been involved in federal government policy-making regarding the work force and education. Cappelli is the author of Will College Pay Off? (Public Affairs, New York: 2015), on which this article is based.
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Bureau of Labor Statistics
Unemployment rate, bachelor’s degree grads age 20 – 24
Bureau of Labor Statistics
Average starting salary, Class of 2017 bachelor’s degree graduate
Fall 2017 Salary Survey
Decrease in hiring projected for Class of 2018 over Class of 2017
Job Outlook 2018
Percent of Class of 2016 bachelor’s degree grads employed or pursuing more education
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