Searching for solace in bleak unemployment numbers, policy makers and commentators often cite the relatively low joblessness among college graduates, which is currently 5.1 percent compared with 10 percent for high school graduates and an overall jobless rate of 9.8 percent. Ben Bernanke, the chairman of the Federal Reserve, cited the data recently on "60 Minutes" to make the point that "educational differences" are a root cause of income inequality.
A college education is better than no college education and correlates with higher pay. But as a cure for unemployment or as a way to narrow the chasm between the rich and everyone else, "more college" is a too-easy answer. Over the past year, for example, the unemployment rate for college grads under age 25 has averaged 9.2 percent, up from 8.8 percent a year earlier and 5.8 percent in the first year of the recession that began in December 2007. That means recent grads have about the same level of unemployment as the general population. It also suggests that many employed recent grads may be doing work that doesn’t require a college degree.
Even more disturbing, there is no guarantee that unemployed or underemployed college grads will move into much better jobs as conditions improve. Early bouts of joblessness, or starting in a lower-level job with lower pay, can mean lower levels of career attainment and earnings over a lifetime.Graduates who have been out of work or underemployed in the downturn may also find themselves at a competitive disadvantage with freshly minted college graduates as the economy improves.
When it comes to income inequality, college-educated workers make more than noncollege-educated ones. But higher pay for college grads cannot explain the profound inequality in the United States. The latest installment of the groundbreaking work on income inequality by the economists Thomas Piketty and Emmanuel Saez shows that the richest 1 percent of American households — those making more than $370,000 a year — received 21 percent of total income in 2008. That was slightly below the highs of the bubble years but still among the highest percentages since the Roaring Twenties.
The top 10 percent — those making more than $110,000 — received 48 percent of total income, leaving 52 percent for the bottom 90 percent. Where are college-educated workers? Their median pay has basically stagnated for the past 10 years, at roughly $72,000 a year for men and $52,000 a year for women.
A big reason for the huge gains at the top is the outsize pay of executives, bankers and traders. Lower on the income ladder, workers have not fared well, in part because health care has consumed an ever-larger share of compensation and bargaining power has diminished with the decline in labor unions.
College is still the path to higher-paying professions. But without a concerted effort to develop new industries, the weakened economy will be hard pressed to create enough better-paid positions to absorb all graduates.
And to combat inequality, the drive for more college and more jobs must coincide with efforts to preserve and improve the policies, programs and institutions that have fostered shared prosperity and broad opportunity — Social Security, Medicare, public schools, progressive taxation, unions, affirmative action, regulation of financial markets and enforcement of labor laws.
College is not a cure-all, but it will certainly take the best and brightest minds to confront those challenges.