Pro-Growth Regulation and For-Profit Colleges

The U.S. has an unemployment problem. It has an education problem. It has a regulation problem. And they are fundamentally interrelated.

This past Friday, the Department of Labor reported that there are roughly 14.1 million Americans in the ranks of the officially unemployed. Ignoring the millions more who may not be counted because they’ve either stopped looking or have taken part-time work, it is costing taxpayers just under a quarter of a trillion dollars per year to support those 14-plus million.

That is a serious unemployment problem.

It would be a radical change in the outlook for the national economy (never mind the national psyche) if unemployment were instead dramatically lower and the more than 7 million Americans now on unemployment payments were instead working, paying taxes (including payroll taxes), and producing goods or services while reducing government expenditures by $10.2 billion per month.

Sounds like a worthy goal, doesn’t it?

What is the dividing line between the bleak reality and the more optimistic vision? The single most important benchmark for employability is level of education. The Bureau of Labor Statistics regularly reports the unemployment rate by level of education. It is a fairly straight line: Americans with less than a high-school diploma have an unemployment rate of 14.3 percent.

Those with a high school diploma, 10 percent. For Americans with some college or an associate degree or certificate, 8.4 percent. For those with at least a bachelor’s degree, 4.4 percent.

Transforming the U.S. labor force and the unemployment plague will not happen in weeks, months, or even a few years. But the tight link between education and labor-market success demands that a medium-to-long range solution to preempting unemployment is incentives for more young Americans to attain their highest possible level of education.

That is a pro-employment, pro-growth, pro-future way to address the unemployment problem.

A sensible education strategy will, however, avoid the pitfall of one-size-fits-all thinking. Americans are familiar with the traditional four-year college route to greater education. But for others, this route may be blocked by financial, social, academic, or other barriers. So, those who share the same productive potential as the freshmen waiting for the fall semester at, say, Vanderbilt or Nebraska may choose to find another course — literally. They may opt to attend a career-oriented college or university.

To qualify for student-aid programs, for-profit institutions must meet the same rigorous accreditation standards, imposed by the same rating agencies, as Harvard or Stanford. The only difference is that students who attend for-profit colleges are taught the professional skills applied in the field of their chosen career.

Career-oriented colleges’ student bodies have a higher percentage of minorities. The students are typically older, have a higher probability of having a family, and have a strong appreciation for the value of a college diploma. These colleges are part of solving the education problem facing the U.S.

Sadly, the Department of Education has targeted for-profits colleges. Its so-called “gainful employment” rule seeks to undercut for-profit colleges and stack the deck in favor of traditional four-year schools. Of course, the ultimate burden of this ill-designed regulation is borne by the very same young who are at the highest risk to remain intractably unemployed. The rule was shoved through the Department of Education in spite of having to withdraw the very research on which it was based. Unfortunately, disqualifyingly flawed research did not stop a flawed rule. The gainful-employment rule is emblematic of America’s anti-growth regulation problem.

President Barack Obama claims to have the best interests of those in most need at heart. If that is true, and if he truly wants to be known as a president who had a dramatic, positive influence on America’s at-risk young people, he would demand the Department of Education withdraw this flawed rule. To let it stand is to sentence millions of Americans to a lifetime of underemployment.


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