The Great Malemployment Debate
By Bryan Caplan
From an early age, my father warned me that if I refused to major in engineering, I could easily end up driving a taxi. As I matured, I discovered that his over-the-top warnings had a firm basis in fact. Many B.A.s do wind up driving cabs, waiting tables, and tending bars. Only recently, however, did I discover that this phenomenon has a name: malemployment.
The term has in turn inspired a lively academic debate. My favorite: Team Northeastern – Paul Harrington and Andrew Sum – versus Team Georgetown – Anthony Carnevale, Nicole Smith and Jeff Strohl.
Round 1: Team Northeastern. Highlights:
The Georgetown measure of the college labor
market includes all employed college graduates, irrespective of the
occupation in which they are employed. So for the Georgetown analysts,
all the college graduates working as bartenders are part of the college
labor market. Indeed, those college grads working in cashier, retail
sales, clerical, health aide, moving and transportation occupations,
landscape and janitorial services and the like are all part of the
college labor market.
BLS analysts disagree. They would not
assign any bartender employment to the college labor market because,
although one in four bartenders are college graduates, these jobs do not
typically utilize the knowledge, skills and abilities acquired in
college. Most of us would agree that college graduates working as
bartenders are not utilizing their college education. We would regard
many, though not all, of these individuals as underutilized with respect
to their education or what labor economists refer to as malemployed.
Amazingly, in the current labor market environment characterized by a
high incidence of malemployment among young college graduates, the
Georgetown analysts argue this type of skills underutilization problem
simply does not exist.
Malemployment denialism isn’t just counter-intuitive; it defies the earnings data:
If malemployment among college graduates
simply does not exist, as the Georgetown forecasters argue, then there
should be little difference in the earnings among college graduates
regardless of whether they were employed in college labor market
occupations or not. We examined the issue of malemployment in greater
depth using data on annual earnings of employed adults during the 2006
to 2008 period to determine if earnings varied systematically by our
measure of college graduate malemployment. Not surprisingly we found
very large and statistically significant difference in the annual
earnings of college graduates based on their malemployment status.
Specifically, we found that:
- At the associate degree level, those graduates employed in a college
labor market occupation had expected annual earnings that were 60%
greater than those of high school graduates, while their counterparts
who earned an associate degree but were employed in a non-college labor
market-related occupation had expected annual earnings that were just
10% higher than those of high school graduates.
- Among bachelor’s degree recipients, those who worked in college
labor market occupations had expected annual earnings that were 88%
higher than their high school graduate counterparts, while the earnings
premium for those who were not employed in a college labor market
occupation was only 15% higher.
Round 2: Team Georgetown. Highlights:
To the contrary, since the 1980s we have been underproducing college
talent, and the college wage premium is the proof. Degree production in
the 1980s flattened out after baby boomers reached college graduation
age, and has remained flat ever since, at slightly above 40% of the
labor force. Over the past decades, employers have responded to scarcity
in college talent by raising college wages relative to the wages of
workers with no more than high school diplomas. Yet in spite of the
growing economic advantage of college degrees, the overproduction,
over-qualification or “malemployed” school of thought still has a strong
“Malemployment” makes little sense in our dynamic modern economy:
The difference between Harrington and Sum and BLS and our method is that we believe that we should not define the “college labor market”
as “essentially a set of occupations,” in keeping with the elite,
traditional, white-collar and professional jobs. The notion of the
“college labor market” as a fixed set of occupations is remarkably
static. In contrast, we assume that job and skill requirements are
dynamic. Technology and other economic forces are constantly updating
the skill requirements in jobs. We view a college job as any job that
brings substantial, positive earnings returns to a college degree,
irrespective of occupation–whether an individual is an insurance agent
or a rocket scientist.
The only way to reconcile the BLS projections with what actually
happened is to assert, as BLS, Harrington and Sum argue, that BLS is
predicting the number of college degrees that employers require,
not the actual numbers of college educated workers that employers hire.
If this is the case then not only did employers hire these “extra”
workers, in 2006 and 2008, but paid them more than 70% wage premiums for
postsecondary degrees they didn’t need. This would be cause for
concern–it would mean that in 2008, 22 million workers–or more than a third
of all workers with postsecondary education–got an appreciable economic
benefit from their degrees that they didn’t earn. It would mean that
employers were smart enough to cut back the college wage premium in the
1970s when they experienced an oversupply, courtesy of the baby boom,
but the same employers started throwing money at degrees in the 1980s
and continue to do so. If Harrington and Sum are correct, crisis
abounds, markets don’t work, employers are irrational, and preparing
your children for college is naive for all but a very select few.
Round 3: Team Northeastern. Highlights:
…Carnevale points to… the long-term rise until recently (2000) in the
economic return to a college degree, suggesting that we think that
college does not pay-off. Again, we have argued that college pays off on average
and have written plenty of papers about this. The results of our recent
multivariate analysis of the annual earnings premiums of college
graduates in New England during 2009 summarized in the Chart 1 below
reveal very large earnings payoffs to college graduates. However, the
findings clearly reveal that, whether a given graduate’s degree pays
off, depends on the success of the individual becoming employed in an
occupation that has a substantial set of duties and tasks that utilize
the knowledge, skills and abilities that they acquired in college. The
estimated annual earnings advantages over and above a high school
graduate for those who earn a degree and become employed in the college
labor market were 55% for those with an associate degree, 71% for those
with a bachelor’s degree, and 107% for those who earned an advanced
degree. Among those graduates who were malemployed, however, we found
very modest annual earnings advantages ranging from only 5% to 8%.
On my reading of this debate, Team Georgetown’s Round 2 blatantly ignores the heterogeneity of returns that Team Northeastern documents in Round 1. Team Northeastern could have fairly replied, “Please re-read our original piece.” But perhaps I’m biased. Question for anyone who takes the effort to read the whole exchange: Does Team Georgetown ever directly confront Team Northeastern’s heterogeneity evidence? Please back up your case with direct quotes.