The Most Educated Poor in History

Check out Matt Bruenig’s very good piece on education, poverty, credential inflation, and signaling.  Key facts:

1. “As the adults migrated up the educational bins, they took the poverty into the higher educational bins with them:”

2. “Over this period, the share of poor adults with “less than high
school” education plummeted 20.1 points from 48.3 points to 28.2 points.
Every other educational bin saw share gains of 2.6 to 5 points.”

In sum:

Adults these days are as educated as they have ever been, but poverty
is no lower than it was in 1991. This is not because the few lingering
people with “less than high school” have soaked up all the poverty.
Quite the contrary: poverty has simply moved up the educational scale.
The poor in 2014 were the most educated poor in history.

Diagnosis:

First, handing out more high school and college
diplomas doesn’t magically create more good-paying jobs. When more
credentials are chasing the same number of decent jobs, what you get is
credential inflation: jobs that used to require a high school degree now
require a college degree; jobs that used to require an Associate degree
now require a Bachelor’s degree; and so on...

Second, having more education does not necessarily
increase people’s productive capacity. Those in the know will identify
this as the old “signaling v. human capital” point. The short of it is
that, even if jobs did automatically pop into existence to match
people’s level of productive ability, it’s not at all clear that college
education necessarily does a lot to increase people’s productive
ability. Instead, what college education does (at least in part) is
signal to employers that you have a certain level of relative “quality”
over others in society. As more people get degrees, the value of this
signal declines, but more importantly, the point is that the degree was
always a signal, not a productivity enhancer.

Third, poverty is really about non-working people:
children, elderly, disabled, students, carers, and the unemployed. The
big things that cause poverty for adults over the age of 25 in a
low-welfare capitalist society–old-age, disability, unemployment, having
children–do not go away just because you have a better degree. These
poverty-inducing circumstances are social constants that could strike
anyone of us and do strike many of us at some point in our lives…

My only caveat is that Matt’s first and third points hinge on his second point – which, not coincidentally, is the heart of the book I’m now wrapping up, The Case Against Education.  If extra education really did transform people from bad workers into good workers, employers would have a strong incentive to create more good-paying jobs.  Profit-maximization, not “magic,” would make it happen.  The same goes for non-workers.  If school sharply increased the productivity of the young, old, disabled, parents, and the unemployed, employers would be more interested in hiring them.  These issues wouldn’t literally “go away,” but employers are a lot more willing to accommodate good workers than bad ones.

Question for Matt: Are you willing to join me in calling for lower education spending to roll back credential inflation?  If not, why not?

HT: Nathaniel Bechhofer

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