Friday, June 17, 2016

The College Degree Prisoner's Dilemma

Of those aged 25 to 34 in the civilian labor force, how many have bachelor's degrees or higher?

Click to enlarge.

This is yet another parabola doomed to fail, for it will not be possible to exceed 100%.

Prisoner's Dilemma

The prisoner's dilemma is a standard example of a game analyzed in game theory that shows why two completely "rational" individuals might not cooperate, even if it appears that it is in their best interests to do so.

Let's say two high school seniors named John and Jane both really want a particular job in their small farming community. The job does not require a college education, but higher education would still be preferable. They are the only two people who will apply for it. The previous person who has that job will be retiring in 4 years. What should they do?

If John goes to college, then Jane must also go to college in order to compete. If Jane goes to college, then John must also go to college in order to compete. It would be in both of their best interests if they cooperated and neither went to college. Going to college pushes both of them into debt and if they both go, neither will have the advantage over the other.

I think that's where we are at in this country. That's why we're seeing the parabola in the chart. Unfortunately, jobs requiring college degrees are not growing as a parabola. Not even close. In my opinion, the number of heavily indebted overqualified workers in jobs that really shouldn't require a college degree will continue at an ever alarming rate. Sigh.

I don't see what can reverse the trend until it finally reaches the ultimate breaking point. College is becoming the new high school, only with extra debt and with four more wasted years. That's not true for everyone obviously, but for many workers it is. The advantage of going to college is being lost for those who will ultimately end up in jobs that don't require it.

Unfortunately, I don't see an alternative. Even if you end up in a job that doesn't require a college degree, you may still need the degree just to get it. All things being equal, most employers would choose the more educated worker. I'm therefore not offering "do not go to college" advice. I'm simply trying to point out the reality of what is happening. When it comes to college education for the masses, especially those who ultimately end up in low paying jobs even with a college degree, the glass is half full, and leaking.

Source Data:
St. Louis Fed: Custom Chart


Blissex said...

Your argument about increasing credentialization of the workforce, which is very agreeable, misses two very important details:

* People who go to college stay out of the work force for four years of their life, and thus the official reported unemployment rate improves.

* People who go to college spend a lot of money on college, which means that they are in effect financing higher levels by getting more in debt.

The effect gets bigger by adding any postgraduate degree.

Therefore a lot of governments have been pushing hard for ever longer education at ever higher levels of debt. The problems they have been getting have been lots of unemployed or underemployed graduates, and lots of debt, but that can always be sorted out later.

Things like this have been part of government tools for a while, a sociologists in the UK has called the overall trend "privatized keynesianism", where governments instead of borrowing and spending, "facilitate" the borrowing and spending of private individuals, whether it be for degrees, or for real estate.

The rationale is that even if pushed by governments and in practice guaranteed by governments, that private borrowing is "off balance sheet", and therefore does not set off the bond vigilantes, because the latter only care for the on-balance sheet borrowing by governments, not about private borrowing. Or so the theory goes.

Stagflationary Mark said...


Thanks for posting that. What you say makes a lot of sense.

I never really thought of college as a busy work project (at least for some). Instead of the government borrowing money to pay people to dig holes and then fill them back in, people instead borrow their own money and go to college.

This doesn't seem like it's going to have the happiest of endings over the long-term, but it does effectively kick the can.

Governments do seem to have mastered the solving of current problems by converting them into future problems. Unfortunately, the future problems are starting to really pile up. And as time marches on, some of those future problems become current problems again. Sigh.