Patrice Onwuka joins the podcast to discuss this month’s policy focus: Degree Inflation, which requires more education than is necessary for workers to succeed in their jobs. We review the origins of the four-year degree push, consider how it has become a barrier to opportunity for many workers, and discuss the steps many employers are taking to eliminate the unintended consequences.
Patrice Onwuka is the director of the Center for Economic Opportunity at Independent Women’s Forum. Patrice co-hosts WMAL-FM’s morning show O’Connor & Company, the leading talk radio station in the DC area every Friday. Patrice is also a senior adjunct fellow with The Philanthropy Roundtable and a Tony Blankley Fellow at The Steamboat Institute.
And welcome to She Thinks, a podcast where you’re allowed to think for yourself. I’m your host, Beverly Hallberg, and on today’s episode, it’s our policy focus. This month we look at what is known as degree inflation, which is requiring more education than workers need to succeed in their job. We’re going to look at the origins of the four year degree push, how it’s become a barrier to opportunity for many workers, and the steps many employers are taking to eliminate the unintended consequences.
And joining us to discuss this is the author of the Policy Focus entitled “Fighting Degree Inflation,” which you can find on iwf.org, is Patrice Onwuka. She’s been with us many times. Patrice Onwuka is a director of the Center for Economic Opportunity at IWF. She also co-hosts WMAL-FM’s morning show, O’Connor & Company, the leading talk radio show in DC every Friday morning. And she is also a senior adjunct fellow with the Philanthropy Round Table and a Tony Blankley fellow at the Steamboat Institute. Patrice, always a pleasure to have you on She Thinks.
Oh, thank you, Beverly. Always great to be with you.
And so again, just want to let people know they can find this policy focus on iwf.org. It is called “Fighting Degree Inflation.” So first of all, I thought we would just start with some of the stats of the workforce today. I want to talk about unemployment and just where the workforce is, and we often hear the Biden administration tout that we have some of the lowest unemployment rates we’ve ever seen and that the economy is great. Yet we also see help wanted signs all over the country, especially when you’re looking at minimum wage paying jobs such as fast food restaurants. So break down the real numbers. What do we need to know about unemployment and the workforce?
Sure, Beverly, so unemployment fell, I believe, to about 5.5% this past month. We’ve got about less than 10 million open positions, so there’s still millions of people who are sitting on the sidelines. Our labor force participation rate, which is the rate at which people are participating in the workforce entirely, has crept up, but it still has not exceeded where it was before the pandemic. So right now we’re about 62% labor force participation rate. We were well over 63% before the pandemic.
So there’s something going. And also, let’s not forget that women, men, lots of different workers have actually been falling out of the workforce for decades now. The big question is why? And also what does this mean for the economy going forward? Especially when you consider that hundreds of thousands of baby boomers are leaving the workforce every year. They’re retiring. And so you’ve got a gap, many positions that need to be filled, particularly those that are skills-based positions, and you just don’t have the workers who have the skillset to fill those jobs, but you still have millions of unemployed workers. So that’s where we’re at.
We’re kind of at an impasse that impacts price increases or inflation, it impacts the ability for small businesses to be able to run efficiently. And I’m sure you’ve been in a place where some of your favorite restaurants or stores have just had the most ridiculous fluctuating hours in service just because there are not enough workers.
Yeah, I think it’s a common thing, probably more so about six months to a year ago than today. But you would see, let’s say on a drive-through in a fast food restaurant, there would be already this apology note that was posted saying, if service is slower than normal, we’re sorry. We don’t have enough workers.
So, it’s been this interesting time where it’s been hard for people to find workers, even when a lot of these fast food places are willing to raise their base salary to $15 an hour. And sometimes they give you a bonus just by starting to work there. Can you break down for us a little bit about why people are desiring to not work? Is it because they don’t want those base level jobs? Does the stimulus funding creep into this? Did Covid just make us lazy? Is it a combination of all of them, but what does the data really show us about what’s going on as far as why people aren’t working?
So one of the biggest factors, and I alluded to it, is the aging and retiring workforce. You have millions of baby boomers who have reached the end of their work life. They’re tired. Some of them because of the pandemic, just decided, you know what? I’m going to retire early. I’m tired of working. During the pandemic, I do believe that generous unemployment benefits and stimulus checks, and all of the direct cash transfers as they’re referred to, to households, did have a chilling effect. They disincentivize people from working.
Now, a lot of that stimulus has worked out of the economy. Families have spent down their savings. So that’s no longer a cushion for folks to decide whether or not they want to work. But I think you also have a mismatch of skills. In some locations in particular, you have companies, that have manufacturing jobs or service-based jobs, but they cannot find the kind of skilled workers within their locality to be able to fill those jobs.
And in it’s unfortunate when you have unemployment that may be higher and with different demographics or in different locations because there are skilled workers, and you’re seeing this in what we called middle skilled jobs. Now, not necessarily the lower wage entry level positions in retail or fast food, but it’s in occupations where people can actually earn a middle class lifestyle. I mean, maybe it’s in customer service representatives, sales representatives, in the trades, from plumbing to roofers, different types of technicians.
These are roles that do not require a four year degree, but do require some additional skills, maybe a little bit of training or advanced training. The problem is you have a young generation who has been raised to believe that the only way to a good middle class lifestyle is going through your local college campus. And that is not necessarily the case. And I think that’s where we come to in the workforce.
And so I want to touch on that a little bit more because for decades, this four year degree trajectory has been considered the best pathway to get to the middle class. I know my parents said, you need to go to college. All of my sisters did. I think most people my age and younger, they’ve been told that you need to get a college degree. Where did this mentality originate from? Obviously it worked well for me. I’m not saying a college degree is a bad thing. It depends on what you want to do in life. But why was this the big push for almost all kids?
Well, I believe I could trace it probably back to the 70s and maybe the 80s, where there was a particular emphasis on getting women into the workforce and getting minorities into the workforce. And part of that was by educating them, allowing them, or encouraging them to go to colleges to pursue that four year degree. Because there was a time when, yes, a four year degree certainly did earn you higher earnings.
And the data will suggest that if you do have a four year degree or more, you’re likely to have a pretty good earnings potential over your lifetime. Now, that said, there are a lot of caveats. One of the biggest being student loan debt. And I certainly have a lot of student loan that I incurred in pursuing both my undergrad and graduate degree studies. And I think a lot of people do have the same, but it’s simple basic economics.
When you have a limited supply of something and many people want it, so you have a limited supply of number of colleges or spots at a university and a lot of people applying because they’ve been told this is the way to the middle class, then obviously it makes the degree more expensive. But then as you get more people into the system getting degrees and pursuing them, they’re graduating. But because people don’t necessarily need those degrees, the value, frankly, of the degree starts to decline.
And so it’s not surprising when you see headlines like, is the college degree still worth it? And I think a lot of young people today are graduating or have recently graduated with student loan debt with degrees in industries, in majors and minors that frankly are not, there are not jobs that are readily available for those degrees. And so that’s why you saw the college educated barista during the Great Recession.
And another part of this too is how employers have prioritized their job hiring practices. You outlined this in the policy focus saying that there was a moment of time a few years back where employees or, excuse me, decided to add certain qualifications that included a college degree, whether or not that college degree was really necessary for the job they were hiring someone for.
Why did employers change these requirements? What was the thinking behind it?
Well, this is around the time of the Great Recession. So after 2008, 2009, beginning around 2010, you had a workforce where unemployment was very high, or higher earning and degreed workers who were in abundance and they were unemployed. So a lot of employers saw that as an opportunity to capture that higher educated talent, thinking that these would be people who would have the skills that they needed for their positions that they had. And certainly they may have had jobs that did not require a degree.
The descriptions, the expectations of the job may not be materially different than before they added that degree requirement. But they thought, you know what? We can get a better educated workforce. And this degree certainly is supposed to signify that you’ve got a potential applicant who is knowledgeable, who has a lot of the soft skills that would make them successful in any job that, that obviously in college you learn about teamworking, you learn about punctuality, you learn about how to communicate in writing and verbally, you learn about how to be professional.
Well, apparently a lot of college students don’t necessarily do learn that. A lot of them graduate with lots of interest in having taken many interesting classes, but not necessarily classes that would prepare them to be in the workforce and particularly prepare them for those middle skilled jobs of which there are millions of jobs.
So that’s where degree inflation kind of took off towards the end of the Great Recession. And you just saw this acceleration of employers adding these degree requirements to jobs that really don’t need them. But it was an opportunity to get better educated skill force.
And something that I found interesting to me as you focused on this in the policy focus because I’m an employer myself, is you said, even if this whole degree requirement is instituted, you may say, well, this person obviously has follow-through and they know how to write and they know how to think. It doesn’t necessarily make for the best employee.
You listed certain reasons, first of all, how long they may even expect to stay in the certain job. Maybe they job hop more frequently. Maybe they realize that they have a skillset that’s higher level than what this job is. So explain to me why this hasn’t always worked out better for employers to have that degree educated employee.
Sure. Certainly Beverly. So a lot of employers in surveys have acknowledged that non-degreed and degreed applicants or employees perform kind of differently. On some measures of basic ability to perform the job they’re about even. But on things like punctuality, turnover, satisfaction with their job, commitment to the work, they found that a lot of college grads were actually performing worse off. So their turnover rate was higher, their likelihood to defect to a competitor was higher as well.
So that’s actually not the kind of workforce you want. You want people who are willing to work hard, be able to accomplish the job, but also not leave you in six or seven months, especially as an employer after you’ve invested so much in onboarding, hiring that person, getting them up to speed with the different parts of your company and getting them into that role.
And so I think there has been an acknowledgement with many private sector employers in the retail space, in the tech space and in different industries that, hey, maybe that degree is really not the best signal of job readiness. Maybe what they actually need are applicants who are better skilled or trained or maybe have greater numbers of years of experience.
So suddenly now they’re starting to swing in the other way. You’re seeing companies remove that degree requirement from a lot of positions. And that’s a good thing because it’s saying that maybe that degree does not have to be there for every position. And really what we’re talking about again, are these middle skilled, middle income positions that frankly are a great opportunity to move into the middle class.
And something that globalization has done. We offshore a lot of skilled jobs, I think of China and things that we outsource. We really became in the digital age, this country that was focused more on automation and technology and more of the soft skills that you say, more of using the brain, using more of the body. But at the same time, you can’t offshore a contractor working on your house or a plumber or an electrician or you think of all these different jobs.
Have you seen those salaries of those type of skilled positions gone up? And do you think that, let’s say there’s a young person listening or a parent listening, should you look in your region at maybe the amount that one would get paid, your child could get paid if they went into one of these careers?
Absolutely. I mean, I think it goes without saying that for the trades, if you are skilled in some of those hard skilled jobs and construction trades, some types of service positions, but those you have seen in wage increase at a phenomenal level because there’s so few people who are actually skilled to be able to lay brick, to be masons, to be electricians. And interestingly, those are occupations that you don’t have to go to a four year college to do. Very often it’s a matter of training and becoming an apprentice.
So you’re working, getting on the job experience even while you’re in high school in some situations, and then you’re able to one day have your own practice, have your own small business. So these folks are… and if you’ve ever needed a plumber on the weekend or during a holiday, you won’t know they are doing really well, but it’s not just limited to the trades.
I think you’re seeing this in the service industry, in the financial industry, in accounting, they’re different types of occupations that don’t necessarily, they don’t need CPA degrees, they don’t need higher degrees, but there’s just a level maybe certification that’s needed, and that could take a few months.
Very often though, you’re also seeing employers start to create their own pipelines of talent starting from the local high school. And so they’re telling these high school students and working with the school administrators to say, these are the positions we have. These are the skills that these students are going to need. We’re able to create apprenticeships or internships that they can work on through high school and then hire them on, so that when they’re ready to enter the workforce, they have a job with us, they are skilled and they’re ready to go.
That kind of innovation is I think, what’s going to be needed to be able to fill the jobs that are open today, but also to think about the future as more baby boomers retire. And frankly, as Generation X starts moving higher and higher up the age level, you’re going to have another wave of these retirements. And so what a great way to start speaking to students earlier on to say, you have different paths if you want to have a good life, and it doesn’t have to be a four year degree, it can be. And that could work for you, but here’s some other alternatives.
I also want to talk about the potential trickle down effect of this. So we talk about what this means as far as employers who are hiring and saying that you have to have a degree in order to work here. Some employers are changing that. What about jobs that we would already put into that skill area, the skilled work where maybe they have to have some type of certification or something that would be referred to as occupational licensings, where states set these specific standards for how many hours trained, et cetera, in order to practice their trade.
Are you finding that states are changing their requirements? The Fed is changing requirements because frankly, there just aren’t enough workers to fill the need that’s there?
Well, this is a good example of the public sector now starting to step up. So I was talking about the private sector moving away from these degree requirements with a lot of positions. Now we’re starting to see states take up the mantle and run with it. Maryland was the first state under the former governor, governor Larry Hogan, a republican governor to look at every single available state position. I think there were over 40,000, and do an audit and say, of these, over 90% of them do not need a four year degree for someone to take those jobs. And so he literally wiped out the degree requirements for thousands of jobs. And that opened the door to many Marylanders who are skilled but maybe never got their degree. People who have worked in the workforce for decades, but never went back and got a four year degree.
Maybe they were raising kids, maybe it was just financially prohibitive for them. And so Maryland is the first state. I think we’re seeing some other states, including Democratic governors, starting to take a look at this idea of reducing and fighting degree inflation in the public sector. And so I think this is just the start. And Beverly, you mentioned occupational licensing, but I think degree inflation and occupational licensing are very similar. They’re literally just this idea that you need certain requirements or certain certifications or certain X, Y, Z for the opportunities that are available, regardless of whether those certifications, those requirements are actually germane to the job. I mean, it’s like telling a hair braider who never touches a chemical, you need to go to beautician school and learn how to do chemicals and dyes and all of this. You don’t need to learn that if that’s not what you’re doing.
And certainly degree inflation has been a barrier to opportunity, just like occupational licensing for people who have criminal backgrounds and are not necessarily able to access federal funding to support their four year degree, people who are immigrants. And very often, if you’re an immigrant, you can’t necessarily get federal funding to go to a four year college. For people for whom just the four year degree is too expensive. Suddenly that degree can become a stumbling block or a hindrance.
And so it’s good to see that this is budding on the public sector. The private sector has been leading the way and hopefully working together, both will continue to look at all of the positions that they have and say, you know what? Let’s take a real assessment. Do we need these degree requirements? And now honestly, it’s going to take some work if you remove the degree requirement, but it’s worth it because you’re going to invest in the right kind of applicants and get the right kind of people in your positions.
And final question for you. How much does a policy or an executive order like President Biden implemented, which is we’re going to pay off your college loan debt, add to degree inflation? How does that play a role?
Well, I think it devalues the degree even more. And so suddenly, if you have a student loan forgiveness for millions of people, well, okay, number one, that’s a taxpayer burden because somebody is paying it, and that’s the taxpayer. But number two, it sets up the unrealistic expectation that in the future, anytime enough student loan debt has been amassed by the next generation of college students, that certainly a president can just sign with his pen and wipe away all of that debt, that does nothing to address the root causes of the cost of college degree inflation.
I mean, the reason why college is so expensive is because these colleges can raise their tuition knowing that the government will always send that check to the student and that and or the check directly to the school to pay for that student. So when you have a lot of people going to college, whether or not they need to or know the purpose of their college degree, they’re getting it financed by the government. That drives up the cost of college.
And then when the government is wiping away the debt that has been incurred, that is certainly devaluing the degree, but also saying, you know what? In the future, just keep sending kids to college. We’ll just keep giving out the degrees, and the government is going to keep paying for it in the front end and the back end. That does nothing to help the workers, the workforce. It does nothing to help workers, and frankly, it does nothing to help taxpayers.
Yeah, I think this policy focus is so important because I think the American mindset, as we discussed for so long, has been you must get a degree in order to get a good paying job. I think we need to think about that a little differently. Think about, well, what are the career options for someone? Where can they have a good living? And does that require a degree or certification? Certification, some way, some job training? Or is it something that they can just do on their own? I think it’s a lot to consider and to change the way we are thinking.
So again, the policy focus is called “Fighting Degree Inflation.” Patrice Onwuka, always a pleasure to have you on.
Thank you, Beverly. Always great to be with you guys.
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