Paul Krugman's article in Sunday's New York Times is generating a lot of talk. Krugman points out that a lot of jobs considered "white collar" are subject to automation and are currently being outsourced. From this point he extrapolates that "education is not the answer", but instead the answer is to give more bargaining power to unions.
Over at Restoring Dignity To The Law, J-Dog emphasizes that although increasing education may have led to a better life 40 years ago, the same may not hold true now. He also mentions that education has shrinking economic returns. Over at Law School Tuition Bubble, Matt also references the article.
Is Krugman right? Should we just encourage our kids to be janitor with strong unions instead of going to college? More below.
First of all, I will suggest that the division of "blue collar" vs. "white collar" jobs is is archaic and mostly meaningless in today's economy. There are "blue collar" jobs that consist of a person sitting in an office in front of a screen punching in a code. There are "white collar" jobs that require a person to go out and take soil samples in the mud.
A more useful metric - and the stand in for what I think Krugman was really referring to - is to classify jobs as to their ease of automation (and considering that the ease of automation is always increasing). That is, I will postulate that all jobs - absolutely all - can be automated to a greater or lesser degree and at a greater or lesser cost, given time and development. Instead what we should look at is the cost and difficulty differential of automating the job. For example, take the UPS guy. Instead of a UPS guy, we could automate the system using self-guided trucks leaving from the warehouse with packages with RF-ids that are automatically delivered to a building's automated reception. From there, robots could read the RF-ids and they could be routed to the recipient's location. We can pretty much do this now, but the cost would be enormous. It is much more efficient and cost effective to just have a human deliver packages using the UPS truck.
Conversely, a checkout person at a grocery store is much nearer the "automation-point" than the UPS guy. There are already self-checkouts in many grocery stores and store adoption and user comfort are increasing.
Additionally, for many jobs in the publishing industry, we passed the automation point long ago. For example, we don't need a lot of English majors to spell check and grammar check new books - computers have been able to quickly do the work for us for years.
Note that viewing jobs with regard to their ease of automation is really neither pro- or con- education. For example, the widely-held assumption is that further education leads to jobs that are tougher to automate, but that's not true in practice. Consequently, why not look directly for "jobs that are hard to automate" instead of "increasing education" if we want to help young people prepare for their future?
However, even beyond the ease of automation, what Krugman's article is really getting at is a mismatch in supply and demand for people with certain skills - and the accompanying costs, both personal and societal. I think that this is a real tragedy for our society - and even more frustratingly, a mostly preventable one. (No, I am not saying that we need to adopt a distopian future like Aldous Huxley's Brave New World wherein everyone's career is chosen at birth and people are physically conditioned to their careers.)
Instead, we need to get real and we need to get transparent with our hiring information. Then we need to position our societal investments to achieve the most gain - without exercising outright control. For example, when a high school student is considering college, we need to stop saying "do what you love and the money will follow" - it is a hollow, pathetic farce. Instead, high school students should be presented with salary information and hiring rate information with regard to all prospective majors - and not the crappy, biased-to-hell NALP-style information, but true, useful information with strong enforcement and auditing behind it.
Next, students should be given some insight into what their life will be like at certain incomes. That is, it is really hard for a high school student to grasp what a $30K/year lifestyle is like as opposed to a $60K/year lifestyle - both seem like a huge amount of money to them. As a hypothetical example, they could be shown that if they major in English, their odds of getting hired in that field are low and they are likely to make less than $30K/year. This will most likely prevent them from owning a home, they probably won't be able to take vacations or buy a new car, they will be scrimping and saving your entire career - here is what that feels like. Conversely, if you major in accounting, you are likely to make more than $60K/year, here is what your life will fell like at that earning level.
As part of this information, there should also be an estimate of the future for that career - are the number of people employed growing or shrinking? Is the field likely to decline soon due to automation, etc. Our goal in providing this information is to allow students to self-select careers that minimize the painful supply/demand imbalance. For example, it does not do society any good to have 10,000 JDs who can't find a job. If you consider that each of them took out about $200K in loans, then that's $2 BILLION of our money that has been wasted in a bad investment with no return. Also, those 10,000 people are mostly pretty smart and could have been making great contributions to other areas of our society - and we have lost that, too. That's bad for us - but terrible for them.
Second, we need to position our societal investments to help minimise the supply/demand imbalance. For example, I think that it is absolutely insane that we don't take major into account when we are dishing out student loans. For example, if the career data analysis above indicates that we need 100,000 accountants, but only 1,000 English majors, then we should structure our student loan program accordingly. That is, for the 1,000 "English-major" loans, those would go to the 1,000 people with the top scores that want to major in English. Other than that, if you want to major in English, then go right ahead, but you are doing it on your own dime. Conversely, if you want to major in accounting, then we will have loan money available for you. It should be clear to all participants that student loans are society's investment in education for positions that are going to be needed in the future - not just giving people a huge rope to hang themselves with or just giving them a license to indulge a useless hobby or hide out from the real world.
At first glance, to a freedom-loving person like me, such a system seems kind of autocratic and therefore undesirable. However, the more you look at it, it's just society providing an incentive to get something of benefit for itself - and providing an ancillary benefit to the student. There is no actual loss of freedom because people can still do whatever they like on their own dime. Further, the results of the program should be better than the current regime because the skills of the students graduating from college should more closely match the needed skills - therefore unemployment should be lower.
For example, consider law students. Let's say the societal projection is that we will need 10,000 lawyers in three years, so 10,000 "Law" student loans are available. Bob graduates undergrad and then applies to law school and is accepted, but his criteria are not high enough to get one of the 10,000 Law loans. The most likely situation then is that Bob declines to go to law school. Fast forward three years - under today's program, Bob would have gotten the loans and now he would have been in a world of hurt because he can not find a job because the 30,000 people who went to law school are competing for the 10,000 available jobs. Conversely, under the proposed system, Bob would not have the debt and would probably be working in another field. Additionally, the opportunities for the 10,000 Law graduates would probably be much better due to the decreased competition.
Is this a loss of freedom for Bob or is this really more of a program that optimizes the returns for our society as a whole? I submit that sometimes it is economically good for Bob not to get what he wants - both good for Bob's personal economics and good for the economics of our country as a whole.
What do you think?
UPDATE: Matt over at Law School Tuition Bubble just posted some data that indicates that the expected demand for lawyers from now until 2018 is only around 100,000 - but law schools will produce around 500,000 law graduates over that time. Wow. Assuming $200K in loans for each of the 400K non-hirable law students, that's $80B in wasted taxpayer money - not to mention 400,000 lives ruined by being saddled with non-dischargable debt that can not be paid off. Again - $80 BILLION dollars.
This is crazy! We absolutely need some sanity in the student loan market. In the home loan market, we have protections in place so that people buying a home can't get a mortgage greater than a certain percentage of their income - it's a "loss of freedom", I guess, but people are accepting of it and it lowers defaults. We also require a certain downpayment. Further, the lender simply will not make the loan unless the property's value justifies it- regardless of the price that the buyer is willing to pay. Also, we call these "protections", not "barriers to home ownership" because they are designed to protect both the purchaser and the market.
These principles seem directly relevant to the student loan market. There needs to be someone who looks at the value of the degree (earnings and open positions) and will not make the student loan unless it make sense - even if the buyer/student really wants the loan. Further, these should be thought of as "protections", not "barriers" - and should be put in place to protect the student and our society's employment as a whole.