Everyone knows the U.S. and the rest of the Western world are riven by deep divides between the “haves” and “have nots.” But what can we do about it? Not surprisingly, as a business school dean I believe the answer is “education.” Let me see if I can convince you that my faith in the transformative power of education is more than the fact that it is my day job.
Consider two facts about the world of work:
1. The economic returns on more education are very high.
In 2013, 122 million American residents over the age of 25 (that is, 58 percent of the total of 212 million) had never received any formal education beyond high school. According to the McKinsey Global Institute, the median income for these people was $25,636. In contrast, the median income for the 69 million (33 percent) graduates of a four-year college was $45,529—a 78 percent premium per year post graduation, or a $795,720 premium over a 40-year career.
Last year, the average yearly tuition at an American public university for in-state students was $9,650, according to the College Board. That makes the ROI on getting a college degree 20 times its cost. This is a story that is frequently told, not only by college and university administrators like me, but also by HR experts like my Wharton colleague Peter Cappelli who analyze the returns on skills and education for a living (see Peter’s recent book: Will College Pay Off?).
But we certainly need to do more. Forty thousand dollars for a college degree is just not feasible for many American families these days. That’s why Bernie Sanders’ “free college” campaign was so attractive and why Pell Grants are so important. Tuition at private universities tends to be about five times higher than at public universities. That’s why leaders like University of Pennsylvania President Amy Gutmann have made needs-blind admission with all grant financial aid packages a core part of their institutions’ missions.
I also think we need to ensure that the kind of education students get in college gives them the greatest chance to realize their dreams. I firmly believe students will do best in school and in life if they follow their passions. American liberal arts education has become the envy of the world for the creativity and critical thinking it engenders.
But at the same time, everyone today must be able to harness the power of technology—that means engineering. And everyone needs to know how to turn ideas into outcome—that means business schools. I believe this will be the winning model for higher education in the 21st century. Not pre-professional degrees versus liberal arts degrees. The way forward is to combine a creative liberal arts core with the tech and business-savvy skills required for success in all walks of life.
I do not believe, however, that degrees are everything. And this brings me to my second fact about the labor market today.
2. The problem is not the absence of good jobs, but the absence of people with the skills to fill them.
The graph from the Wall Street Journal below is striking regarding the scale of the labor market mismatch in America today. Forty-four percent of American firms report there are few or no applicants qualified for the jobs they wish to fill. Twenty-nine percent of firms report they have jobs right now that they cannot fill.
As you would expect, this is partly a function of today’s low level of U.S. unemployment—4.8 percent last month. The lower the level of unemployment, the more people have found jobs, and the harder it is for employers to find employees.
But we also know the unemployment statistics are deceiving.
Many Americans of working age are out of work but not looking for jobs—they are too dispirited even to file for unemployment benefits (and hence are not included among the officially “unemployed.”) In the past decade, the American labor force participation has decreased from over 66 percent to under 63 percent. Put differently, nearly 5 million working-age Americans have stopped looking for jobs since the financial crisis.
Moreover, many more Americans are doing part-time jobs who might well prefer full-time work. According to Harvard’s Lawrence Katz and Princeton’s Alan Krueger, 15 percent of jobs are now engaged in what they call “alternative work arrangements,” like temp agencies, contract work, and short-term part-time jobs in what is sometimes called the “gig economy.”
Here is the potential win-win:
Lots of people who would like good jobs + lots of firms looking for qualified applicants for the jobs they have = providing the education needed to match workers to jobs.
This is where short courses focused on specific skills can be invaluable. These skills will often entail some kind of computer literacy, from the kind of spreadsheet work that Lynda.com (acquired by LinkedIn) gives online training in, to more sophisticated coding skills that can be gained face-to-face or online from firms like General Assembly (founded by Wharton alum Jake Schwartz.) Broader business skills are also in high demand on MOOC platforms like Coursera where there are numerous courses, including Wharton’s, and coding/data science courses from Stanford.
Now is the time to double-down on education, of all forms. It is not degrees versus short courses. What we will all need is the foundation provided by a college education, augmented by lifelong learning opportunities to update our skills. Wharton is all-in on both degrees and lifelong learning. Which is why I think it is a very good time to be in a great business school.
Editor’s Note: This post was originally published on Dean Geoffrey Garrett’s LinkedIn page, where he was named an “influencer” for his insights in the business world. Geoffrey Garrett is Dean, Reliance Professor of Management and Private Enterprise, and Professor of Management at the Wharton School of the University of Pennsylvania. Follow Geoff on Twitter. View the original post here.