College Education Is the Key to Economic Growth

This year's presidential campaign has created a lot of discussion about higher education. There seems to be bipartisan consensus around the idea that high school no longer provides the skills that young people need to keep America competitive and to find jobs in the 21st century economy. The real issue for voters is whether the policies of the candidates will boost college attendance.

Perhaps the low point in this discussion occurred when candidate Rick Santorum reacted to President Obama's call for all young people to get some kind of postsecondary education or training. The former senator from Pennsylvania misrepresented this as advocacy of college for everyone, and he accused the President of snobbery.

But, in fact, the importance of college keeps growing. To be sure, noncollege forms of postsecondary education and training--most notably apprenticeship--can teach very marketable skills. College, however, has consistently been the engine of employment growth in America's economy for two decades. Consider the following graph created by the Center on Education and the Workforce at Georgetown University. (It's part of their vital report, The College Advantage: Weathering the Economic Storm.)

Another way to look at the advantage of college (at the personal level, rather than at the national) is to compare the earnings of college grads with high school grads. Over the past several decades, the advantage has grown.
Source: U.S. Bureau of the Census, Current Population Surveys, March Supplement, 1968–2011.

But what about the rising cost of a college education? Isn't that eroding the value of college?

It's true that college is now 12 times more expensive than it was in 1978, whereas overall consumer products are only 3.6 times more expensive. However, increases in the availability of financial aid for college have offset much of this increase in sticker prices, especially at public colleges. The College Board calculates that public four-year colleges raised their tuition and fees between the 2006-07 and 2011-12 school years by about $1,800 in 2011 dollars. This is an annual rate of growth of 5.1% beyond inflation. However, if you account for what "in-state students pay after taking grant aid from all sources and federal education tax credits and deductions into consideration," the increase was only about $170, which is an annual growth rate beyond inflation of only 1.4%.

One of the sources of grant aid that is frequently referred to during the presidential campaign is Pell grants. It's important to understand that these grants have not been keeping up with the increases in college costs. During the 1979-1980 school year, the maximum Pell grant paid 77% of the average cost of a four-year public college. By the 2010-2011 year, that share had shrunk to 36%.

So pay attention to what the candidates are saying--and, more important, what their policy proposals indicate--about the future of Pell grants and other sources of college tuition aid. This country's economic growth depends on college attendance, and that in turn depends on financial aid. Governor Romney has remarked that his test of a government program is whether the benefits are worth borrowing for. If our government does not borrow to provide tuition aid, college students individually will have to take out larger loans than they already do (and those loans already exceed the amount of credit card debt). The government can get a much better interest rate than individual students can. To keep America competitive, this is an expenditure worth continuing--and increasing.

The Fastest-Growing Transferable Skills

In the computer industry, project management skills are highly sought-after. In the energy industry, employers are expected to open many jobs for engineers skilled at hydrofracting. But these are highly job-specific skills. What about transferable skills, the kind that are useful in almost any industry and occupation? Which of these skills have the best job outlook? 

To answer this question, I looked at the 35 transferable skills in the O*NET database and calculated their correlations with the percentage of growth that the Department of Labor projects. I was able to make these calculations for the 735 occupations that are included in both the O*NET and the growth-projections database of the Department of Labor.

Below, I identify the top 10 transferable skills and explain why demand for them is growing so fast. Note that I do not order the skills strictly by ranking, but rather I cluster related skills together.

I’m not at all surprised to find the following three skills so high in the rankings. These are all very important for jobs in our largest and fastest-growing industry: health care. In addition, many jobs in all industries are placing increased emphasis on working in teams. In these work settings, active listening and social perceptiveness can be very important skills.

Service Orientation Definition: Actively looking for ways to help people. Rank: 1 Correlation: 0.5

Active Listening Definition:  Listening to what other people are saying and asking questions as appropriate. Rank: 2 Correlation:  0.4

Social Perceptiveness Definition:  Being aware of others’ reactions and understanding why they react the way they do. Rank: 5 Correlation:  0.4

The following two skills rank so high because the modern workplace is constantly changing and evolving. Workers need to master the stream of new technologies, new markets, and new business practices that affect their jobs. The second of these, learning strategies, also owes some of its high ranking to the projected high growth of teaching occupations, especially for adult education.

Active Learning Definition:  Working with new material or information to grasp its implications. Rank: 3 Correlation:  0.4

Learning Strategies Definition:  Using multiple approaches when learning or teaching new things. Rank: 8 Correlation:  0.4

The following communication skills are perennial necessities. Health-care careers, again, probably help explain the fact that speaking ranks highest of these.

Speaking Definition:  Talking to others to effectively convey information. Rank: 4 Correlation:  0.4

Writing Definition:  Communicating effectively with others in writing as indicated by the needs of the audience. Rank: 6 Correlation:  0.4

Reading Comprehension Definition:  Understanding written sentences and paragraphs in work-related documents. Rank: 9 Correlation:  0.4

One way to understand the importance of the following skill is to consider what is happening to occupations that don’t require it at a high level: They are being either taken over by automation or shipped overseas to low-skill foreign workers. The occupations with growth potential require workers to evaluate options critically to make nonroutine decisions.

Critical Thinking Definition:  Using logic and analysis to identify the strengths and weaknesses of different approaches. Rank: 7 Correlation:  0.4

No doubt you’ve heard about the projected growth of STEM careers. The following skill will be important in numerous health-care, technology, and technician jobs.

Science Definition:  Using scientific methods to solve problems. Rank: 10 Correlation:  0.4

It may no longer be possible (if it ever was) to build a career on mastery of just one of these skills. For example, someone with spectacular science skills who wants to succeed in the job marketplace will also need to be good at communicating, learning, helping other people, or some other skill. For this reason, most bachelor’s degree programs include requirements that are designed to teach a good cross-section of important transferable skills. That’s also why employers value the degree so much.