Not all jobs need four-year degrees, and not every citizen needs to work one that does.
Many Americans started thinking more seriously about job security after unemployment rates peaked in the midst of the coronavirus lockdowns. Naturally, they turned to education; for decades, the bachelor’s degree has been perceived as the hallmark to a stable career path with secure employment. But desperate times had Americans looking for quicker and cheaper options.
Enter short-term credentials, certificates, and other sub-baccalaureate programs. While such programs have existed for years, they are now of greater interest as various tech companies create their own short-term credentials for in-demand jobs. Universities are getting in on the action too: The University of Utah wants to offer short-term programs by partnering with businesses. As these credentials continue to garner interest, Congress is even considering extending federal funds to programs of length less than 15 weeks.
The increased interest in short-term credentials has reinvigorated a broader conversation about higher education’s role in the labor market. New America, a think tank, is skeptical of federal funds going to these programs over poor employment outcomes, especially among minorities and women. Their analysis implies that a traditional college education still produces the best outcome for students, and the disparities warrant “new efforts to ensure that all students have equal access to the promise of higher education.”
On the other hand, I recently published a report, Priced Out: What College Costs America, in which I argue that we should decrease demand for four-year degrees in order to fix our broken student loan system and runaway tuition growth. Growth in short-term credentialism presents a unique opportunity to solve these long-term problems through competition in the postsecondary education market.
How Short-Term Credentials Could Solve Student Debt
In order to analyze the effect short-term credentials could have on student debt and tuition growth, we need to understand some of the historical factors which led to the extraordinary levels of student debt and tuition we have today. Decades of misguided visions for higher education and unintended consequences of bad policy have led us to a country with 45 million citizens holding a collective $1.7 trillion in federal student loan debt.
The story begins with two World War II-era events: the G.I. Bill and the Truman Commission report. The G.I. Bill, passed in 1944, subsidized higher education for millions of World War II veterans. In doing so, it greatly expanded the American higher education industry and the prevalence of college degrees in society. However, it also provided the precedent for government subsidization of higher education—a phenomenon that has continued to grow unabated for decades since.
Around the same time, the Truman Commission report established the philosophical underpinnings of the “higher education for all” narrative. While it was unaccompanied with serious policy change at the time, it laid the groundwork for the consequential 1965 Higher Education Act. This act established the current federal student aid system, making college accessible to more people than ever before.
As student loans became a more important part of the student aid system later on, the extensive financing available for higher education artificially increased its demand. This led to rapid tuition growth, resulting in the almost tripling of tuition in real dollars from 1980 to today. Of course, as tuition grew, the student loan system had to grow in a concomitant fashion. So we ended up with the debt crisis we have today.
However, this isn’t the full story. Even if college were more financially accessible, there still needs to be a reason why so many students would also pay the four years of lost wages to attend. An obvious answer to this is the rising college earnings premium—the difference in wages between college and high school graduates rose over time.
Less obvious is employment regulations causing employers to require a college education for jobs which wouldn’t have required one before. In 1971, the Supreme Court ruled in Griggs v. Duke Power Company that employers could not administer aptitude tests if it resulted in differential outcomes based on a protected class. To avoid litigation, employers turned to college degrees as imperfect proxies for intelligence and skills. The results of this change, combined with excessive college attendance in general, are felt by the economy as underemployment. A staggering 40 percent of recent college graduates are doing jobs high school graduates could do. This represents a massive misallocation of education resources.
There are three main ways to solve these problems: cut student aid, loosen the regulations on employers, and provide better opportunities outside the traditional higher education system. While we still support addressing the problem in the first two ways, short-term credentials are a convenient pathway to achieve the third solution. If these credential programs offer competitive outcomes for their students, they may be able to break the debt cycle that has plagued the American economy for decades.
What the Skeptics Have to Say
New America and other groups object to the funding of short-term credentials on two main grounds: equity concerns and disappointing outcomes. The equity concerns mainly consist of observing disparate outcomes between genders and ethnic groups. This is a very weak argument—one reminiscent of the disgraced gender pay gap myth. Observing disparate outcomes is not a sign of inequity or discrimination, because groups differ in preferences and abilities. They should not be expected to perform exactly the same on any given metric. None of this heterogeneity is accounted for by the type of analysis that New America performs.
The disappointing outcomes concern is more substantial. Short-term credentials don’t have a fantastic track record of producing comparable earnings outcomes to traditional four-year degrees. Though many of the programs being introduced by tech companies like Google may differ from previous poor-performing programs, we cannot deny that these programs have not produced confidence-inspiring results in the past.
Nevertheless, the analysis should not stop here. While short-term credentials might not perform exceptionally well in terms of student outcomes currently, this does not mean that the idea itself is hopelessly flawed. First, improving the programs and their reputation among employers could have a large positive effect on their return on investment for students. This idea is already being addressed by large technology firms creating their own short-term credentials, so that receivers of their certificates have the name of a well-known company to back them up.
Second, the failure of these programs to materially improve outcomes could itself be a function of bad policy. Some well-targeted policy changes in the labor market could establish a friendly, level playing field within which short-term credentials could operate.
Policies Which Hurt Earnings Outcomes for Short-Term Credentialed Students
Currently, graduates who earn short-term credentials demonstrate poor salary outcomes. Over half of adults with a short-term certificate earn under $30,000, with the median salary range between $20,000 and $30,000. This falls below the poverty line for a four-person household, and is below the median salary for full-time workers of around $50,000 and even for all workers (part-time included) at $36,000.
Popular fields for short-term certificate holders include healthcare, information technology, and construction. Coincidentally, these happen to be some of the most common industries which experience immigration and offshoring in the United States. Over 25 percent of I.T. workers are foreign-born, along with nearly 25 percent of construction workers, and 22 percent of healthcare support workers (compare these to the national average of 17 percent). Commonly offshored jobs include manufacturing, data entry, and telemarketing.
Immigration and offshoring tend to reduce wages for native workers, especially for low-skilled workers who might need only a certificate to attain employment. Recent immigrants are especially willing to work for less pay — for many, the opportunities that come with living in the U.S. are far greater than where they are likely coming from. With an increased labor supply, and employees who are willing to work for less, employers looking to cut costs turn to cheap labor through immigration. This has become much more popular over the past several decades — the percentage of foreign-born workers in the U.S. civilian workforce increased from 5 percent in 1970 to 17 percent in 2019.
Offshoring, on the other hand, moves tasks and labor demand to other countries, reducing opportunities for native workers. Again, this is a business move to lower costs, and defenders typically use this as a justification. However, the reduction of labor demand at home has the undeniable side effect of lowering wages for native workers. Offshoring has become much more common in recent decades as well.
Between 1993 and 2013, over 850,000 jobs were lost, many of which were due to offshoring to Mexico in the wake of the North American Free Trade Agreement. Manufacturing employment dropped by 30 percent between 1993 and 2016, heavily affecting non-college educated workers in states like Ohio, New York, and Michigan. Even during the pandemic, companies like Bed Bath & Beyond, and Brooks Brothers, laid off American employees and relied on work abroad.
College degrees and other long-term credentials offer workers insurance against cost-reduction techniques like immigration and offshoring that short-term credentials don’t. This is because the time it takes to obtain a degree and the prohibitive cost act as barriers to entry. Note that the percentage of foreign-born workers in the U.S. without a high school degree is 22 percent, compared to 5 percent for native workers.
When think tanks like New America simply conclude that short-term credentials don’t work due to disappointing outcomes, they ignore potential causes of these poor outcomes from other policy decisions like immigration. With a more restrictive immigration policy, it stands to reason that short-term credentials could provide more stable opportunities for Americans which wouldn’t require four years and thousands of dollars of debt to obtain.
It’s clear from the student debt crisis and the high levels of underemployment for college graduates that we need to do a better job at allocating our labor and intellectual resources. For employment requiring a high level of skills, like academics and researchers, a four-year degree is a good start. But not all jobs fall into this category, and not every citizen needs to work one of these jobs. For routine level work, apprenticeships or short-term credentials are great options. For mid-level skills, which require a combination of higher education and field experience, we suggest that colleges offer a two- to three-year vocational track.
Yet some policymakers and researchers continue to advocate for the same old tired recommendation: We just need more people attending college. In doing so, they not only neglect potential causes of poor outcomes like immigration and offshoring, but they also perpetuate the vicious debt and rising tuition cycle that has plagued our higher education system for years. And as each generation of young, idealistic students exits the higher education system to finally achieve their American Dream, they instead find that they’re living in an American Nightmare. With little left to lose, they spend their lives advocating and promoting increasingly radical proposals that they believe will alleviate their immediate circumstances.
We must rethink the entire system, focus on reducing the excessive demand for higher education in order to lower tuition, and fix policies which may make alternative options less viable. Rosy ideals of universal accessibility and “education for all” must be replaced with practical realities about efficient allocation of education resources. Otherwise, future generations will be further alienated from the American ideal, to the point where they’d rather live in a brave new world than in a gloomy city upon a hill.