Working Paper: NBER ID: w0697
Authors: Richard B. Freeman
Abstract: This paper examines evidence regarding the impact of the changed labor market on the higher educational system. Four basic propositions can be drawn from the paper's findings. Firstly, the labor market for the highly educated underwent a downturn in the 1970s, reducing the relative earnings of new college graduates and forcing them into jobs not normally considered as requiring college training. Secondly, this downturn resulted in a leveling off, and, in the case of white males, a sharp decline, in college enrollment. Statistical and survey questionnaire data show that this is due to the economic responsiveness of potential students to market incentives. The effects of this labor market change were most severe in the liberal arts, teaching, and academic and research-oriented occupations. In other business-oriented fields such as management and accounting, and in engineering, economic opportunities remained substantial or in some cases improved. Consistent with these changes were changes in enrollments and degrees. Depressed job markets experienced rapid declines in enrollment, while fields such as engineering experienced an increase in enrollment. Concurrently, professional schools benefited while liberal arts schools suffered from labor market induced patterns of change in enrollment.
Keywords: Labor Market; Higher Education; College Enrollment; Economic Incentives
JEL Codes: I23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor market downturn for highly educated individuals (F66) | Significant decline in college enrollment rates (I21) |
| Reduced job opportunities (J68) | Decreased enrollment (I21) |
| Labor market conditions (J29) | Educational decisions (I21) |
| Labor market downturn in the 1970s (J29) | Reduced relative earnings of new college graduates (D29) |
| Labor market downturn (J63) | Forced graduates into jobs that did not require a college degree (J79) |
| Labor market downturn (J63) | Differential effects on various fields of study (A12) |
| Enrollment declines in liberal arts programs (I23) | Increases in engineering and professional fields (O49) |
| Labor market changes (J29) | Leveling off and decline in college enrollment among certain demographics (I21) |
| Market conditions (D49) | Prioritizing economic incentives in educational decisions (I21) |
| Labor market changes of the 1970s (J29) | Shifts in enrollment patterns (I21) |