By Josh Mitchell
In past recessions, the U.S. higher education system has served
as a buffer of sorts by absorbing unemployed workers. The
peculiarities of the coronavirus-induced recession present
obstacles to colleges playing a similar role this time around, some
economists say.
For one, it is unclear how many colleges and universities will
reopen or to what extent, or how many people will decide to enroll.
Many laid-off workers might lack access to high-speed internet to
take online courses. It is also unclear how long unemployment will
remain elevated, and whether students will acquire the skills they
need in the post-Covid job market.
Workers who lose jobs in a recession often suffer consequences
that reverberate for years, through lost wages and delays in career
advancement, research shows. Enrolling in college and graduate
school can help mitigate or overcome that damage, as newly acquired
skills give workers greater earning potential. And a better
educated labor force benefits the economy, boosting productivity
and growth potential.
"When there are few jobs and the economy's not doing well,
that's the best time to go back and get a college degree," said
Adam Looney, a nonresident senior fellow at the Brookings
Institution who served in the Obama administration's Treasury
Department.
A 2005 paper in the Journal of Econometrics found that spending
one year in community college increased the long-term earnings of
displaced workers by an average of about 9% for men and 13% for
women. The paper analyzed workers who had spent significant time
with their employer or industry, were permanently laid off in the
early 1990s and later found work.
During the 2007-2009 recession and subsequent recovery, the
Obama administration made higher education a central theme of its
strategy to heal the economy. Officials believed the strategy would
lift growth in the long term also providing a short-term boost as
students spent money on tuition and living expenses.
In a February 2009 address to Congress, President Obama asked
every American to spend at least one year in college or career
training. The 2009 stimulus package increased the maximum Pell
grant, which helps financially strapped students pay for tuition,
and provided a tax credit for tuition. States were encouraged to
tell jobless workers they could get federal aid to go to
college.
Those efforts may have helped raise enrollment at colleges and
universities, which jumped by 2.8 million, or 15%, to 21 million,
between 2007 and 2010, according to Education Department
figures.
The ability of workers to learn new skills could be crucial if
unemployment remains elevated for a long time. While the jobless
rate fell to 11.1% in June from 14.7% in April as parts of the
economy started to reopen, 17.8 million workers remained
unemployed, Labor Department data show. Another 8.2 million were
out of the labor force entirely even though they wanted to
work.
One big question about the current recession is just how many of
the job losses will be permanent, forcing workers to acquire new
skills so they can find work in another company or industry and
avoid pay cuts. In June, the number of workers reporting being
permanently laid off rose sharply to 2.9 million.
Workers without a college degree have been hit the hardest and
stand to benefit the most from gaining new skills. Jobs held by
workers with only a high school diploma and no college experience
were down by 5.5 million in June from February, Labor Department
figures show. Jobs held by workers with a four-year degree fell by
1.1 million. The unemployment rate for the first group was 12.1%
last month, compared with 6.9% for college graduates.
Some colleges have said most or all courses will be taught
online this fall to prevent the spread of the virus. Some have said
they will move entirely online. The American Council on Education
said this spring that enrollment could fall 15% as a result.
Moody's Investors Service said it expects enrollment to rise, but
that families will choose lower-cost options.
"At this time the quality of that degree is really uncertain,"
Mr. Looney said. "I don't think people want to go and take online
classes. They're not getting the college experience."
Andrew Barr, an associate professor of economics at Texas
A&M University, said the career benefits of college courses
vary widely among majors. It isn't clear how effectively
instructors will be able to teach certain courses online versus in
person, he said. With online courses, workers will have more
trouble determining which programs are most beneficial, he said,
potentially making it harder to learn new skills in a different
trade. "You have this greater uncertainty as all these programs are
moving online," Mr. Barr said.
Still, for-profit colleges, which pioneered the use of online
courses in the early 2000s, may be a popular option. Earnings
reports suggest their enrollment rose in the first three months of
the year, said Jeffrey Silber, a managing director at BMO Capital
Markets.
That points to a potential risk for workers and the economy.
Higher education may not be beneficial if workers take on debt they
can ill afford to repay to obtain degrees that don't lead to
well-paying jobs.
A 2015 paper released by the Brookings Institution showed that
the boom in enrollment during the last recession and the early part
of the recovery was driven disproportionately by students at
open-admissions schools such as community colleges and for-profit
trade schools. Such students were far more likely to drop out and
default on student loans than those who attended nonprofit and
public four-year colleges, according to the study.
Other research shows student debt during the last recession rose
particularly quickly among Black families, many of whom later
defaulted on loans. Student-loan defaults often harm borrowers by
damaging their credit. The Federal Reserve Bank of New York posted
research last week.
Write to Josh Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
July 12, 2020 10:14 ET (14:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.