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Implications of the Changing U.S. Labor Market for Higher Education

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  • 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.

Suggested Citation

  • Richard B. Freeman, 1981. "Implications of the Changing U.S. Labor Market for Higher Education," NBER Working Papers 0697, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0697
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    1. Eli Schwartz & Robert Thornton, 1980. "Overinvestment in College Training?," Journal of Human Resources, University of Wisconsin Press, vol. 15(1), pages 121-123.
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    3. David R. Witmer, 1980. "Has the Golden Age of American Higher Education Come to an Abrupt End?," Journal of Human Resources, University of Wisconsin Press, vol. 15(1), pages 113-120.
    4. James P. Smith & Finis Welch, 1978. "The Overeducated American? A Review Article," UCLA Economics Working Papers 147, UCLA Department of Economics.
    5. Zvi Griliches, 1970. "Notes on the Role of Education in Production Functions and Growth Accounting," NBER Chapters, in: Education, Income, and Human Capital, pages 71-127, National Bureau of Economic Research, Inc.
    6. Psacharopoulos, George & Hinchliffe, Keith, 1972. "Further Evidence on the Elasticity of Substitution among Different Types of Educated Labor," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 786-792, July-Aug..
    7. Russell W. Rumberger, 1980. "The Economic Decline of College Graduates: Fact or Fallacy?," Journal of Human Resources, University of Wisconsin Press, vol. 15(1), pages 99-112.
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