More Education Alone Won’t Fix Flat or Declining Wages, But Appropriate Compensation and Stable Job Markets Can Make College Worth It

Dean Prigelmeier, President of Proactive Technologies, Inc.

Having several degrees myself, I can say that I am a strong believer in higher education. I sometimes take issue with the quality and relevancy of courses or degree programs, but I would always encourage an individual to consider the value of acquired knowledge to their life plans and the additional doors it may open.

I say this even though many of us who have achieved a higher degree silently questioned how much of their degree really mattered, or how much was forgotten for lack of application when an opportunity to apply it came along too late.

All said, two major trends influence my need to add a caveat to my encouragement to pursue higher education. First, be aware of the endless increases to the cost of higher education and, second, be cognizant of the instability of target job classifications and careers that not only renders a two or four-year degree irrelevant but, today, may leave the graduate empty handed and swamped with student loan debt. Even if the graduate is able to find a job it their expected field, the shock of unexpectedly low and flat wages may harness them to an unfulfilling job for life and sliding backward with all-consuming debt.

According to the Huffington Post, the cost of a college degree in the United States has increased “12 fold” over the past 30 years, far outpacing the price inflation of consumer goods, medical expenses and food. Referencing a Bloomberg study, college tuition and fees have increased 1,120 percent since records began in 1978. Using a chart to explain its findings, Bloomberg reports that the rate of increase in college costs has been “four times faster than the increase in the consumer price index.” It also notes that “medical expenses have climbed 601 percent, while the price of food has increased 244 percent over the same period.” Additionally, according to the National Center for Education Statistics, since 2013 the tuition costs continued on its upward path.

While education costs have skyrocketed and with student loan debt reaching $1.5 trillion, wages for graduates have continued to stay flat or decline. While it is still true that advanced degrees have a tendency of leading to higher starting wages and higher wage caps for the field, the number of fields this still holds true for are dwindling as these jobs are redefined, relocated or staffed with foreign workers invited to work for less. This makes working out of student loan debt slow, laborious in itself and often impossible.

In an analysis of wage trends in a report called “Wage Stagnation in Nine Charts,” the Economic Policy Institute examines the wealth gap from many angles.

All of this data defies the dire economic reports of the “shortage of skilled labor” and the perilous “growing skills gap.” We are always reminded, when convenient, that the reasons for rising prices of, well, everything can be explained by the notion of “supply and demand.” The more demand for a product or service than is available, the prices rise to correspond to the level of demand. Likewise, the more supply there is for a product or service the lower the supply because of the effect of competition. So if we have a shortage of skilled labor and the skill gap is growing, why aren’t wages rising accordingly? Could it be employers have become so concentrated with all of the mergers and acquisitions, and Wall Street so influential in matters of workers wages and benefits, that deliberate, constrained lower wages that are still heading flat or downward are the real problem here?

Perhaps employers are having a hard time finding skilled labor that will work for wages levels and benefits that do not match the expectation or are needed to support a household AND a monstrous student loan. Highly skilled workers have choices. They may take a poorly compensated job in their field for now, while they look for something better in their field. Or they may reject the job entirely and give up on the desired career path that they struggled through 2 or 4 years of college to achieve, and which has left them with crushing debt. Outcomes, such as this, eat at the fabric and legitimacy of a capitalist system, and diminish consumption power vital to sustaining a capitalist economy.

While apprenticeships may be a start to building a bridge between the skills employer want and need and the wages and compensation a worker expects and needs, without a structured on-the-job training (i.e. task-based best practices for the critical tasks of the job classification, which will facilitate the accurate and expedited driving of a worker to “full job mastery”), the credibility of the program can come into question. Same too if an apprenticeship emphasizes too general of industry skills development or lacks job-relevance and excludes/minimizes the job-specific task training that is the expected outcome of employer and trainee. An apprenticeship can become as incredible and unfulfilling an experience as higher education risks being.

Three things need to be present to make this country’s workforce development strategy work for all, the enormous amounts of money spent worthwhile and the opportunity wasted minimized:

1. A return the days of previous generations when diligently pursuing education that will lead to the inspired career path, and provide sustainability and further opportunity to grow and excel, are achievable. For that, we need:
   a. to return our form of capitalism to the days when Wall Street provided capital to good ideas, not micro-manage entrepreneurs and proven companies. If lowering costs (including labor) in the short-term to make the company look more profitable to shareholders than it is in reality takes priority over long-term stability and capacity, it’s like the tail wagging the dog. Deliberately driving each worker to full job mastery increases worker value by 4-500%; if structured for accelerated development it can cut the costs of worker development while increasing worker (and, therefore, organizational) capacity, work quality, quantity and worker compliance – while mitigating risk. Cutting labor or wages to cut costs only does so in the short-term but guts organizational capacity in the long-run. It increases worker development and retention costs when opportunity returns, and adds operational risk, as well. Hopefully the movement toward ISO 30414 – Human Capital Measurement and Reporting – could force employers to weigh these issues and feel less “ordered” to consider short-term shareholder interests over long-term shareholder, employee and society interests;
   b. A comprehensive, long-term national economic development plan that considers all factors: availability of investment capital to any good idea that will create and continue to provide well-paying jobs in the U.S. The plan should put in place a healthcare system that removes the financial stress and burden for any worker or citizen, similar to other developed exporting countries that compete with the U.S.;
   c. Government fiscal and tax policies that encourage and sustain a balanced, growing economy for all. It used to be like this, believe it or not. U.S. leaders tried to balance fiscal and monetary policy, and used the power of strategically placed tax incentives, penalties and policies to maintain an economy in which anyone had a better chance of thriving. The slow erosion of this approach started in about the late 1980’s and accelerated to what we have today;
   d. Most of all, we need new economists who report to an independent agency and are not on the payroll of the special interests that are doing so well in the current economy; which seems unfair to all but a few who do not want it to change. If all the media reports is economic data strategically collected and released by those whose interests, and we all continue to cheer them on without considering how our lives are improved, we will continue this growing multi-decade disparity until either the capitalist economy stops moving or the inhabitants demand change – or both. If this happens, it may take decades to return this system back to where it was before it became unbalanced. In the meantime, my advice to future workers is to pursue your passion cautiously and deliberately. Weigh the media’s “happy talk” on the future of work with research, reason and pragmatism
2. Accurately identified and monitored job targets. Once job targets are more stabilized, and relevant trends that change the nature of these jobs can be better predicted for the log-term, general education and general industry content can be more accurately defined and managed.
3. Encouraged employer-provided structured on-the-job training to ensure a graduate’s retention of educational content by driving it into application. Workers with more capacity have more value; more worker value justifies higher compensation. Structured on-the-job training always ensures the worker can perform the tasks required of the job as designed and eliminates inconsistent performance between workers, between shifts and minimizes risks associated with non-compliance with engineering, quality and OSHA standards. Emphasize “return on worker investment,” not “cost of labor.”

Apprenticeships designed with numbers 2 and 3 in mind have credibility, value and will be more welcomed by employers as part of an overall workforce development strategy. Anything short of these three components leads to, well, what we have now. We may all feel helpless that we cannot get our leaders to consider the factors mentioned in number 1, but education and employers can influence the status quo by focusing on numbers 2 and 3.

Unless employers and their investors work towards creating jobs and careers for the longer haul, selecting a college degree program may continue to be risky. And in today’s world this means expense, which could also lead to debt, which could lead to personal and family strife at the least. Hopefully government leaders will recognize this and put tax breaks and incentives in place for employers that try to stabilize the labor market so worker lives can have meaning again and the U.S. economy can thrive for all. After all, consumption is what drives and sustains an economy for all; profits drive the economy for a short period for a few.

Until then, if employers embrace structured on-the-job training they can at least find a strong, common ground between the worker’s need to develop marketable skills and the employer’s need for workers that can do the work they were hired to perform today. This is a big step while we wait for the rest to catch up and could influence wages upward.

If you recognize these challenges and have shed your fear of looking at other solutions, check out Proactive Technologies’ structured on-the-job training system approach to see how it might work at your firm, your family of facilities or your region. Contact a Proactive Technologies representative today to schedule a GoToMeeting videoconference briefing to your computer. This can be followed up with an onsite presentation for you and your colleagues. A 13-minute promo briefing is available at the Proactive Technologies website and provides an overview to get you started and to help you explain it to your staff. As always, onsite presentations are available as well.