Mythical Labor Markets and Demographic Crises of the Education Reform Movement

By Neil Kraus

The Agile College: How Institutions Successfully Navigate Demographic Changes by Nathan D. Grawe. Baltimore: Johns Hopkins University Press, 2021.

Economist Nathan Grawe’s 2018 Demographics and the Demand for Higher Education set off shock waves in the higher education community by crystallizing the “demographic-cliff” narrative. Grawe argued that the nation faced the prospect of substantially fewer students attending college in the coming years, a decline that would necessarily be destructive to a tuition-driven system. What has received much less attention, however, is Grawe’s uncritical embrace of key tenets of the larger education-reform movement that have become conventional wisdom—including the assumptions about an underperforming education system and perpetually inadequate workforce—thereby enabling the demographic-cliff hypothesis to metastasize in higher education.

Under the heading “Big-Picture Lessons,” Grawe argued that, “while the economy’s needs for greater educational attainment are substantially higher than we have achieved in recent years, it is possible to imagine plausible policy interventions that could hope to make significant progress on this front.” This claim is rooted in human capital theory, the dominant mode of thinking regarding the purpose of education: to provide the population with economic opportunity. The theory, developed by economists in the 1950s and 1960s, posited that incomes are—and implicitly should be—a function of individuals’ formal education and training. Some of its biggest proponents, including Gary Becker, both reflected and reinforced corporate opposition to the New Deal and used the theory to explain income inequality. This approach became central to the corporate-led education-reform movement that the Reagan administration ushered in with the 1983 report A Nation at Risk.

Human capital theory must be understood within the context of the onset of neoliberalism, which championed a substantially reduced state and a new business culture driven primarily by the interests of owners and shareholders. In neoliberal thought, wage stagnation and growing inequality were not the result of real-world developments, such as the attack on labor unions, deindustrialization, a flat minimum wage, the offshoring of work, the proliferation of noncompete agreements, and increasing corporate concentration in all major sectors. Rather, economic hardship was the fault of allegedly inferior K–12 and higher education systems.

As the real economy shifted toward low-education, low-wage, service-sector jobs, business interests constructed a mythical version of the labor market, labeled the “information age” or, more recently, the “knowledge economy.” Subsequently, economists would invent the concept of skill-biased technological change—also a key component of Grawe’s argument—which assumed that the education levels that the labor market requires necessarily rise along with technological advances.   

Human capital theory seemed to affirm the critical importance of education, enabling its embrace across the ideological spectrum, and, crucially, within the education sector itself. But because education cannot directly affect the distribution of jobs and wage rates, reflexive acceptance of the framing of economic opportunity as dependent on education was tantamount to a political declaration of war on the sector. Blaming education for the fallout of decisions made by employers and policy makers ultimately established the chronically weak political status of education and provided justification for decades of misplaced reforms in both K–12 and higher education. And the assumption became entrenched that individuals not thriving in the so-called knowledge economy should take personal responsibility for their educational and skill deficits.       

The empirical problems with human capital theory are glaring. Average or median income levels are certainly higher for those with advanced education than those without. But federal data have long shown that a significant majority of jobs typically require only a high school education or less. With educational attainment rates at historic highs, official data have also shown consistently high underemployment rates among bachelor’s degree holders for at least the last several decades, not to mention the legions of underemployed advanced-degree holders. Moreover, large numbers of highly educated individuals work in low-paying, unstable jobs commensurate with their education levels or in fields that have been devalued and marginalized, including education, the civil service, social services, and the nonprofit sector. Thus, the main empirical support typically offered—if it is offered at all—for Grawe’s assertion of society’s needs for “substantially higher” levels of educational attainment are the claims of business interests, foundations, and the researchers they fund.

In Demographics and the Demand for Higher Education, Grawe largely avoids official labor market data and fails to consider the National Center for Education Statistics annual projections, which include the projected numbers of high school graduates and higher education enrollments. Instead, he advances his own model of probable higher education attendance and argues that the future is bleak for many colleges and universities. The book includes advanced statistics, maps, and figures predicting steeply declining numbers of prospective college students.   

Grawe’s most recent book, The Agile College: How Institutions Successfully Navigate Demographic Changes, largely accepts his earlier book’s thesis—which remains unverifiable because his predictions go many years into the future—and advances several policy prescriptions predicated on the need to increase higher education enrollments. Like its predecessor, the book’s target audience does not appear to be a scholarly one. Rather, it is most likely to appeal to higher education administrators, media commentators, business leaders, and policy makers—constituencies that all tend to accept implicitly the mythical labor market of human capital theory.

To be fair, many of these individuals presumably act in good faith. Indeed, many well-meaning elites are only now learning what the term neoliberalism means since until recently the word has been confined mainly to academic treatises. Human capital theory, like the assumptions of neoliberalism generally, is so ubiquitous in the higher education ecosystem that to argue that it is an ideologically driven theory which holds education responsible for ugly labor market realities would seem outlandish to most higher education administrators and reporters. But this is also an ecosystem in which official labor market and educational attainment data are rarely cited, even though they tell the story of an increasingly educated population in a low-education, low-wage labor market.  

The central problem with Grawe’s thesis—based on the straightforward assumption that official data are the most objective available—is that the most recent federal projections of education statistics currently project very modest increases in total higher education enrollments as far as they go into the future, currently through 2030. Also, the most recent federal projections for high school graduates project slightly higher numbers by 2031 than during the Great Recession, a period that corresponded with higher education’s boom years for enrollment. Federal projections published prior to Grawe’s 2018 book also did not project significant declines in either high school graduates or higher education enrollments. Moreover, the US population is growing, albeit at a slower rate than in some other historical periods, and many students enroll in colleges and universities well after they graduate from high school.    

The demographic-cliff thesis thrives because neoliberal decision-making over the past several decades has created a tuition-dependent system of higher education. Administrators perceive or present even modest declines in enrollment, particularly following the historic highs of the Great Recession, as support for a coming cliff, and use them to justify budget cuts and layoffs.              

Federal data also show that over 70 percent of all postsecondary students in degree programs attend public institutions. But because Grawe presumes the need for tuition-driven austerity, he treats declining public support for higher education as inevitable and gives no serious consideration to the prospect of restoring state funding. Thus, his policy recommendations focus on measures that increase enrollments, including recruitment, retention, financial-aid and loan-repayment options, and “tuition resets.” The Agile College even includes an austerity-influenced chapter titled “Reorganization, Rightsizing, and Other Names for Retrenchment.”

Like the skills gap—a myth created by business interests at the height of deindustrialization—the demographic cliff has taken on a life of its own. Moreover, the concept continues a long tradition in the education-reform literature of predicting that a major demographic crisis is on the horizon. Roughly thirty-five years ago, the Reagan administration’s Workforce 2000 report, produced by the Hudson Institute and credited with creating the skills-gap narrative, foreshadowed the demographic-cliff panic, including its corollary preoccupation with racial change. The authors of that extraordinarily influential report, William B. Johnston and Arnold E. Packer, fretted about the nation’s “aging workforce” and maintained that the “shrinking numbers of young people, the rapid pace of industrial change, and the rising skill requirements of the emerging economy make the task of fully utilizing minority workers particularly urgent between now [1987] and 2000.”   

Human capital theory persists because of its usefulness in service to corporations and the wealthy, and it has been an essential component in the decades-long, systematic defunding of public higher education. If you begin the discussion with an ideologically driven story positing a fictional labor market dependent on high levels of education, then you assume that education must be failing because of the mere existence of economic inequality and wage stagnation. Austerity becomes the default, and educators—successfully blamed for labor-market realities well beyond their control—are compelled to continuously defend allocations for any tax funding at all.

Federal educational projections provide no evidence for a demographic cliff on the horizon. It is important when evaluating works like The Agile College to recognize that wage stagnation and growing inequality are outcomes of neoliberal economic policies and not of inadequate K–12 or higher education. If history has taught us anything, it is that jobs and wage rates are up to employers, policy makers, and the collective bargaining efforts of workers themselves—not the education system.     

Neil Kraus is professor of political science at the University of Wisconsin, River Falls. He is the author of a forthcoming book on neoliberalism, inequality, and the education-reform movement, as well as two books and several articles on inequality and urban politics and policies. His email address is [email protected].