This is an excerpt from the essay, “Wage Interventionism, Gruppa Bezdelnikov, and Universal Education” by Jeffrey Braddock. In this essay, Braddock explains the motivation behind Obama’s plan for universal education, and what that will do to the real wages and unemployment of the United States.
A Sleight of Hand
“Why universal education now?” There is no demand, quantitatively, for more university graduates. There is, however, a demand for employees with higher literary skills. Perhaps President Obama and the Congress are attempting to raise the literary skills of the nation – yet this cannot be so, since any increase in the quantity of graduates necessitates a decrease in educational quality. I posit that President Obama, and the Congress, are attempting to mask the unemployment problem at the taxpayers’ expense. Let us consider – the labor force participation rate for full-time four year university students is around 42% and around 55% for full-time two year university students. Another way to read the data is that 58% and 45% of four and two year students, respectively, were not employed (full or part time) or actively seeking employment. The unemployment rate for high school graduates and dropouts is 26.7% and 39.5% in 2008, respectively.
Now, Mr Obama’s universal education program reduces unemployment by allocating educational subsidies. How is this accomplished? First, the subsidy is extremely generous – enough to pay for the whole cost of the educational program and provide an additional subsidy to cover living expenses, such that the students will opt out of participating in the labor force. Given the generous size of the subsidy, many unemployed high school graduates, dropouts, and a sizeable number of employed high school graduates choose to resume their studies. More positions are freed by the increased capacity of frivolous volunteer programs, which offer educational subsidies in return for community service. Many recent college graduates are then able to take positions vacated by students. In the short term, unemployment is reduced as some citizens who were considered unemployed by the Bureau for Labor Statistics cease actively searching for work and transition to full-time student status; others find employment in those positions vacated by those citizens who opted to resume their studies. The American public, historians, indeed, the entire world applaud Mr Obama’s administrative genius and vision for reducing the official unemployment rate to historic lows while guaranteeing universal post-secondary education. Yet it is little more than a sleight of hand. Some four to six years later, a nasty shock ensues as the graduates finish their studies or return from their volunteer/internship experiences. The United States achieves the highest proportion of university graduates, but due to wage interventionism, those graduates cannot find work commensurate with their wage/educational expectations. The disillusioned graduates return to the government, demanding more social programs, more benefits, and more government intervention. The next administration, the next round of legislators, acquiesces without a struggle.
In this brief essay I presented the effects of wage interventionism on unemployment. Wage interventionism, in terms of artificially high wages, barriers to employment, or accrued benefits, leads to the misallocation of factors of production, including human capital. Wage intervention gives rise to the bezdelnik, or the university graduate who cannot find employment commensurate with their education. Bezdelniks enter jobs formerly requiring only a high school education, thus displacing high school graduates and drop-outs. The involuntary unemployment of high school graduates and drop-outs represents the true unemployment problem.
This essay is meant to provide an analysis of Mr Obama’s educational policy proposal and answer the question “If this policy is implemented, will it achieve its stated objectives?” If universal post-secondary education is implemented, will it end the unemployment problem? According to Obama’s own metrics, the answer is a resounding “No.” Mr Obama’s plan only serves to sweep the unemployed under the rug. Mr Obama is free to blame increased competition, immigration, technological change, and imports from low-wage nations, but he does not address the main culprit: wage interventionism.
Despite access to the best data and the most polished “academic” minds available, Mr Obama and his advisors cannot see the evidenced link between wage interventionism and unemployment. Instead, they present policies of non sequitur. Rather than attacking wage interventionism, which precludes the full employment of factors, they call upon Americans to return to the university, or give-up on your nation! Forget that government policy led to the increase in university graduates (and thus reduced the real value of your diploma), and, coupled with the Federal Reserve policy of quantitative easing, disrupted business profitability, reduced real wages, and caused your unemployment, bezdelnik- volunteer! and evidence the power of the state to organize labor toward greatness works, prosperity, and fraternity. Laud the exponential growth of university graduates, citizens, but do not draw attention to the lack of perceptible change save a considerable transfer of wealth from the taxpayer to the educational system- that, and no real change in employment options!
Mr Obama and his economic advisors would do well to revisit the problem of scarcity. Scarcity stipulates that any measure, any benefit, which is coerced from employers in the name of altruism, progress, or caring for the “exploited” employee, comes at a direct cost to a fellow citizen, who is precluded from employment. Thus, any “organizer of the exploited,” “social progressive,” or “coercive altruist,” through his well-intentioned efforts, robs a third party of his right to life, liberty, and pursuit of happiness. The ends achieved by the President Obama’s educational plan are contrary to his very well wishes. In light of this, President Obama and the “New Brain Trust” might do well to heed the words of Bastiat in la Loi: “Away with the whims of governmental administrators, their socialized projects, their centralization …their government schools. . . their regulations, their restrictions, their equalization by taxation, and their pious moralizations! Now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in [mankind]!”