HIGHER EDUCATION BUBBLE UPDATE: A Leak In The College Bubble?

When the housing bubble burst and sent the economy into a tailspin, the college bubble started to inflate even more rapidly. Desperate to compete in a brutal labor market, workers faced intensifying pressures to rack up degrees. Colleges (even marginal institutions) found a pool of captive consumers willing to pay high prices for their dubious credentials. And businesses, which had a dominant edge in the slack labor market, had the luxury of tossing out applicants without impressive educational histories.

But now that the labor market is tightening, each of these dynamics is changing, and the artificially inflated value of a college degree may be starting to come back down to earth. . . .

This trend couldn’t be more welcome. As we’ve noted before, college—at least for many students, and in many areas of study—”functions more and more as a signaling device for employers and a networking tool for the middle and upper classes rather than as a rigorous educational program.” There are a number of interests that would like to see this system sustained—academic bureaucracies, downwardly mobile children of the rich, and investors in student debt chief among them. But employers, students, and the public at large are all better served by a job market that allocates opportunities based on actual skills and knowledge, rather than empty letters on a resume.

All is proceeding as I have foretold.