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College Education: Metros’ Anti-Recession Vaccine?

Are regional college education rates a stay against metro unemployment in bad times? It sure seems like it. Just take a look at the varied metropolitan area unemployment rates reported last week by the Metro Program’s quarterly MetroMonitor and its companion Mountain Monitor, the inaugural edition of which begins coverage of recession and recovery conditions in the metropolitan areas of the six-state Intermountain West. In that document, we noticed that the Mountain region’s third-quarter unemployment rates seemed to have a lot to do with metros’ college education levels, but we didn’t make too big a deal of it. Here, we thought we would belabor the point a bit more and ask why it’s so.

First, we’ll just note that others like Ed Glaeser have noted this connection before, and observe further that it’s hardly surprising that skills might explain metropolitan unemployment rates during the Great Recession given the huge and longstanding employment gap between skilled and unskilled workers at all other times.

Still, it really is striking to survey the extreme variation in unemployment rates revealed by the  MetroMonitor and MountainMonitor maps and connect it to local education levels. Nationally, highly educated metros like Washington DC, Bridgeport, Madison, and Des Moines (with BA attainment rates of 47.3, 42.7, 40.5, and 32.5 percent respectively) have much lower unemployment rates  than less educated metros like McAllen, Stockton, and Lakeland-Winter Haven (with BA attainment rates of 14.8, 16.8, and 17.7 percent, respectively), and this is not just because of regional or even state characteristics. Within the same state, there are still large and significant differences between well- and poorly-educated metros. For example, San Francisco, San Jose, and Austin are doing considerably better than their intra-state peers like Riverside, Bakersfield, and McAllen.

Or look at across the Intermountain West.  There, highly educated metros like Denver, Provo, and Colorado Springs (with BA attainment rates of 36.5, 36.1, and 33.5 percent and unemployment rates of 7.1, 5.5, and 7.2 percent, respectively) have much lower unemployment rates than metros with low education attainment like Las Vegas and Phoenix (with BA attainment of 21.4 and 24.5 percent respectively and unemployment rates of 13.9 and 8.6 percent). And it isn’t simply the case that these metros had low pre-recession unemployment: The recession-induced uptick in unemployment has also been significantly lower in the more educated metros. Nor can the trend be explained away with reference to specific local concentrations in growing high-skilled industries or slumping low-skilled industries. After adjusting for employment in finance, manufacturing, medical services, education services, construction, accommodation/recreation, and even overall diversity, the effect of bachelor’s attainment is even larger and more significant. Taken literally, regression results suggest that raising the attainment rate of the least-educated large metro (Bakersfield) to the level of the most educated (Washington DC), would decrease the former’s unemployment rate by seven percentage points! (See figure below).


What explains this?

First, education makes a job-seeker more valuable to the average employer, as we know from research on the college wagepremium. This means a worker will be less likely to be laid off. The most recent 2009 data from the Current Population Survey confirms this: Respondents with a BA are over three times less likely to have been laid off than other workers. The November unemployment rate is 4.9 percent for those with a bachelor’s degree or higher, while it is 10.0 percent nationally (and 9.0 percent for those with just some college or an Associate’s degree).

Second, education translates into flexibility. As a Pew study shows, college educated residents move across states more frequently and are more likely to cite job prospects as their reason. Likewise, young, college educated people are more likely to change their state of residency, presumably to seek better opportunities, according to a recent report. They are also more likely to start their own business or otherwise become self-employed. Crucially during a recession, college educated workers are significantly more likely to change occupations across industries, given their general industry of employment. The reason seems to be that their skills can be applied more generally across a variety of tasks. For example, a human resources manager, an accountant, or an IT expert could work for a large company in any sector of the economy, whereas a construction worker, a roofer, a plumber, or assembly plant manufacturer without a college degree would find it more difficult. Even educated people with highly specific skills like architectural engineers or financial analysts can readily adapt those skills to fit the needs of other professions in alternative industries, such as teaching high school math, performing technical consulting, or organizing information in an administrative or management capacity. College educated workers are also advantaged by alumni networks, easier access to internships, and career placement offices.

Finally, the benefits of college education are not limited to the graduate. In an influential article, the economist Enrico Moretti has shown that living in a more educated city or metro area raises the wages of all workers, especially those with little education. One explanation is that innovation and business creation are enhanced by human capital, and these entrepreneurial energies increase the demand for complementary lower skilled labor, as well as other college graduates.

In short, college degrees protect individuals and metros from the most severe effects of a recession and contribute to regional resilience. Those metros that have many of them are better off on just about every economic indicator.

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