The COVID-19 pandemic has caused elected officials to shut down large segments of the U.S. economy, within 30 days of President Donald Trump’s National Emergency Proclamation in mid-March, putting more than 26 million American payroll workers out of work and shuttering countless small businesses, thereby shutting down the self-employment option upon which workers frequently rely in times of economic trouble.
NEJHE on 2020 College Grads and the Complex Job Market
When fear of the coronavirus shut down all but essential businesses in March, The New England Journal of Higher Education invited economists and other experts on “employability” to weigh in on how #COVID19 will affect 2020’s college grads in New England.
The initial shutdown is already having substantial secondary effects in sectors of the economy that have not been closed by state officials. The college labor market —largely composed of employment in professional, technical and managerial occupations—was mostly insulated from the early effects of the shutdown. One exception was healthcare, which experienced substantial employment losses as delivery of non-essential healthcare services was sharply curtailed is now shedding workers at an accelerated pace as employer revenues decline precipitously.
Putting the world’s largest economy into a sort of induced coma means two important things for higher education consumers. First, family incomes and wealth are declining, and this results in reduced consumption, including reduced enrollment in higher education programs. Second, a cloud of uncertainty remains around the virus, and this uncertainty results in a more conservative approach to family finances led by increased savings and reduced consumption, including college consumption.
During the Great Recession of 2008-09, undergraduate and graduate enrollment rates skyrocketed as students sought shelter from the very weak labor market conditions of mass employment losses and rising unemployment and malemployment among college graduates. However, it appears unlikely that this sort of enrollment surge will occur in this unprecedented economic decline, particularly as options for a “full-college experience” (stereotyped as an 18-year-old going off to a campus with all its social, sports, travel and cultural amenities) seem to be narrowing, by state mandate
Rethinking college decisions
Declining income and wealth and rising uncertainty mean that families are rethinking their college-enrollment decisions. Indeed, several new surveys suggest that among the prospective freshman class, a lot of consideration is being given to alternative ways to reduce spending on higher education, without giving up on it altogether.
Surveys of college-bound seniors find that substantial shares of students who were intent on starting at their first-choice four-year college are thinking about lower cost four-year college options. One recent survey by the Arts and Science Group estimates that about two-thirds of graduating seniors are considering some type of alternative to their first choice option, with about 20% reporting that such a change is likely. Similarly, shifting from a four-year residential college to a two-year community college is now on the radar for many college-bound seniors who would not have considered a community college prior to the pandemic. A third option for students is to delay enrollment for a year until family income has had time to recover and the uncertainty about future possibilities is reduced as the pandemic abates over time.
The first two adjustments may be sensible for some families but does that third scenario, taking a so-called “gap year” make sense?
We believe that taking a gap year is not a good option. Delaying college for most college-bound seniors is disastrous. Delayed enrollment sharply reduces the likelihood of earning a degree.
Our large-scale longitudinal research of a cohort of 9th graders in Philadelphia found that after controlling for demographic and socioeconomic traits as well as in-school behavioral traits and measures of academic performance, delaying college enrollment after high school and subsequently enrolling in a community college reduced the likelihood of earning a college award (including certificates) by a massive 39 percentage points, compared to their counterparts who had enrolled in a four-year private college immediately after high school graduation. Among those who delay and then enroll in a four-year public college the completion rate is reduced by 20 percentage points. (This study tracked students for seven years after the expected date of high school graduation. Only a handful of students in the study remained enrolled at the end of the period. Because these students had not dropped out and were continuing their study, we counted them as completers in our study, although they had not yet earned an award.)
Other researchers have also found substantial negative effects on college completion associated with the gap year.
If students don’t earn a degree, the investment returns to their college education are essentially zero. Almost all the employment and earnings advantages to higher education are associated with an academic award of a degree or a certificate.
Despite the image created by the popular press about the benefits of a gap year between high school and college, the typical delayed-enrollment student is not the stereotypical high-income bon vivant touring the continent. Rather, delayed-enrollment students are about six time more likely to come from families in the bottom 20% than the top 20% of the nation’s socioeconomic distribution, according to research by Sara Goldrick-Rab and Seong Won Han. This suggests that delay in college enrollment is much more likely to be associated with less ability to pay than perhaps has been assumed in the past.
Income and wealth changes
The prevailing income and wealth developments in the U.S. will have an adverse impact on the college-going decisions of high school seniors. The closing of much of the nation’s college housing facilities and lingering uncertainty about their fall opening means that the “college experience” of living away from home and leading the idealized life of a resident undergraduate has become more distant to many newly minted high school graduates preparing to start their next phase of life.
Much of the “college experience” that many students desire is not an investment in higher education insofar that the campus experience doesn’t contribute much to post-graduation success. It is really just another form of consumption. (Indeed, when economists measure the cost of higher education, room and board costs are not included, as they are part of normal consumption of the individual. However, it is useful to note that the cost of forgone earnings as student allocate their time to schooling is included in economic measures of college costs.) College investment comes in the form of course-taking and study that leads to growth in the knowledge, skills and abilities of students that are valued in the labor market and yield large and sustained employment and earnings advantages.
The opportunity cost of a gap year is very high. The proficiency and human capital gap between those who enroll and those who do not will widen. The cost is essentially a lost year of investment, during a time in life when human capital investment should be at its greatest. Students who take a gap year will find it very difficult to secure paid work. The labor market is awash with massive numbers of job-seekers and this will continue as economic reopening begins in a phased and cautious manner. New high school graduates, not especially welcome in the labor market in the best of times, will struggle to find employment. Even for students with strong financial resources, the opportunity to engage in the sort of gap year experiences such as cultural or environmental travel will likely be greatly diminished. A gap year for many young people will just mean an extension of the lockdown; in this instance, it will mean being locked out of work and school.
School and work are the two primary ways in which individuals build their stock of human capital. Students who opt for a gap year will find themselves left behind as their peers continue their education and develop their productive capacities. College-bound seniors are right to think carefully about adjusting to the COVID-19 environment, but one adjustment that is almost guaranteed to lead to financial failure is that of doing nothing—the gap year.
Neeta Fogg is research professor at the Center for Labor Markets and Policy at Drexel University. Paul Harrington is director of the center.