Betsy DeVos Is Right About Gainful Employment

By Richard Vedder

Last Friday, U.S. Secretary of Education Betsy DeVos announced she was killing off gainful employment rules governing for-profit colleges. These Obama Administration era regulations deny federal student financial aid to individuals attending institutions considered not having enough attendees “gainfully employed” after attending school.

On the face of it, this seems like reasonable regulation. Let’s direct federal aid to institutions where there are positive vocational outcomes for most students. However, the devil is in the details, and I believe DeVos made the right decision, for two reasons.

First, the Federal Reserve Bank of New York says that, as of March 2019, 41.3% of recent college graduates are “underemployed,” meaning they are working in jobs that are relatively low-skilled and filled usually by those with lesser education, such as high school graduates. The underemployment rate of all college graduates is also a very high 34.1%. Some of these folks are making a pretty good income (as some relatively lowly educated persons get good paying jobs), but most are not.

The supposition that college has or should have a primary purpose of preparing  persons for jobs is debatable, and beyond that there are respected economists (e.g, Bryan Caplan at George Mason University) who have argued exhaustively that little of the higher typical earnings of college graduates is actually attributable to employable skills gained while in college. College degrees are screening devices enabling employers to identify the best, brightest, most reliable and productive potential workers from the rest.

Given this, the whole concept of “gainful employment” is flawed. A school taking in high-performing high school graduates will likely have most of them “gainfully employed” a few years later, even if the college itself added little to the individual’s productivity. Moreover, many would argue that the “bottom line” of college is far more than getting good jobs. Good universities teach virtue, civic responsibility, and other things. Moreover, as Mike Rowe (of “Dirty Jobs” TV fame) and others have demonstrated, many persons with not necessarily high-paying blue collar jobs lead very satisfying lives.

But there is a second reason why gainful employment rules as constituted during the Obama years were inappropriate… (continue reading)