From Labor Shortage to Labor Surplus: The Changing Labor Market Context and Its Meaning for Higher Education

Triggered by a crisis in the American financial system, the American economy has experienced sharp contractions in overall levels of output, income, and wealth. These losses have had an impact on the nation's labor market, causing sharp declines in payroll employment levels in the nation and most states. Higher education's link to the job market has become quite important in recent years, as rising returns to college endowments have fueled increases in both enrollment and real tuition and fees. Over the foreseeable future, it appears likely that the earnings levels and the size of the earnings advantages among new college graduates will fall as the excess labor supply - even in the college labor market - becomes the basic economic and labor market context in which higher education operates. Colleges and universities must adjust to a new labor market environment that is different in fundamental ways by regrouping and re-organizing their resources to more effectively respond to the new labor surplus context that will characterize the nation's labor markets in the next decade.