Federal Reserve Chairwoman Janet Yellen defended the value of higher education as a protection against the pressures of technological change and globalization. A college degree increasingly will be important in helping workers compete in a world-wide labor market that is constantly inventing ways to replace people with machines, she told the graduating class of the University of Baltimore on Monday. “While globalization will likely continue and technology will continue to advance, we don’t know how fast the economy will grow, what new technologies will be developed, or how quickly and consistently employment will expand,” she said. Ms. Yellen noted recent improvements in the economy, which she said have created one of the strongest job markets in years for graduates. She didn’t discuss monetary policy.
The U.S. unemployment rate of 4.6% is now near what it was before the recession, she said. Wage growth is picking up, “and weekly earnings for younger workers have made strong gains over the past couple of years,” she said. Ms. Yellen spoke hours after the Fed released a survey conducted in December 2015 that found young people were growing more optimistic; 61% had a positive outlook about their employment prospects, up from 45% in 2013. One of Baltimore’s graduates, Carolyn Chance, 55, said she was reserving judgment on the economy for now. “The next few months will show a whole lot,” said Ms. Chance, who wants to use her new bachelor’s degree to start programs helping people with disabilities. President-elect Donald Trump has vowed to bring back some of the lower-skilled U.S. jobs that have left for other countries in recent decades.
Ms. Yellen didn’t comment on his plans, but made a case for the need to prepare workers for a world of increased global pressures. “Like technological change, globalization has reinforced the shift away from lower-skilled jobs that require less education to higher-skilled jobs that require college and advanced degrees,” she said. “The jobs that globalization creates in the United States, serving a global economy of billions of people, are more likely to be filled by those who, like you, have secured the advantage of higher education.” She also expressed worry for workers who don’t attend college, saying “we must find other ways to extend economic opportunity to everyone in America.” She recognized the challenges faced by University of Baltimore students, many of whom juggle jobs and families along with schoolwork. Almost half the university’s students attend part time and the average age among undergraduates is 27 years old. “You did not have all of the advantages that can pave the way to college and graduate school,”
Ms. Yellen said. “The degrees you have worked so hard to earn and the opportunities now opening up to you represent the stubborn, earnest hope that anyone and everyone who strives to succeed still can succeed.” One of those students, LaToya Barnes, 31, said she worked one full-time job at a community health center and another part-time job at a crisis response center while also going to school full-time to earn her bachelor’s degree in human services administration. “It was very hard,” said Ms. Barnes, who grew up in foster care and who is now thinking about going to law school. “When you really want something you do whatever you need to do to make it happen.”
Ms. Yellen’s address comes as rising college costs and debt loads have raised fears that higher education has become out of reach for many households. As of the third quarter of 2016, borrowers had amassed $1.28 trillion in student debt, according to a study by the Federal Reserve Bank of New York. Ms. Yellen said the benefits of a college degree outweigh the costs. “Some of you may be worried about paying off loans you have taken out to pay for your education,” she said. “The good news is that the vast majority of student borrowers who complete their degrees find work that allows them to keep up with their payments and pay off their loans.”
A separate New York Fed report found college graduates over the past 40 years have earned 56% more than high-school graduates. The Labor Department reported earlier this month that college graduates had a lower unemployment rate—2.3% in November—than workers with high-school diplomas but no college experience. Ms. Yellen also cited more intangible benefits, noting that a degree leads to “a happier, healthier and longer life.”