Allan Schnaiberg on Student Debt.

(Excerpted from an uncompleted manuscript written in 2005).

Juliet Schor, an economist, has written several influential books about individuals in the treadmill of production, The Overworked American and The Overspent American. They are remarkably lucid accounts of ways in which individuals’ economic behavior is shaped by impersonal market forces, despite the preferences of the individuals themselves.  In our framework, we are interested in fleshing out how “consumers” act in ways that constrict rather than expand their degrees of freedom.  In particular, we want to extend our earlier analyses in this chapter by turning our spotlight on newer forms of consumer indebtedness.  Our primary interest here is on debt incurred for educational expenditures.

Why do students (even more than their parents today) ‘choose’ to attend colleges and universities that leave them indebted for many years after they graduate (or even after they drop out without graduating)?   Is it merely rising consumer expectations about what they desire?  Or is it a change in the socioeconomic structure of society that has been shaped by the expanding treadmill of production?   In her study of work patterns in the US, Schor noted the contradiction between Americans’ professed desires for more family time (we have generally noted as being less accelerative of the treadmill), and their actual hours of work, which have been increasing.  Through a small modification of previous studies, she essentially argued that these hours of work have increased, because of the growing competition for jobs.  This permits employers to reduce their risks of expanding labor forces in good economic periods, and increasing their total productivity by expanding the hours of work of a smaller body of workers.  In turn, workers are more coerced than seduced by this overtime work, because of their desires to keep their jobs.  By simply looking at the growing hours of work, analysts have instead inferred that this is a preference of workers, for greater income to generate more consumer expenditures.

And this includes a growth in consumer debt, as relative wages stagnate, and workers need to both work more and borrow more just to sustain their material quality of life.  This has also been part of the explanation for why mothers of small children have increasingly gone outside the home to work – because their partners’ earning have not kept pace with inflation.  While parents could also choose to work less and have a lower quality of material life, this is hard to do in a society marked by the centrality of consumption in social standing.  And this is even more so when a “living wage” is harder for more and more workers to find.

The advance of the treadmill in recent decade has reduced jobs with good incomes, as skilled workers were first replaced by machine automation, and both blue- and white-collar employees have been discarded with new forms of computer-controlled production and distribution of goods and services.  To this has been added the outsourcing of many jobs to the South, because of lower wage bills there.

If we bring this framework into our discussion of growing educational indebtedness, there is a direct connection.  Parents and students both feel that higher education is more vital for finding and keeping a job.  But because of expanding numbers of educated youth and the failure of job opportunities to expand to the same degree, there is greater competition for jobs with a living wage.   In this competition, families increasingly believe that a degree from a more prestigious college or university will increase their competitive advantage.   Generally, it is private universities that have had tuition growing much faster than inflation over the past two decades.   And private universities have a stake in stoking the anxieties of their potential students and their families, proclaiming that their school has a much higher placement of students in good jobs – or more frequently, in good medical or legal programs.

For treadmill managers, this offers a free ride for enhancing the quality of their employment pool, at little cost to the firm.  And the industry of college preparation  has expanded enormously, focusing entirely on improving students’ test-taking skills (for a substantial fee) as a means of improving their chances of getting into a “good” school.  The costs of this structure of competition are heavily borne by families and students, rather than by governments.   Subsidies for higher education – both in private and public institutions – have been shrinking.   This means greater indebtedness even for students going to a state school (especially from out-of-state).   Thus, while the gap between public and private school costs has increased, both have increased relative to workers’ wages.

Thus, growing student indebtedness for higher education is less a matter of “taste” than it is a matter of maintaining some competitive edge in a crowded labor market.  And as middle management’s ranks are shrunk by replacement of managers with computerized systems of decision-making, the competition among white-collar workers has grown in intensity, rivaling some of the previous experiences of blue-collar workers in the 1970s and 1980s.  And both are outcomes of corporate investment patterns, which accelerate the treadmill of production by decreasing the share of returns going to workers (and increasing “shareholder value”).

If this is the pattern causing more educational indebtednes, what are some of its outcomes for environmental and social behaviors.  The reality is that, once students’ indebtedness has increased, there are strong pressures from lenders to get steady repayment of the loans, and at increasing interest rates.  This means that graduates (and especially dropouts) are facing fewer options in the kind of work or life activities they pursue.  This generally means that fewer will opt for not-for-profit work, and many more will take jobs at the highest wage rates, rather than based on personal preferences.   On rhe one hand, this benefits treadmill organizations by widening their choice of workers.  Moreover, if graduates are working primarily for wages and not personal challenges, more of their income will go towards purchasing market goods and services, to offset the dissatisfactions and discomforts of their work environment.  This means that consumer demand will grow, other things being equal.

Middle-class and upper-class American workers are “ relentlessly searching for happiness and identity through consumption”. In traditional stratification research of the 1950s and 1960s, the distinction between blue collar and middle-class white collar workers was that the former had little job control and little work satisfaction.  Blue collar workers were alienated by their work, but worked for income that would enable them to buy more goods and services to compensate for their alienation.   Their children would learn to follow rules, whereas middle-class children were trained more permissively, since their jobs involved many more decisions and consideration of complex tradeoffs.   As middle-class jobs have become less available and more constrained, far more middle-class Americans also find consumption a solace.  This is highly reinforced by all media, of course, since the treadmill always has a problem of overproducing, and needs to stimulate old and new consumers alike.

If we step away and consider the environmental impacts of much of this increase in educational indebtedness, several things become apparent.  First, the government has been induced to spend less on higher education, so this lowers the tax liability of treadmill organizations.  Second, educational indebtedness potentially increases the productivity of educated workers, who are striving to maintain their jobs and wages.  Third, the decrease in educated workers’ control over their working conditions makes for greater unhappiness of educated workers, and makes them turn to goods and services as consolations.  Each of these in turn, and especially all taken together, accelerate the treadmill of production, and enhance the relative power of treadmill owners and managers to dictate the conditions of educated workers.   In recent years, this has become even more pointed, as US firms have been outsourcing technical jobs (such as computer help lines) to the South, with India becoming a prime center for both software production and computer helplines (in part because of the dual impact of a common language with the US, and a surplus of indigenously educated technical-professional workers.

On the other hand, other forms of educational indebtedness have had problems for some time.  When there was some slowdown of demand for educated workers, new public attention was drawn to rising loan defaults by students.   By far, the largest level of default was not in colleges or universities, but in trade schools.   As the treadmill has accelerated. it has lowered the demand for skilled blue-collar workers much faster than for educated white-collar workers.  Among other reasons for this disparity has been the fact that skilled blue-collar workers have had much heavier employment in the manufacturing sector, while white collar employment has often been relatively independent of US manufacturing and manufacturing employment levels.  All facets of business enterprise, as noted in chapter __, involve some white collar employment.  Conversely, the making of goods themselves is the primary sector of blue collar employment.

Trade schools have been of two types in the US.  Historically, these were associated with manufacturing and building trades, in both cases employing graduates in union or non-union positions involved with the construction of some goods.   More recently, with the contraction of manufacturing employment, trade schools have increasingly expanded in forms of (1) business services that involve skilled labor, and/or (2) personal services that involve somewhat lower skills for workers, but which certify workers for their formal completion of training programs.  Among the former is computer repair and computer operation, which are closer to blue collar types of employment.  Among the latter is a variety of beautician, barbering, and other kinds of cosmetic services for individual consumers.  The reasons for the far higher default rates on student loans for these modern trade schools is that the students fail to obtain employment.  This is llikely due to some combination of negative selection of students, and/or poor socialization in these trade-schools of their students.  Either or both of these result in low employability of the students of these programs.  Students either drop out in higher numbers, or upon graduation, discover that there is a “glut” of trainees relative to employment possibilities.  In either event, students are obliged to repay student loans, whether or not they have found employment.

There is certainly some default of loans among students from traditional colleges or universities, but even here this is concentrated on the lower-quality public institutions.    Once more, some combination of weak selection and/or weak socialization accounts for much of this, we believe.  Paradoxically, the successful college/university students struggle to repay their loans – but in doing this, they must often take jobs with higher pay than with higher satisfaction (another stimulus for the treadmill to accelerate).   This has become especially noticeable among legal and medical students, whose substantial post-graduate loans require them to avoid public-sector positions in favor of private practice.   Some years ago, law schools began programs of debt-forgiveness for those students who entered lower-paying public sector work.  To some extent, medical schools have begun to introduce such reforms as well.  In both cases, the interests of the professional schools include having some of their alumnae occupying public policy-making and policy-implementation roles, which in turn somewhat enhance the influence of their alma maters.

Overall, then, educational indebtedness has, until recently, repaid the debtors some substantial dividends.  But this may be declining in the future, and has already diminished in cases where graduates seek work in the public sector.   An attenuated and poorly-staffed public sector, in turn, tends to tilt the political economy even more towards accelerating the treadmill of production, putting even greater pressures on the environment.  And the tilt towards private sector and even entrepreneurial employment further empowers treadmill organizations’ influence on the political economy of the US.