A second obvious characteristic of jobs in the sub-baccalaureate labor market is that hiring is strongly cyclical, decreasing to the vanishing point during recessions (including the period of this study) and increasing during boom times. Employment in the sub-baccalaureate labor market is more cyclically sensitive than it is in the market for professionals and managers with advanced degrees, who have greater job security because of their control over production, their greater firm-specific skills,[24] their power over hiring and firing, and the like. A common pattern among the employers we interviewed was to lay off less well-educated workers during the current recession and substitute better-educated managers and technicians since less well-educated workers with less specific training can more easily be hired when economic conditions improve. In addition, many individuals from community colleges find their initial employment in small firms, and such firms are more likely to go out of business during recessions. Between the layoffs within well-established firms and the demise of small businesses, individuals in the sub-baccalaureate labor market are more likely to find themselves in the job market during recessions. This helps explain the cyclical variation in enrollments in community colleges and technical institutes examined below and in the large amount of retraining (rather than initial training) that takes place in these institutions.
Unfortunately, there are many negative consequences to the cyclical variation of employment in the sub-baccalaureate labor market. The most obvious is simply that intermittent employment reduces the earnings of individuals in this segment of the labor market; stability in employment and access to positions where employment is more continuous become more important considerations for individuals deciding which educational programs and occupations to enter.
A more subtle consequence of intermittent employment is that hiring standards and procedures are less well codified: Procedures developed during periods of hiring are abandoned during recessions so that they are constantly being developed anew. Many employers we interviewed, having done little hiring during the recent recession, were vague about their employment standards; the skills they require; and the tests, interviews, and other hiring procedures they use simply because there has been no need to have such procedures. Even among those firms who have been adding new workers, their hiring policies prove to be quite informal, as we will see in the "Employers in the Sub-Baccalaureate Labor Market" section. Particularly in a world of substantial cyclical variation, the notion of a "hiring policy"--something that prospective employees, students in postsecondary institutions, and educational providers can count on--does not exist, and there is greater uncertainty about what employers want.
Still another consequence of unstable employment is that the incentives for substantial investment in skills over long periods of time are weak. Among the occupations we studied, this became clearest in the case of machinists. There is a long history of complaints from employers about "shortages" of skilled machinists, and the employers in our sample were no exceptions: Many mentioned the long period of both formal and on-the-job training necessary to become a skilled machinist or repairman and bemoaned the apparent unwillingness of young people to invest the time necessary. At the same time, the same employers had laid off many of their machinists in the recent recession and had failed to hire for two or three years. There are, as a result, no economic incentives for individuals to spend long periods of time developing a broad range of machining skills. As the staff director for an employers' association in Frankton commented,
One of the reasons [for shortages] is that we can't get employers focused that this is a long-range thing--that if you think you need three or four years to go through more sophisticated programs, you've got to have meaningful jobs downstream.
The contradiction between employers' desire for skilled machinists and their unwillingness to provide stable employment and economic incentives was noted by a few education providers.
Cyclical variation affects the education providers of the sub-baccalaureate labor market as well. Enrollments in community colleges and technical institutes are highly sensitive to the business cycle: During recessions, enrollments expand substantially then contract once employment increases again.[25] The conventional explanation is that the opportunity cost of attending school is low during recessions; but an equally plausible argument is that individuals who have been laid off decide to undertake retraining in order to move into occupations where employment is still available or is more cyclically stable. Whatever the explanation, the consequence is that community colleges and technical institutes find themselves during recessions with greater numbers of older students with some experience in the labor market and needing retraining--not, as most four-year colleges find, younger students seeking initial entry.
The cyclical variation in employment within the sub-baccalaureate labor market, on the one hand, and in educational enrollments, on the other, creates a special dilemma: Enrollments in community colleges and technical institutes increase just as employment opportunities dwindle. Unless the period of time in such institutions precisely matches the length of the recession,[26] we should expect to see placement rates decline precipitously during recessions and increase during expansions (and similarly, placement rates should be much higher in low unemployment regions than in high unemployment regions). Particularly with the current movement for accountability and performance measures in education, it is important to remember that the standard of "acceptable" employment rates may vary both regionally and cyclically.
Because of enrollment variation, another effect of business cycles is that programs are dismantled during recessions. Community college administrators are acutely sensitive to the marginal revenues (tuition plus state reimbursements) and the marginal costs (instructor salaries plus equipment costs) of various courses and programs and move relatively quickly to close programs whose enrollments fall below the break-even level. In the Palmdale area, therefore, several electronics programs had closed by 1991. At the same time, deans claim that they respond to advisory committees of employers in establishing new programs, raising the prospect that programs closed in recessions will be started up again during the next expansion. While we did not observe any special consequences of closing and opening programs over the business cycle, this pattern may be quite wasteful of administrative resources.
[24] Although there has been an increase in firms providing training to their sub-baccalaureate employees, firm-sponsored training--much of which has firm-specific components--still predominantly goes to upper-level managers and professionals (see Bowers & Swain, 1992). In turn, firms are less likely to let go of their specifically-trained employees since they lose the benefits of such training (see Becker, 1975, Ch. 2.)
[25] See Betts and McFarland (1992), who estimate that a one percentage point increase in the unemployment rate increases full-time enrollment by 4.5% and part-time enrollment by 3.5%. It is important to note that--contrary to the human capital model in which education enrollments should be responsive both to the benefits of education (e.g., higher earnings) and to the direct and opportunity costs--the empirical literature suggests a greater responsiveness to costs than to benefits (Betts & McFarland, 1992; Grubb, 1988). Of the many analyses of enrollment, only Mattila (1982) has confirmed a strong response to the economic benefits associated with formal schooling.
[26] If students stay enrolled in a community college (by combining coursework with intermittent employment) until the recession ends and they can find more permanent employment, then they can effectively match the period of enrollment to the length of the recession.