The Twilight of the Guilds?

Two stories this morning cast some light on where the country is headed.  The news isn’t good for the upper middle class.  If you are, or you plan to be, a lawyer, a tenured university professor, a manager, an architect, a civil servant or a doctor, be afraid.  Be very, very afraid.

The bell is tolling for you.

One of this morning’s ominous stories comes from Bloomberg.com: “Making Partner Less Likely” trumpets the headline, “As Big Law Firms Face Cash Crunch.”  The other comes from our old friend The New York Times, and it’s a report on a study that reports rising public dissatisfaction with the price and quality of college education in the United States.

Both stories are straws in the wind pointing to the possibility that the biggest bubble in the US economy may be coming to an end.  The biggest bubble of them all isn’t the real estate bubble; it’s not the dotcom bubble that took two thirds of the value off the NASDAQ when it burst at the start of the last decade.  The biggest bubble in the United States is the upper-middle class professional bubble; for the last generation the incomes of Americans with professional degrees continued to rise, sharply in many cases, even as incomes for blue collar workers steadily fell.  While investment bankers left us all coughing in their dust, doctors, lawyers, university professors and other professionals got generally richer while the rest of the country faced stagnant or even falling living standards.

This can’t and won’t go on.  Just as house prices can’t rise faster than household incomes for very long, college tuition can’t go on rising faster than peoples’ ability to pay.  The costs of health care, legal services and other professional services cannot keep rising if costs everywhere else are being squeezed.

Over the next generation American professionals are going to face the same forces that transformed (often, not in a good way) the life situation of the lower middle class.  The cost squeeze is on, and just as Walmart forces its suppliers to become ever cheaper and ever more competitive, so corporations are telling law firms and other suppliers that they have to cut costs.  Even as law firms cut down on creating new partners, they are shifting more and more operations overseas.  Only a relatively small part of what law firms do really has to be done in the US by an actual lawyer; there is a lot of fat in the law, and over the next thirty years it’s going to be wrung out of the system.

For universities the big story will likely be driven by the financial problems of government.  Through subsidies of various kinds, both directly through support to the universities themselves and indirectly by providing financial aid to students, the state and federal governments are the ultimate paymasters of the colleges and universities that most of our students attend.  Looking at the financial prospects of all levels of government, big changes are clearly coming down the pike for higher education.  Increasingly, politicians and taxpayers are going to be unable or unwilling to pay the extraordinary (and inexorably rising) costs of supporting the ‘research university’ model.  The natural sciences (which can claim to produce identifiable economic benefits) will probably do better than the humanities and social sciences, but overall, life for professors at state universities is going to look more like life for high school teachers now.  Tenure is going to become much, much rarer than it is now; teaching loads will likely increase.  Taxpayers are not going to subsidize research in critical literary theory very much longer.  I would not be surprised to see higher education in some states restructured through initiative and referendum petitions.  What better target for angry Tea Party organizers than heavily-subsidized nests of irreligious, left-leaning snobs who charge outrageous tuition for miseducating the youth?

Professors, beware.  Despoiling the monasteries is a traditional resort of cash strapped rulers, and our rulers will soon be turning over the couch cushions scrounging for dimes.  Ultimately higher education is going to be overhauled in a big way.  Term papers can be graded in India as easily as over here, after all, and lectures can be watched on the web.  In a perfect world we could all go to Oxford and have tea with world famous professors in their romantically disheveled studies, but that isn’t the way American higher education is headed.  In an increasingly competitive global environment, we will be building something more like McHarvard: think of online instruction with recorded lectures and non-Ph.D. TA’s trained to handle a particular group of courses rather than trained to be independent researchers in the field.  The person-to-person learning will probaby come increasingly from mentoring and internships; already many students think getting the right internship is more important than getting into the right class.

Rich private universities will survive and maintain the old model in all its glorious excess. Some states and some private donors will continue to support a handful of prestigious institutions.  The guild system (long apprenticeships, individual instruction) has more of a future in the natural sciences than elsewhere.  It is at least possible to conceive of convincing arguments that would persuade the public at large to continue to subsidize expensive scientific and technical education — and scientific innovation seems to make money for universities in a way that breakthroughs in literary theory unaccountably do not.

But even the big, rich private endowments have something to fear.  Before Harvard’s endowment started melting down like a Himalayan glacier in an IPCC report, Massachusetts legislators were pondering the possibility of taxing the Harvard endowment as well as those of other rich colleges to subsidize public higher education in the state.  The city of Pittsburgh wants to impose a one percent tuition tax on students enrolled at colleges within its city limits.  Virtually every state and local government in the country faces mounting financial pressures for years to come.  It is much harder for colleges to move their campuses than it is for corporations to move their headquarters or for rich people to change their residence.  Do the math.

For the last thirty years, economic trends broadly speaking have supported a rising standard of living for the upper middle class in the United States.  That doesn’t seem to be the way the next thirty years are shaping up.  The upper middle class is coming back down to earth.