This past week there has been much media coverage of a new program, launched by Starbucks and Arizona State University, aimed at offering Starbuck’s employees a free online college education. While this attention is well deserved, I believe another emerging trend pioneered by AT&T and Udacity–“NanoDegrees”–may have an even greater transformative effect on U.S. labor markets (original article):

Could an online degree earned in six to 12 months bring a revolution to higher education?

This week, AT&T and Udacity, the online education company founded by the Stanford professor and former Google engineering whiz Sebastian Thrun, announced something meant to be very small: the “NanoDegree.”

At first blush, it doesn’t appear like much. For $200 a month, it is intended to teach anyone with a mastery of high school math the kind of basic programming skills needed to qualify for an entry-level position at AT&T as a data analyst, iOS applications designer or the like.

Yet this most basic of efforts may offer more than simply adding an online twist to vocational training. It may finally offer a reasonable shot at harnessing the web to provide effective schooling to the many young Americans for whom college has become a distant, unaffordable dream.

Intriguingly, it suggests that the best route to democratizing higher education may require taking it out of college.

“We are trying to widen the pipeline,” said Charlene Lake, an AT&T spokeswoman. “This is designed by business for the specific skills that are needed in business.”

Employers have been complaining for years about a lack of skilled workers to fill available jobs. According to the Organization for Economic Cooperation and Development, the skill level of the American work force is slipping dangerously behind other nations.

The evidence so far suggests that online education may do better in giving low-income students a leg up if it is directly tied to work. And companies, rather than colleges, may be best suited to shape the curriculum.

The “NanoDegree” is a step in a similar direction: offering a narrow set of skills that can be clearly applied to a job, providing learners with a bite-size chunk of knowledge and an immediate motivation to acquire it.

It may not offer all the advantages of a liberal arts education, but it could offer a plausible path to young men and women who may not have the time, money or skill to make it through a four-year or even a two-year degree.

AT&T will accept the NanoDegree as a credential for entry-level jobs (and is hoping to persuade other companies to accept it, too) and has reserved 100 internship slots for its graduates. Udacity is also creating NanoDegrees with other companies.

If all goes according to plan, Mr. Thrun says, Udacity will ultimately create an alternative approach to the “four years and done” model of higher education, splitting it into chunks that students can take throughout their lives.

“It’s a more focused education with less time wasted,” Mr. Thrun told me. “They can get a degree quickly, get a job and then maybe do it again.”

This isn’t the kind of educational pathway that encourages much smelling of the roses. The live college experience is probably better at providing noncognitive skills.

For many young Americans, though, the alternative to the traditional path may well be no useful degree at all.

“We still need rounded people, which you can’t get through mini-certificate courses,” Professor Hollands said. “But we also have an economy to run here.”

—

It seems to me that this “NanoDegree” model is a response to a problem that does not exist– an under-skilled American workforce. Large corporations, which have thrived on a shift from labor to capital / technology, are able to be more selective in their employment choices. Furthermore, more specialized capital requires more specialized laborers to utilize said capital. Further reinforcing this trend is downward pressure on labor markets due to the recession; people with years of experience are willing to take essentially entry level positions.

Due to these factors, companies are basically unwilling to hire people who need on the job training. A 4 or 2 year degree may help develop social and cognitive skills, but is unlikely to result in experience with specific software / technology / capital used by specific companies (a problem I believe must be addressed by greater coordination between businesses and traditional education institutions).

This has been particularly concerning to young adults trying to start their careers, who all to often lack both the experience and specific skills required for many “entry level” jobs, resulting in high levels of youth unemployment and related socioeconomic issue. NanoDegree’s offer an opportunity for people to gain the training they needed for a specific job, at virtually no cost to the company. In addition to their stated purpose of offering an avenue to employment for less skilled / affluent job seekers, I can easily see “NanoDegrees” becoming complimentary to traditional college (either directly implemented in curricula, or pursued post graduation like a Masters degree) for those who can afford such luxuries.

—

I can see both potential benefits and drawbacks to NanoDegrees, which I will summarize as follows:

Potential Adverse Effect: greater job specialization –> less labor mobility –> power imbalance shifts further in favor of management and away from labor.

Potential Benefits**: greater investment by company in workers* –> more value from labor  / employees more valuable to company’s competitors–> greater bargaining power for labor.

* this would require the company footing the bill for a “NanoDegree”, which is not how the programs are currently modeled

** longer-term trends, the immediate benefit would be employment

—

There is simply no way to “force” businesses to hire more workers, especially when they have been able to maximize profits with less employees. Short of drastic redistribution through corporate taxation (which aside from being politically difficult would require tackling global tax avoidance issues) and social spending, there are few ways to ensure economic gains are somewhat evenly distributed.

While the “under-skilled workers” argument may be an artificial problem created by an unwillingness of companies to offer on-the-job training (due to a confluence of factors: a partial switch from labor to capital production, globalization, mechanization, the decline of unions, downward pressure on the job market, etc.) the “NanoDegree” model could prove to be an attainable avenue to gainful employment, particularly for young people / long-term unemployed.

Any program benefiting these groups (young people and the long-term unemployed) should have particularly stimulative effects on overall economic growth. Furthermore, if this program is proven effective, there will be a strong argument for expanded access through needs and merit based subsidies. Investing in “quality” jobs yields strong returns; “NanoDegrees”, in combination with other policies such as the EITC, minimum wage increases, etc., could become an essential component of poverty / inequality reduction initiatives.